Note to readers: This Litepaper was published on October 22, 2022 by the Flame Technologies AG.
Last changes: October 22, 2022
Download PDF: >> coming soon <<
Arming adult content creators with NFTs.
Creator Economy in the Adult Industry
The Creator economy is a software-facilitated economy that allows creators to earn revenue from their creations. Examples of creator economy software platforms include YouTube, TikTok, Instagram, Facebook, Twitch, Spotify, Substack, OnlyFans, Tiki and Patreon.
The Creator Economy is a new way for performers in the adult industry to monetize their work. It lets them scale their businesses exponentially and earn passive income. It removes the shackles associated with gig-based work for big studios and provides platforms like OnlyFans for users to produce content that can be always consumed.
Creators have access to production tools on their phones, use social media to be discovered, and have access to a wide range of monetization platforms.
Creators already turned the adult industry upside down. The above-described commoditization of business infrastructure means that any adult content creator can now transform their audience into a scalable empire.
Creators are the new powerhouse in the adult industry. Slowly everyone in the adult industry is realizing that the creator economy is here to stay and will replace the old gig-based economy.
OnlyFans became “a Billion-Dollar Media Giant Hiding in Plain Sight” according to Bloomberg.
OnlyFans reported revenue soared 160% to $932 million year-over-year, according to financial results for the year ending November 2021. Creators on the site earned nearly $4 billion in 2021. The number of creators rose 34% to 2.1 million in 2021 compared to the prior year, while the number of fans surged 128% to nearly 188 million during the same period. Pre-tax profits exploded to $433 million, up from $61 million in 2020.
The Top 3 earners on the site are:
Monthly Earning: $20 million
IG Followers: 16.5 million
Monthly Earning: $11 million
IG Followers: 25.3 million
Monthly Earning: $9.43 million
IG Followers: 142 million
The top 1% makes the most money on OnlyFans. The Top OnlyFans creators are making over $100,000 a month on OnlyFans. The top 10% of OnlyFans make less than $1000, the Top 4% of OnlyFans make between $1500 to $2000 and the top 0.1% make over $50,000 to $100,000 a month. On Average, OnlyFans creators make $151 a month.
OnlyFans has more than 1.5 million creators worldwide as of August 1, 2022, up from 70,000 creators in July 2019. Considering that only 4% make more than $2,000 a month, 60,000 are then professional creators (4%) and 1,44 million are amateur creators (96%).
Mainstream numbers suggest that of the 50 million creators worldwide, 46 million are amateur creators (92%), and 4 million are professional creators (8%).
On Spotify, for instance, the top 43,000 artists — roughly 1.4% of those on the platform — pull in 90% of royalties and make, on average, $22,395 per artist per quarter. The rest of its 3 million creators, or 98.6% of its artists, made just $36 per artist per quarter.
Estimates suggest that venture capital firms have invested more than $7 billion into 300 mainstream start-ups focusing on creators since early 2021. Investors have clearly signaled their interest in creator focused startups, and subscription services helped them see that the creator market has a strong financial case.
After spending a decade investing in start-ups of various value propositions, the world has realized that investing in the creator economy is the next big thing. This revelation has occurred to the growing recognition that the creative economy’s potential is considerably larger and deeper than previously thought. Creators aren’t just upending the media industry. They’re upending entire sectors.
What we’re not seeing, however, are investment products that give creators access to growth capital for their businesses — and investors a way to invest in creator-associated assets. Especially for adult content creators.
Meanwhile, the adult industry is leading the way from a gig-based industry into a creator-based one. However, adult creators face problems promoting their content on mainstream social media. By design, these platforms don’t allow NSFW content — which limits the creators ability to promote NSFW content. Many of them build huge followership on these platforms, just to get banned after a while and start over. But the problem goes even deeper: Imagine you run a successful media business with a monthly turnover of $150.000 and you can’t spend a single dollar in advertising to grow it even further. Unthinkable for every mainstream business! The U.S. Small Business Administration recommends spending 7 to 8 percent of your gross revenue for marketing and advertising. Huge media companies, like Hollywood, spend almost 30% of their overall budget on paid marketing.
As a result of all the problems creators in the adult industry face, we have created Sharesome, a sex-positive social media network that allows adult creators to freely advertise their content and do what mainstream social media platforms are prohibiting.
But this only solves the problem of deplatforming and content discovery. It doesn’t solve another problem: 96% of all creators on OnlyFans have a revenue lower than life costs, but higher than pocket money. They will struggle for years to build their audience and make ends meet to finally quit their day job and focus on content creation as a full-time job.
