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The Economics of Streaming


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Successful streamers are able to make a living out of playing games for an online audience, but how do they maximise their earnings and what risks do they face?

For anyone who loves video games, being a streamer sounds like a dream job. Why sit in an office when you could be sitting around playing games all day long – and making money from it?

There’s also the prospect of reaching an audience of millions, as influencers like Fortnite player Ninja does, with some treated like celebrities. But it’s important to remember that, for the hundreds of thousands of professional streamers out there, it’s not a hobby – it’s a job. And as such it comes with financial responsibilities, if only to yourself.

So how do streamers handle that responsibility? We spoke to three to find out more

Online Origins

ChocolateKieran first got into streaming in 2016 purely as a hobby while he was still a student.

Chocolate Kieran
 

“I was at university at the time and playing games anyway, so I just thought why not?” he says. “It’s a natural way for most people to grow a small community organically before taking it to the next level.”

However, it wasn’t until a year later that Twitch announced its Affiliate Programme, which meant he could monetize his channel. He continues: “Beforehand, you needed to be a Twitch partner – the requirements for which are quite high and difficult to reach in order to earn money through subscribers, ad revenue and other Twitch features. But with the Affiliate Programme, just earning money from content creation has been a lot easier.”

Becoming a Twitch Affiliate requires a minimum of 50 followers as well as an average of at least three concurrent viewers in the last 30 days. As the status unlocks the ability to have monthly subscribers or receive donations through Twitch Bits (100 Bits equating to $1), the income potential exists for the humble hobbyist getting pocket change as much as someone who wants to stream as their next job.
 

For Jake James Lugo, Twitch has been just one of multiple sources of income. As a content creator for over a decade, when the streaming giant was still just known as Justin.tv, he was already producing video content on YouTube, as well as freelancing for various media outlets. Streaming naturally became another avenue of boosting his profile.

Jake James Lugo

 

“I was unhappy in my original job that I was doing – retail – but then I was also seeing the potential where I could go with streaming, and also blend that together with the other freelance work that I was doing,“ he says. “That's when I really kind of went all in on it. A lot of people will wait to leave their jobs when they're finally making a lot from streaming stuff, but everybody's different – everybody goes through a different course of events when it comes to streaming.”
 

Charlie Pearce, who streams on Facebook Gaming as HimAgain96, always knew he wanted to get into streaming: “I watched streamers on my phone, during my lunchtime when I was in my normal job, when I was getting home from work. I was always opening up a stream and watching streamers, so it was something that I knew I wanted to do,” he says.

The fact that most consoles have streaming functions built in makes it even easier for anyone to just create a channel on Twitch, YouTube or Facebook, and get started. But although Pearce had initially planned to stream as a hobby, he also wanted to take it seriously from the get-go.

“You can go live off your PS4 at home, but it's the quality of your stream, the quality of your camera and your microphone that’s important,” he says. “For me, if you're going to be a successful streamer, you need to sound and look the part.”

Pearce chose to stream on Facebook Gaming as he felt he would grow a more mature community since most people use their real identities, which means less toxicity. Opting to play Fortnite, which has over 350 million players worldwide, he quickly grew his audience and became a Facebook partner in just under ten months of streaming. But that many viewers creates a level of expectation that is hard to meet when holding down another career.

“I was a set builder for TV commercials, but once I went live with the streaming, it kind of blew up a bit – to the point where I unlocked supporters and then people were paying a monthly subscription to support me,” he explains. “So then once you've got these people behind you, you can't really be like 'I'm not here today, I'm doing 'real' work'.”

Making Money

Streaming platforms have a natural trajectory of how a streamer’s career might take off, from affiliate status to being made a partner, which opens up even more revenue opportunities such as running ads. But besides platform-specific features like subscriptions and donations, it’s also possible to set up external ways for viewers to support a streamer, such as a PayPal, Patreon or Streamlabs.

Having external avenues for supporters is especially helpful if, like Lugo, you’re creating content across multiple channels, or if you haven’t unlocked supporters to start off with and want to ensure you’re getting 100% of the proceeds, since channels like YouTube or Facebook take a cut.

“The one thing that people don't understand is that Twitch, like Patreon, fluctuates a lot,” says Lugo. “Sometimes you're not always going to have the same amount every single month that you get from people, because people will decide not to subscribe anymore, their financial situation will change, so you'll see it constantly go up and down.”

There are nonetheless ways to incentivise viewers to subscribe and donate. “That's actually a thing that is super common that I take for granted,” says Kieran. “When people subscribe to the stream or share Bits, there will be a personalised alert that pops up on the stream. So it's an incentive for people to get engaged in supporting you because their name popping up on your steam is like a direct interaction with you.”

Cosmetics like unique emotes, badges or having a supporter’s name up as one of the top donators of the month, may seem like small things but it’s an effective way of supporters displaying their loyalty.

