Equitization of Freelance Creators

Why we should rely on and support creative geniuses

Structural Inequality

Employees dreams didn’t come true. As Stiglitz writes, […] In the middle of the twentieth century, it came to be believed that ‘a rising tide lifts all boats’: economic growth would bring increasing wealth and higher living standards to all sections of society […] In the ensuing economic and political debate, this ‘rising-tide hypothesis’ evolved into a much more specific idea, according to which regressive economic policies — policies that favour the richer classes — would end up benefiting everyone. Resources given to the rich would inevitably ‘trickle down’ to the rest […] So overall wealth increases, but this does not lead to an increase in the productive capacity of the economy or in the mean marginal productivity or average wage of workers. On the contrary, wages may stagnate or even decrease, because the rise in the share of rents has happened at the expense of wages […] Monetary policies that lead to low interest rates can increase the value of these ‘unproductive’ fixed assets […] The way in which globalisation has been managed has led to lower wages in part because workers’ bargaining power has been eviscerated (1, *).

Labour and Education Crisis

The unemployment rate all over the world is significant today. It is approximately 5.767%, according to the World Bank (2), about 5.7% in advanced countries, based on the IMF data (3), and 6% — based on OECD (4). In 2015, total global unemployment stood at 197.1 million — 27 million higher than the pre-crisis level of 2007 (4). […] Economic activity in both advanced economies and EMDEs is forecast to accelerate in 2017–18, with a global growth projected to be 3.4 percent and 3.6 percent, respectively, again unchanged from the October forecasts (5). World population is 7.4–7.6B or so (6) with 1.8% growth rate a year (7). Here is a problem that a global youth unemployment is on the rise again, expecting to be approximately 13% (8).

Global Wealth Report 2015 by Credit Suisse

And that is thrilling enough in respect that we have no sustainable growth model for the future. With EM economies borrowing more heavily, global debt has set a new record high of USD217 trillion (over 327% of GDP) in early 2017 (9). It has been “axiomatic” for a long time that economic growth and prosperity are combined with higher education. And how! Richest 2% of adults own more than half global wealth (10). Oxfam blames aggressive wage restraint, because businesses were too focused on delivering ever-higher returns to wealthy owners and top executives (11). Credit Suisse estimates that 3.4 billion individuals — or 71% of adults worldwide — have wealth below USD 10,000, and millionaires, who comprise less than 1% of the global population, account for 45% of total wealth (12).

Student Debt in America Has Hit a New Record by Bloomberg

Over the last decade, college-loan balances in the United States have jumped more than $833 billion to reach an all-time high of $1.4 trillion (13). Total U.S. student debt hit a record $1.31 trillion last year, the 18th consecutive year Americans’ education debt rose, according to the FRB of New York (14).

More than that, 56% of employees are stressed when it comes to their financial situation. 53% of these employees report that the stress interferes with their ability to focus and be productive at work (15). It comes to a mind that something is wrong with the employment and our system at all over the world. It seems that direct investments in creators and practices as a whole are underestimated, but labour and education markets are overvalued.

Global Music Report 2017 by IFPI

Looking at Music Industry Inheritance

The music industry is all about large amounts and numbers. As Shridhar Subramaniam from Sony Music Entertainment thinks, “we are seeing a shift in consumer’s attitude from content ownership to having easy access to a vast library” (16). Warner Music Group reported its best quarter (Q2, 2017) in 14 years, with $917 million in revenue and a 59% increase in streaming cash — far more than enough to offset the continuing decline in digital download sales (17). Record companies are estimated to annually invest $4.5 billion worldwide in artists and repertoire (A&R) combined with marketing. The major labels have combined around 7,500 artists on their rosters and tens of thousands more are signed to independent labels. New talent is the lifeblood of the industry and 25% of those artists was signed in the previous year (18).

Investing in Music: The Value of Record Companies by IFPI, 2016

Global independent label revenue stands at $5.6 billion in total (19). Independent music companies are characterised both by a desire to seek out new musical forms and artists, and in their entrepreneurial willingness to take risks. In today’s market, independent labels continue to balance artistic and commercial priorities. Quoting, early independent labels, like Atlantic and King Records, introduced blues and R&B music in the 1940s […] Island Records, founded in 1959, performed a similar ‘bridging’ function, introducing a new generation of rock and reggae artists to global audiences through the 1960s and 1970s. Initially the label was associated with Jamaican music, popularising ska and reggae music in the UK, in particular the music of Bob Marley. It also promoted U2 (20).

After succeeding of David Bowie securitization with Pullman Bowie Bonds lots of investors pay more attention to music securitization. Notwithstanding a rating downgrade to Baa3 in 2004, Pullman Bonds have become a new class of securitization assets in the world. In fact, the credit was loaned for 10 years with a 7.9% interest rate — a pretty much rate. The Dutch Pension Fund ABP invested in Imagem and cashed out recently when Imagem had been sold for between $500-$600 million to Concord Music Group owned by Barings Alternative Investments. As WSJ writes , “a small but growing number of investors is buying the rights to musicians’ future earnings, lured by returns that can run between 8% and 12% annually, or more when junk bonds are yielding less than 6%” (21). The Church of England’s £7.9 billion investment fund is looking at music royalties and direct venture capital deals for this year’s new asset allocations, according to its director of investments (22).

Creators Donating: New Musicians and Doers

While each recording deal is different, there are common areas of investment that usually feature, particularly in an agreement involving emerging artists. These are the payment of an advance, the funding of a recording, music video production, tour support and promotional costs. It can cost between US$500,000 and US$2,000,000 to break an artist in a major recorded music market (23). By 2025, the global crowdfunding market could reach between $90 billion and $96 billion — roughly 1.8 times the size of the global venture capital industry, according to a 2013 study commissioned by the World Bank.

“If you look at the music industry, there was this whole layer of people who used to go out and scout bands,” Hirsch said. “It was the coolest job in the world”, — David Hirsch, managing partner at Metamorphic Ventures — which led Indiegogo’s seed round — likens crowdfunding to what the music industry calls A&R, or artists and repertoire.

Platoon: We live to create. We live for the creatives

Music creation and scaling have all changed. Thanks to YouTube, SoundCloud, VK and all the new platforms, there are lots of charismatic and imposing creators in Europe. They live following Otto von Bismarck who said: “We live in a wondrous time, in which the strong is weak because of his scruples and the weak grows strong because of his audacity.” People are changing the whole employment paradigm. Hence, there is a living idea that we should let freelancers a more powerful role in the changing economy. Forget about really too big companies. It is time to personalize economies — from companies to creators. Independent musicians, actors, e-gamers, free artists, writers philosophers, engineers and doers all over the world will be able to receive standalone financing from their followers and other donators.

Mixmag: The World’s Biggest Dance Music and Clubbing Destination

It is all about the essence where (A) creators get tokenized, sell their digital tokens and receive investments and donations with a blockchain-based confirmation; new ventures (B) support the variety of creators. Nonetheless, remember that wages may stagnate or even decrease, because the rise in the share of rents has happened at the expense of wages (24). So it is clear: a power of big labels should be also restricted, but if people do not want to retrieve the autonomy — labels won’t too.