They only have one option to quit a full-time job and focus on content creation: dept.
But it only works for small investments. You need a new camera, and you know that OnlyFans pays out in 5 days? Go and leverage your credit card debt. But quitting your job and hoping that you cover rent and health insurance with your credit card limit — that is crazy. And going to a bank to take a loan is mission impossible. Banks separate customers into two categories: Consumer & business. Creators are neither, so they are underserved. Plus, adult content creators are vice-industry customers and have no standing at banks.
The next option is equity. Besides the fact that equity financing is like a tattoo (very hard to get rid of), adult content creators do not have exit scenarios that can make their investors rich. First, because there is no money floating in the adult industry — only out. Second, the best scenario is a steady stream of positive cash-flows and not a 10–20x multiple IPO.
The most likely option for creators is a model that is based on future revenue. That means creators taking an investment in return for a percentage of the creator’s income and the IP they generate over a certain amount of time.
Technically that could be built with NFTs.
We describe in this Litepaper for an NFT-based creator crowdfunding solution how creators could basically tokenize themselves on Sharesome.
Creators are businesses
I am not a businessman, I am a business, man!
Creators are businesses. Like every business, they go through their cycles of maturity: the classic stages of (i) bootstrapping; (ii) establishing consistent income streams and monetization; and (iii) strategic expansion and growth. Typically, an established business can bring in capital to grow, but creators are hamstrung by the lack of investment resources.
Adult content creators face the additional challenge of being considered high risk and being very often cut off from access to financial tools. In September 2022 for example porn star Alana Evans’ video went viral describing how her bank closed her account because she’s a legal sex worker. Sex workers in the financial world are like Viktor Navorskiy (Tom Hanks) from The Terminal, who gets stranded at the airport, only to be told he is “simply unacceptable.”
Adult content creators can’t simply go to a bank’s office and get a mortgage based on the number of their OnlyFans subscribers and the amount of the monthly payout. Adult content creators are literally underbanked, if not unbanked.
Creators businesses scale
The fact that investors go crazy about IT is simple: it’s scalable.
To start a business is expensive, but later it becomes a money printing machine. The marginal cost of any additional user on any given SaaS platform is $0. It doesn’t matter whether you have 100 or 1,000 or 10,000 users, your tech costs will stay about the same.
And it’s the same for content creators: the content can go ‘viral’ at any time and every new fan will bring you more fans, exponentially. The distribution costs are zero – whether you have 100 or 100,000 followers.
But at some point, every content creator needs to switch from amateur to professional and for that a creator must surpass the ‘wall’ of around $50k yearly income – or raise $50k somehow. Creators, like startup founders, need capital to get going.
Adult content creators aren’t investible
The reason why constitutional investors aren’t interested in adult content creators is because they are afraid. And they don’t know how to value creators. They are also very often limited in what kind of industry they can invest. Vice industries like the adult industry are mostly no-go areas for constitutional investors, like VCs.
If we could solve the problem with funding creators, there is a lot of potential upsides for everyone. Imagine investing in Eva Elfie three years ago, when she was just starting in porn. Or own a piece of Bella Thorn’s deals. Or having 10% of Asa Akira’s brand. ROIs must even be better than the ones of startups during dotcom.
So, why can startups raise millions of dollars in a few weeks while creators often struggle for years to make ends meet? The answer is that the startup ecosystem has already established new financing models adapted to the world of the internet. The creator ecosystem hasn’t done the same yet. And especially the adult creator ecosystem is still where the startup ecosystem was in 2003.
Adult content creators can’t turn to institutions for investments, but they can turn to their superfans and ask for additional money.
The thesis for adult content creators
1. The most valuable brands of the future will be people, not companies. We see power already shifting from companies to people, and value will follow.
2. Creators today are limited because they don’t have access to funding. Creators need to go into dept or use cash-flow to invest in their brands.
3. Providing creators with seed capital in return for small non-voting minority share of future creative earnings is a win-win for creators and for investors.
4. Superfans are the natural group of people backing creators.
Income Share Agreement (ISA)
ISAs are a financing model that comes mainly from education, used as an alternative to student loans, but it could very well be applied to creators. With an ISA a creator agrees to pay back a percentage of their future personal income (~5-20%) for a limited period (~5-10 years) and with a ceiling (~2-5x). That means that the absolute amount to be paid back is not known in advance, nor is the when. The risk is mainly on the investors side. If it fails, the creator walks away debt-free.
