Small Business Labs

NFTs are Helping to Monetize the Creator Economy

The Creator Economy - the economic activity generated by the people who create online digital content and the firms that serve them - is a hot topic in tech circles. 

And one of the hottest creator economy topics is NFTs.  These are non-fungible tokens.  

The reason they're hot is they provide a way to make money selling digital content.

In simple terms, an NFT is used to prove the ownership and uniqueness of a digital item.

NFTs are tokens (digital code) that are attached to digital assets and content.  The tokens use blockchain technology, which provides the ability to track the content's origin and current ownership.

This means the objects an NFT is attached to can be bought and sold.

For example, a digital art piece recently sold for $6.6 million on an online art marketplace.       

And the art auction house Christie's is currently running an auction to sell a digital art piece (pictured) by the artist known as Beeple. 

Current bidding is over $3 million.  **Update: Beeple's digital art piece sold for a stunning $69 million after a frenzy of last minute bids.**

Another example is sports video highlights.  A film clip of a Lebron James dunk recently sold for over $200,000. 

You may be asking why anyone would want to own digital content that can be freely downloaded from the Internet.  

Key quote on this from TechCrunch's The Explosive Potential of NFTs in the Creative World:

“Humans inherently, whether we will like to admit it or not, want to own things,” Ronin said. “And I think that that’s part of the human experience is owning things. When you own things, it’s a connection, and it’s like you have a reason for being and there’s something unique about ownership ...”

Supporting this is the fact that people are willing to pay astronomical sums of money for physical works of art when free or cheap copies are easily available.

So on some level, it makes sense that people are willing to pay to own original digital content.

The challenges of earning money in the creator economy is another hot topic.  This is because while some creators (the vast majority are independent workers) make a lot of money, most make very little. 

The hope is NFTs will allow more people to monetize their digital assets. 

Does It Pay to Be a Freelance Writer? Yes, But Not Well For Most

Several recent surveys focused on the pay rates on income of independent and freelance writers.

The Authors Guild’s 2018 Author Income Survey collected pay data from over 5,000 published book authors. They found that the median pay for full-time book authors was $20,300 in 2017, and that number decreased to $6,080 when part-time writers were included. 

They report this is a 42% decline in authors earnings over the past decade.

The Authors Guild cites the growing dominance of Amazon, lower royalties and advances for all but best selling books and extremely low royalties paid on the increasing number of deeply discounted books and ebooks for the decline.  

However, if an author can get in the top 10% of earners things are pretty good. 

Among the top 10%, those who self-publish earned a median income of $154,000 and those who are traditionally published earned a median of $305,000. 

The second survey comes from The Make a Living Writing blog. The Pay Survey 2019: What 1,400+ Freelancers Get Paid to Write study surveyed writers of all types, with most writing articles and blog posts.

As the study chart below shows (click to enlarge) nearly one-third of writers report they earn under $20 an hour for their work. 

But again there is good news. 10% report they earn more than $76 an hour, and another 17% earn $50-$75 per hour. 

The article has a number of suggestions on how writers can increase their earnings. These are beyond the scope of this post, but if you're a writer you should visit The Make a Living Writing blog for this information.

Social Network Support Helps Turn Knitting Hobbyists into Hobbypreneurs

A recent academic paper - Knitting Community: Human and Social Capital in the Early Transition into Entrepreneurship - covers research on the process hobby knitters go through to decide to turn their hobby into a business.

The study found that many of the hobbyists that started a knitting business had been encouraged to do so by people they knew, such as husbands, friends and other knitters.

The research was based on digging through the data at the knitting community site Ravely.com, which is known as the "Facebook for knitters".

Key quote from a Washington Post article on the study:

...analyzed almost 100 interviews and 403,168 profiles of knitters and crocheters. She found that even on one of the Internet’s great niche social networks, offline encouragement and feedback helped most talented hobbyists recognize their ability and take the first steps toward monetizing it. Success on the Internet was propelled by real-life interactions.

The in-person networking that was found to be most effective at encouraging entrepreneurship was membership in a Stitch n' Bitch group.