While none of the streamers we spoke to actively promote donations, they nonetheless explain that others will have devised creative ways to generate them.

“YouTube has Super Chats, which are basically donations that are highlighted on stream when you pay a minimum amount,” Lugo explains. “Depending on what streaming software you're using, you could have little effects that pop up, but it also gets highlighted on the stream chat, where it pops up on the top where you can see the actual value donation.”

Pearce adds: “I don't actually promote donations at the moment, but something I am going to be including is an overlay showing the top three Star senders of the month. It's something that some people [compete for], so it gets a bit of banter going within the community.”

But while subscriptions and donations are the most common ways of generating income on a stream, it’s far from the sole source of income. Indeed, for many to make streaming a viable career, it becomes important to have multiple streams of income.

“You kind of need to build a brand around yourself and what you're doing in order to get more outside revenue,” explains Kieran. “Essentially, rather than just earning money off Twitch, you need to diversify how you're earning money as well.”

Sponsorship is one such example, which itself can take different forms. For high profile streamers, a brand may provide them with their gaming equipment or clothing but many can also stand to get a little more income by becoming an affiliate sponsor.

“With affiliate sponsorships, a lot of creators get codes to use for certain brands to get a certain discount,” explains Lugo, who is an affiliate for tech audio company One More USA and boutique pastry company Terrific Treats. “Every time someone buys something from these and uses my code, I get a small cut of that.”

Kieran also negotiated a rolling sponsorship deal with VPN provider Surfshark, which involves him actively promoting their products for a monthly fee. Then there are the lucrative requests for collaborations or appearances that may pop up any day of the week, such as his paid appearances on ‘Dungeons & Dragons’ YouTube channel or featuring in ads. And now he is a YouTube partner, he can monetise the video content he produces through Google’s AdSense.

Producing standalone video content, as opposed to livestreaming, can serve multiple purposes. For one thing, it can serve as promotion for your streams – and those streams can also provide you with that video content.

Kieran notes that most streamers also upload the content of their Twitch broadcasts, for which they only gain money while live, to YouTube. Those uploads then earn money passively – a process that’s enhanced by becoming a YouTube partner.

The Cost of Streaming

The reliance on finding alternative sources of revenue can make the business of streaming seem like a lot of hard work. The situation can be made worse when content creators find themselves drastically affected by a sudden payment policy change in a platform – or even lose their platform, such as when Microsoft abruptly shut down Mixer and merged with Facebook Gaming.

“There's a lot of times that I've had to question it and I think that everybody does at some point – even the larger streamers,” says Lugo. “When you're not employed by a company or a major site, it's always fluctuating. You're constantly putting energy into it and it almost feels like sometimes you have to be on it 24/7 in order to keep things going. Sometimes things can change on a dime that can really screw over a lot of people.”

There’s also an upfront cost involved for many where there’s a pressure to invest in the latest expensive tech equipment, which Lugo warns can lead to vanity: “A lot of people get messed up because they overspend too quickly and they spend on stuff that they don't need at the moment, thinking that's what will lead them to success. They think that showing off is going to help them bring in more traffic and more opportunity, and it really doesn't.”

Of course, investing in good tools to produce content is important – plus, they can also be claimed as expenses when filing taxes. The issue of taxes is definitely one that streamers, essentially classed as self-employed, certainly need to be mindful of – especially when taking account of multiple streams of income.

“All creators should take at least half of the stuff that they earn, and put it aside, because you still have to claim that as your income and the IRS does not play about,” Lugo continues. “A lot of people put themselves into a bad spot by not thinking of that, for not keeping that in mind, and they'll get into trouble.”

A career in streaming, therefore, comes with risks, making it difficult for someone to throw themselves into it full-time without a safety net or more privileged circumstances. Kieran admits that he already started off with some support, and offers advice for streamers who find success early on.

“It’s important to know when you have a really good month to not overspend,” he says. “Be careful of what you have, learn to save, because there'll be bad months as well. You may not have a rolling-on sponsorship, for example, and if you're relying on how well things are when it comes to crowdsourcing, it's just a matter of saving and budgeting and being careful.”

Pearce sold his car to help as a kind of collateral to see if he could ride the early momentum of his streaming career. Fortunately, he has not had to rely on these funds and even managed to buy another car. Meanwhile, his partnered status with Facebook Gaming means even more opportunities to earn even more money down the road.

However, he remains careful not to paint himself as an overnight success: “I'm managing enough to pay for my rent and stuff like that, and still keep a little bit to the side. It's not like I'm raking it in and I'm going out buying new clothes – I'm comfortable, but I'm not going to be retiring in a couple years.”

“I always wanted to be a full-time streamer, I just didn't think it would happen quite as quick as it did. If you want to get started, if you want to do it as a little hobby, then have the mindset that you're going to do it as a hobby. Anybody can go out there now and start streaming, and we've all got the same amount of chance of making it. So I do encourage people to go and try it, because it's the best thing I ever did.”

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