This option would theoretically be best suited for amateur creators who would need ~$50k to focus 100% on their content for about a year and see if they can make it full-time as a professional creator.
The problem with ISAs is that before you can collect payments, you need to verify income. So, the oracle problem shows up. All income must be either on-chain because smart contracts can only access information that is on-chain, or you need an oracle to access off-chain income data.
Examples for creator investment projects
Incomeshare.me is an Ethereum DApp leveraging OpenLaw to enable legally enforceable income share agreements and to facilitate a secondary market for them.
Tokit.io allows content creators of any kind to create their own tokenized economies, by representing their creative projects through tokens on the Ethereum blockchain.
Chisos.io invented and pioneered Convertible Income Share Agreements (CISAs), a combination of an ISA at the individual level and a convertible note at the company level.
Fairmint.com invented the Continuous Agreement for Future Equity (CAFE) allows a company to continuously fundraise from its community and stakeholders to give them access to the financial upside early on.
Tryroll.com and Bitclout.com offer Social Tokens that challenge traditional equity fundraising.
The blueprint for a NFT based crowdfunding solution
Creators setup a crowdfunding campaign for their own brand on Sharesome. They sell NFTs (or fractionalized NFTs) and commit to a legally enforceable Income Share Agreement (ISA).
- Amount to ask, for example = 50,000 USD (in Flame Token)
- Percentage of income to offer, for example = 10%
- Period to offer, for example = 7 years
- Ceiling to offer, for example = 2.5 (125,000 USD maximum payback)
- Additional perks to offer, for example free access to OnlyFans, or access to custom content
The ISA will define an oracle that has access to off-chain income data. The oracle is a certified auditor with the right to access the books and accounts of the creator. Sharesome will take a Kickstarter-like fee from the money raised to cover the oracle costs.
A solution where the income is 100% on-chain is unrealistic for the next couple of years as adult content creators usually monetize on more than one Web2 platform. But the crowdfunding platform will progressively move on-chain as Web3 is the future of the content creator economy.
The creator will send the monthly payback to a smart contract in Flame Token (XFL). The smart contract will distribute the Flame Tokens to the current NFT owners with a pull request.
Become a Co-Creator
Once a creator is established and works as a professional full-time creator, the needs for additional funds are project related. Even for an established creator it might be a challenge to shoot with other famous creators on a beautiful remote Caribbean Island, renting a stunning beach villa and include a helicopter flight into the budget.
So why not turning to the launch of NFT collections to fund a movie production? Crowdfunding has long been a primary use of blockchain technology.
A mainstream example is PLUSH, a French movie set to release sometime in 2023. With the intention of creating a 50,000-piece collection, PLUSH’s creators aim to make whoever collects their tokens a co-producer that will, in turn, receive a share of the film’s profits, access to special screenings, and more.
In this scenario creators setup a crowdfunding campaign for a movie project on Sharesome. They sell a movie themed NFT collection and commit to a legally enforceable Income Share Agreement (ISA). This is how we introduce Co-Creator rights based on Creator NFTs.
- Amount to ask, for example = 100,000 USD (in Flame Token)
- Percentage of profits to offer, for example = 80%
- Period to offer, for example = 25 years
- Ceiling to offer, for example = 5 (500,000 USD maximum payback)
- Additional perks to offer, for example free access to backstage material
Supporters of the project will act as Co-Creators along with movie creator and Flame Technologies, releasing and promoting content that they like.
The launch of the movie will be on-chain (on our own subscription site), so initial profits can be accessed by the smart contract and automatically distributed to the current Co-Creators with a pull request.
To be entitled to generate any revenue after purchasing a Creator NFT, the movie must be promoted either directly by the Co-Creator or by using our promotion platform.
The creator will send the monthly payback for the profits in secondary markets (aka Adultprime, Spicevids, etc.) to a smart contract in Flame Token (XFL). The smart contract will distribute the Flame Tokens to the current Co-Creators with a pull request.
In our example Creator NFT holders are entitled to receive up to 80% of any revenue generated from their own promotional efforts and will share the remaining 20% of any such revenue with the creator and Flame Technologies.
Note: Much like a trailer to a movie, this Litepaper serves as a teaser version of a potential NFT Whitepaper. it is not final and contains more ideas than concrete projects we work on. It should mainly inform our community about the projects we want to work on. We also want to see if we get someone interested.