These are formal or informal knitters clubs where members meet, knit, socialize and share knitting advice. Again from the Washington Post:

People who joined a so-called “stitch n’ bitch” group to craft socially were 25 percent more likely than otherwise identical knitters to take the plunge into entrepreneurship. This is true even when correcting for geography, experience, skill level and productivity.

We've long studied the shift from hobbyist to hobbypreneur. It's clearly a growing source of new and especially part-time small businesses.

See the 2009 Inuit research brief Today's Hobbyists are Tomorrow's Hobbypreneurs for more on this topic. We worked with Intuit on this report and while the research is 9 years old, we think the findings are still relevant.  

BTW and not particularly relevant is yes, AI is starting to be used in knitting. See the Atlantic's SkyKnit: How an AI Took Over an Adult Knitting Community for more on this.

Will Pilotworks Become the WeWork of Shared Commercial Kitchens?

A lot of people think the coworking movement is only about shared office space, which is wrong

There are thousands of other types of shared workspaces in the U.S., including Makerspaces - communal workshops where entrepreneurial makers share ideas and tools - shared biolabs, auto repair spaces, artist spaces and many others. 

Another example is shared commercial kitchens. 

These are spaces where bakers, caterers and other food entrepreneurs can rent, often by the hour, commercial grade kitchen space. These spaces also offer training, events, mentoring and access to food specific networking activities. 

There are hundreds of shared commercial kitchens in the U.S. and their numbers are growing rapidly. According to a  2016 report by Econsult, "between August 2013 and March 2016, the number of kitchen incubators increased by more than 50%". 

So far the shared commercial kitchen industry, much like the early years of coworking, mostly consists of small, independent operators. 

But just as WeWork, Industrious, Serendipity Labs and other office coworking space chains emerged, the same may be happening with commercial kitchens.

Pilotworks is one of the first nationwide chains of shared commercial kitchens. This food incubator has locations in 7 cities and has raised $13 million in venture funding (led by Campbell Soup's venture fund) to help them expand.

It will be interesting to see if the shared commercial kitchen industry moves the same way as office-based coworking has. The industry is, obviously, quite different than office coworking.

One could easily argue makerspaces are a better analog for commercial kitchens than office coworking is. And so far at least, there hasn't been a successful makerspace chain. 

So the jury's still out on this.

For more on Pilotworks, see Food & Wine's How This Culinary Incubator Is Democratizing Food.

For more on the trends driving the growth of artisan food, see our New Artisans section.

Duluth's Booming Artisan Economy

Duluth's Lincoln Park neighborhood was until recently a rundown section of this lake front city in Minnesota, with many empty storefronts and buildings.

But now Lincoln Park is the center of a new artisan business boom. Key quote from the head of economic development for the city of Duluth:

A new wave of creative entrepreneurship is taking over Duluth and it’s happening in Lincoln Park. The area is undergoing a healthy revival with niche retail stores, unique restaurants, and longtime anchor businesses that feed the economic pipeline and build a stronger neighborhood. The future for Lincoln Park is full of promise and great potential.”

We recently listened to an interesting "Conversations on the Creative Economy" podcast that featured three entrepreneurs who founded artisan small businesses in Duluth.

The entrepreneurs said they located their businesses in Duluth because it's a great place to live (they must like winter), has a talented workforce and relative to big cities, low costs.

We've pointed out in the past that tech firms are starting to move jobs to the Midwest for these same reasons.

Craft businesses in Duluth include pottery makers, craft brewers, shoe cobblers, outdoor gear manufacturers and others.  The also have a growing number of farm to table restaurants.

All across the country small and mid-sized cities like Duluth (population 86,000) are benefiting from the artisan business renaissance.

In addition to revitalizing neighborhoods and creating jobs, artisan businesses make a city a more attractive place to live. This attracts more artisan businesses as well as non-artisan ones (including tech firms). 

Expect to see these reinforcing trends continue.

Food Truck Nation

The U.S. Chamber of Commerce's study Food Truck Nation includes a "food truck index" that shows which cities are the most food truck friendly.

