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Creator Economy

Usage-Based Pricing for the Creator Economy

Photo by David Rock Design on Pixabay

Creator Economy Platforms Pricing Models

Creator economy platforms work with a combination of two pricing models:

  1. 1. Take rate - a percentage of creator income taken by the platform
  2. 2. Subscription - monthly subscription for using the platform

Often the combination is based on multiple pricing tiers, with each tier defined as a different combination of these models.

The take rate especially is a significant pain point for the creators.

Creator economy platforms justify the take rate, usually by the discoverability provided by the platform, think YouTube.

Usage-Based Pricing Models

An excellent series of articles on usage-based pricing (UBP) by Rotem Shacham, defines UBP as:

UBP in SaaS, as its name suggests, is a type of pricing structure that is tied to actual usage. It’s a variable payment structure tied to the level of consumption and is usually agnostic to the number of users. UBP can be in pure form as a linear function of usage or as a tiered step function where the different tiers are tied to different usage levels.

Think about the difference between your gym membership, where you pay irrespective of how much you go (traditional subscription), and your electricity bill, where you pay based exactly on how much electricity you consumed (UBP). For the tiered version of UBP, think arcade tokens: If you bought enough for five games, you’d pay a certain amount per token, but if you bought enough for 20 games, you’d probably pay a lower price per token.

Dominant examples of UBP are:

  1. 1. AWS S3
  2. 2. Slack
  3. 3. ConvertKit
  4. 4. Mailgun
  5. 5. Twilio messaging

Usage-Based Pricing for Creators

While UBP is considered a superior pricing model for SAAS, and all creator economy platforms are SAAS, none of the well-known platforms work with a usage-based model.

This is in contrast to the usage-based model being the dominant model for cloud providers and SAAS players.

We believe this is due to the resources being allocated to creators not being quantified relative to usage, as usage is dimmed approximately equal across creators. Streaming cost per creator is deemed proportional to revenue, so the take rate compensates the platform for that.

When Will a UBP Work in the Creator Economy

This makes one wonder whether UBP can work for the creato economy platform and the creators.

We believe it works when the platform requires allocating resources per usage and significantly when this is associated with real-life usage by creators of IRL hall or similar.

Paying by the usage, say by the minute, will let the platform optimize its resources by renting per minute. In parallel, it will make all creator costs on the platform and IRL be charged per use.

While minutes of use do not guarantee success, it avoids the more significant pain point of a take rate.

The Auction Events Platform for Creators

We are building an auction events platform for creators. The basic idea is - a creator comes to the platform and creates a live auction event. Add a few items. It can be a drawing, painting, or whatever physical thing. An auction event is either a hybrid with audience IRL hall and online or virtual only. You run the auction, project it to the big screen in the hall, stream video, and chat with the audience.

We are considering using usage-based pricing for events. This will offer the creators a service without the fat take rate of auction houses. Thereby democratizing auctions.

From the platform perspective, we project we need to scale resources per event, so usage-based pricing fits nicely for the platform.

Yoram Kornatzky

Yoram Kornatzky