(Bloomberg) -- Twitch Chief Executive Officer Emmett Shear thinks US employment laws could be improved to better support content creators who generate millions of dollars for the video live streaming site.
“It’s not quite a W-2 job and it’s not quite a contracting job,” Shear said in a recent interview. “I think we could really use legislation that created a third option that was appropriate for the gig economy and the creator economy.”
The debate over how to classify people who make a living through an app or a digital service, such as drivers at Uber Technologies Inc. or DoorDash Inc., or the Ikea furniture assemblers of TaskRabbit, has simmered for years. Some 16% of US adults have earned money through such apps, according to a Pew Research report last year.
Gig economy giants such as Uber Technologies Inc. and Lyft Inc. have spent years and millions of dollars in a push to keep drivers classified as contractors rather than employees, with mixed success. Shear’s comments echo those of Uber CEO Dara Khosrowshahi, who has lobbied for a “ third way,” proposing guidelines for laws that would grant gig workers both flexibility and benefits. The Biden administration recently issued a proposal that could make it harder for gig companies to classify workers as contractors, and it could force them to categorize the people as employees entitled to certain protections and benefits.
Twitch, which is owned by Amazon.com Inc., was a pioneer of the creator economy when it launched in 2011 as a way for gamers to broadcast their play and interact with fans. Its success over the years has turned the site into the primary source of income for thousands of people who are able to monetize their fan bases with monthly subscriptions, ad revenue and donations. Top streamers on the site can generate more than a million dollars a year in subscription revenue alone, of which Twitch receives a 30% to 50% cut.
But to be successful in the increasingly competitive $104 billion creator economy, top streamers must devote their full attention to it. Some have been known to livestream themselves for up to twelve hours a day or forego taking vacation lest they lose followers or relevance. Twitch recently outlined upcoming changes to how creators will be able to make money on the platform, reducing the percentage of revenue top streamers can keep after they hit $100,000 and increasing an emphasis on advertising. The shift was controversial among creators and led many to question their own economic stability and potential growth on the site.
“One of the fundamental dynamics of the creator economy is that tech companies aren’t used to the level at which creators rely on them for their business,” Shear said. “A rapid change to how a product works isn’t just a matter of ‘This person didn’t get as many views on their video,’ but rather, ‘This person can’t make rent this month.’”
Shear didn’t offer specifics on what this third type of employment would look like and sidestepped a question about whether Twitch streamers would have access to such a system. “It depends on how you form it,” he said.
Ultimately, the success of gig workers and people who make videos on YouTube or Twitch is governed in large part by an algorithm—whether it’s one that rewards the quantity of rides in a given timeframe or determines how easy it is for viewers to discover creators’ content. For US legislators, “algorithmic management is going to be a major area of scrutiny,” said Miriam Cherry, who directs the Center for Labor & Employment Law at St. Johns University.
Shear said a third type of employment status, in between a contractor and an employee, could benefit creators and gig workers. But under the current system, he thinks “contractor” is a better fit for streamers because it allows them to “make it big and build a business.”
He also compared Twitch to a publishing house and said the payment structure is more similar to a royalty payment than a wage. On the other hand, wages are a good fit for gig economy apps like Uber, he said, as they have become almost universal basic jobs, where the price of labor gets pushed down over time.
Currently, Twitch streamers don’t receive benefits such as paid overtime or contributions to unemployment insurance through the platform or have recourse if they’re booted off the site. They also can’t legally organize under a union. If Twitch were ever to shut down, like Microsoft Corp.’s streaming site Mixer did in 2020, streamers would lose their most valuable asset—their followers—whom potential sponsors evaluate before offering the gamers paid partnerships.
Brooke Erin Duffy, a Cornell University professor of communication who has written several books about the creator economy, said diversifying one’s work across apps is a function of precarity, not bounty of opportunities. “They do this because the level of instability is so profound,” she said.
Right now, Twitch is focused on helping streamers earn more stable and predictable income without burning out. According to Mary Kish, Twitch’s head of community, the company is increasingly asking, “How do we get more money in the pockets of creators throughout their careers?”
©2022 Bloomberg L.P.
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