The index covers 20 U.S. cities and the goal is to show what it's like to start an operate a food truck. The index covers three key criteria: obtaining permits and licenses, complying with restrictions, and operating a food truck. 

The study chart below shows the top 10 food truck friendly cities, with  Portland leading the list. 

See the report for the complete list. Boston, BTW, came in last.

We think the key quote from the report is:

“You can create your restaurant on wheels for $50,000 to $60,000. You get a little slice of the American dream, pretty inexpensively.”

We've long covered the food truck industry and in 2012 released what is still our favorite study, Food Trucks Motor into the Mainstream, in partnership with Intuit.

Our key finding at the time was that the growth of food trucks was an excellent example of the broader of growth of niche, artisan businesses.

Craft brewing, which we covered a few weeks ago, is another example. 

Our thinking hasn't changed. For more on this topic, see our food truck section.

The Return of Independent Bookstores

In 1936 George Orwell pointed out that one of the main difficulties of owning an independent bookstore is turning a profit.

This, of course, was long before Amazon.

But as NPR's Why The Number Of Independent Bookstores Increased During The 'Retail Apocalypse' reports, despite Amazon and other challenges independent bookstores are having a bit of a renaissance. 

From 2009 to 2017 the number of U.S. independent bookstores increased roughly 40%. 

So why is this happening?

According to a study by Harvard Business School professor Ryan Raffaelli, there are "“3 C’s” behind this resurgence: community, curation, and convening:

Community: Indie bookstores stress their local community ties and values. This positions them to benefit from the broader new localism trend.

Curation: Independents tend to focus on curating inventory that allows them to provide a more personal and specialized customer experience. They also stock books that appeal to local tastes and interests. 

Convening: Independent bookstores are often community centers that host lectures, book signings, game nights, children’s story times and even birthday parties. 

The rise of independent bookstores nicely illustrates several broader social trends impacting the economy.

These include the shift to experiences over things, growing interest in personalized services, unique products, and all things local, and the desire to be part of a community. 

It's also an example of small firms thriving despite having to compete with global giants, such as Amazon. We refer to this as a barbell industry structure, which we cover in more detail in our Industry Structure section.

The growth of independent bookstores is another signal that the New Artisan Economy is gaining traction. 

Is Craft Brewing a Harbinger of a New Artisan Economy?

There have been a number of recent articles pointing out that despite having to compete with several giant beer companies, the craft brewing industry has dramatically expanded over the past decade.

Examples include The Atlantic's Craft Beer Is the Strangest, Happiest Economic Story in America, Bloomberg's Craft Brewing as a Model for Helping the Middle Class, and the Economist's Crafting a Life.

All three also make the point that craft brewing may be a model that spreads to other industries, creating new artisan businesses and middle class jobs. 

That artisan businesses can be job creators is certainly true in the case of craft brewing. As the chart below from The Atlantic shows, brewing jobs have taken off with the craft brewing boom.

 

These jobs also pay decent wages, have consistent schedules and generally come with benefits. In other words, these are good jobs.

We've long used craft brewing as an example of the rise of niche businesses. We even featured the industry in a 2008 research report, The New Artisan Economy, which we did with Intuit.

So we certainly agree that niche, artisan businesses will continue to become more numerous. 

We also continue to see three broad trends we laid out in the New Artisan Economy driving the growth of these niche artisan businesses:

1. Growing numbers of customers are looking for unique, unusual, personalized or locally produced products.  

2. The Internet and online marketing has made it much easier to find or be found by people interested in buying niche products.  

3.  Technology is lowering the costs of serving niche markets and making artisans able to compete with even the largest of firms.  

And we still like this summary paragraph from The New Artisan Economy report:

The new generation of artisans will be amplified versions of their medieval counterparts. They'll be equipped with advanced technology, able to access global and local business partners and customers, and be capable of competing in any industry. Their firms will agile, flexible and often partner with larger firms to accomplish their business goals.

Most will be knowledge artisans, relying on human capital to solve complex problems and develop new ideas, products, services and business models. These artisan firms will attract and retain highly skilled and creative talent by offering freedom and flexibility and, in many cases, high competitive compensation.

