How Do Platform Subsidies Affect Creation, Engagement, and Pricing?

Abstract

Content creation costs pose a threat for online marketplaces aiming to attract new users. In response, platform managers devise new policies to subsidize these costs for content creators. In this study, we analyze data from a leading NFT marketplace to examine the impact of a lazy minting policy, which enables content creation without upfront fees, on created content, engagement with that content, and pricing. On the creation side, we observe a volume-effort trade-off, with creators producing more work for the market but exerting less effort during creation. On the engagement side, we note a decrease in engagement, particularly affecting creators with higher engagement levels prior to the policy change. Additionally, we explore the mechanism driving this reduction and find that effort and attention play crucial roles, while a larger follower count does not shield creators from decreased engagement. Furthermore, we analyze token prices and sales, revealing no evidence to support that creators pass on the reduced creation costs through to first-time buyers. Finally, we discuss our contributions to the literature and its implications for platform managers.