How will AI change the video creator tools’ value chain?

When it comes to selling software and hardware, the creatoreconomy resembles other types of hobby. Take sports: there are plenty of cheapfootballs and tennis rackets out there for consumers who want to start playing.For creating content, it is arguably even cheaper to get started. Most peoplealready have a smartphone, so they can begin creating and sharing contentimmediately. Monetising this long tail is big business for the video creatortools industry. Nearly 40% of entertainment consumers spent time creatingcontent weekly during Q4 2023. Many of those will have bought accessories tosupport that pursuit.

Micro purchases, such as ring lights, or subscriptions toentry-level video editing software are important because a healthy long tailhelps feed the rest of the industry. Even those companies who do not cater toit still rely on it for new business. The hope is that a significant proportionof long tail consumers become hooked on creating content and begin moving upthe value chain. The more time they spend creating content, the more likelythey are to invest in higher value software and equipment. This is because buyingmore expensive equipment is not just about need; it is also about visibly communicatinga commitment to their passion to peers and fans alike.

Buying your way to the top

The creator economy certainly helps perpetuate the notionthat the more a creator spends on the process, the more success they will have. Many large Twitch creators haveexpensive setups: a gaming PC worth upwards of £1,600; a DSLR camera in theregion of £1,300; a £400 microphone; plus hundreds of pounds in equipment toimprove their workflow. This sends a message to up-and-coming creators that improvingproduction quality is just as important as producing engaging content in orderto gain an audience. This is a lucrative notion for the video creator toolsindustry, despite numerous examples of creators having expensive setups andsmall audiences as well as superstar creators – like Jynxzi –having budget setups and still pulling in huge audiences.

Value chain disruption

So, what happens to this value chain when generative AI isthrown into the mix? Building on our previous post – ‘Ideasare king in the land of AI video creation’ – the answer is that the longtail becomes even longer and the incentive to buy hardware diminishes. This isfor three reasons. Firstly, a new breed of creator, who exclusively relies on generativeAI, will be born. How can companies persuade them to buy hardware when theyhave never used hardware to create? Secondly, video creator tools companieswill find it more difficult to persuade existing creators to keep spending onhardware when generative AI software can replicate the results. And thirdly,the generative AI modus operandi is to streamline as much of the creativeprocess as possible. This means more work carried out by hardware willultimately be absorbed by software over time. This will put pressure on hardwaresales.

Yet, this does not mean generative AI will completelysubsume hardware sales. Far from it. Hardware will command less control overthe long tail but will continue to have a place in the middle to upper end ofthe value chain, where creators need greater control than generative AI toolscan provide. However, what creator hardware companies do need is a new story. Thecurrent narrative of ‘buy bigger to get better’ will struggle to hold in theworld of generative AI. Instead, it needs to demonstrate that hardware andgenerative AI software are mutually beneficial for achieving the best results.This will mean not just finding and exploiting generative AI’s weaknesses butalso being complimentary to its workflows.