It's important to note that craft brewing is not the only artisan sector that is doing well.

For example, The U.S. National League of Cities has called artisan makers the future of small manufacturing and have urged cities to create programs to support them due to their positive economic impact.

And there are many other successful artisan business sectors, including crafts, fashion, distilling, food of various kinds, etc. 

Having said all this, the jury is still out as to how big and impactful the New Artisan will become. 

But in the case of craft brewing, the New York Times article How Craft Breweries Are Helping to Revive Local Economies reports the impact can be quite significant.

Are Makers the Future of Small Manufacturing?

The National League of Cities recently released Discover Your City's Maker Economy, a report that "provides a roadmap for cities to develop policies, programs and a culture that better supports local maker businesses."

The thrust of the report is that "maker-entrepreneurs" -  individuals or micro-businesses who create (either by design or fabrication) and sell tangible products - are potentially the future of manufacturing. 

The report also suggests the maker movement can drive employment opportunities and provide more inclusive access to entrepreneurship. 

This echos a report earlier this year from the Brookings Institution. It too says the maker movement could be the future of manufacturing and describes it as:

 "a deeply American source of decentralized creativity for rebuilding America’s thinning manufacturing ecosystems."

Brookings concludes by saying:

“By embracing the do-it-yourself ethos of the maker movement, communities across the country can renew a sense of local community and help rebuild American manufacturing from the ground up.

The recent article Economy of Scale: Can the Maker Movement Revive U.S. Manufacturing?, from AB Architecture, also covers this ground. 

The article chart below provide some interesting data on the growth of maker entrepreneurs. 

    

We've long covered the growing maker movement and "maker-entrepreneurs".  It's one of the most interesting industrial sectors we follow.

So we certainly agree there's a lot of potential for growth from this sector. 

Patreon, True Fans and the Return of "Patron Funding"

In 2008 Kevin Kelly wrote a prescient essay called "1000 True Fans".

Key quote:

"A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author - in other words, anyone producing works of art - needs to acquire only 1,000 True Fans to make a living."

According to Kelly, if you have 1,000 True Fans (defined as people who will pay for your content) you have a large enough audience for your work to generate enough money to live. 

Since that essay crowdfunding has become a large industry, but it's been mostly focused on the funding of physical products.

More recently there has a been a growing trend towards the funding of artists and other creatives through "patron funding" models. These are sites that allow fans to subscribe to the creative output of individuals. 

A good example is Patreon, a site that allows creators to build subscription services that allow access to their work. 

According to the New York Times article Suffering for Your Art? Maybe You Need a Patron, Patreon currently "has one million “fans” who each contribute an average of $12 every month to their favorite artists on the site."

Originally designed for musicians, Patreon now has a wide range of "creatives". 

A good example is Naked Bakers.

The Vice article How NSFW Content Makers Found a Home on Prateon describes Nakde Baker as an R rated video series "that let's patrons of the show watch the "Baker" whip eggs, sift flour, and add her wet ingredients to her dry ingredients in the nude."

NSFW is a an acronym for "not suitable/safe for work".  

Subscribing to Naked Bakers costs a minimum of $3 per month, with the average subscriber paying $10 per month. The Naked Bakers, BTW, also gardens and cleans in the nude. 

While the relatively new Naked Baker show is not a huge hit, it's generating enough revenue that the "Baker" has quit her day job. 

One driver behind the shift to patron funding is advertising revenue models are becoming harder to make work. This is due to what some are calling the adpocalypse, which is the advertising revenue declines many content sites are seeing. 

The other driver is the growing awareness that a relatively small number of patrons can generate a decent living. As Kelly pointed out in his essay:

 "If you keep the full $100 of each true fan, then you need only 1,000 of them to earn $100,000 per year. That’s a living for most folks."

Patron funding is not new. During the Renaissance royal houses provided room, board, materials and business support to talented artists of the day.

Today, thanks to the Internet and platforms like Prateon, you don't have to be a Medici, or even rich, to be a patron.

This democratization of patronage is a good thing for artists and content creators. We believe this model will continue to expand, providing a growing alternative revenue source for a variety of independent workers.