What Are Worker Cooperatives? (Patreon)

 
Last summer, I joined my team at Wild Blue fulltime, primarily working as our lead concept artist.  I have gotten SO many questions since then about what it's like to create a worker cooperative and how they differ from traditional company structures.
This is meant to just touch on some of the basics, but you can find more resources around the web on how co-ops are set up in other industries. We have a unique take on how we've structured our co-op for games, but they come in many different forms and for many different functions.
I refer to a variety of different but related business models in this article to shed light on a global ecosystem of values-focused business models. I'm embedding a lot of sources into the article (yall, I've done a lotta Googling for this one) but I also include resources at that end. I highly recommend checking them out.

What is a Worker Cooperative?

A worker cooperative (or worker co-op) is a business model under the larger umbrella term "cooperative." It is a worker-owned and -controlled business. They are (usually) for-profit companies that are driven by their shareholders- but in the case of co-ops, the shareholders are the workers. 

 Most "co-ops" in the game industry are not legally incorporated as worker co-operatives, which are specifically C-Corps (Cooperative Corperation.) Wild Blue Studios is the first C-Corp in the games industry in the US. Some game companies that call themselves "co-ops" are more accurately S-Corps or LLCs that "function with cooperative principles." There is a lot of confusion around these definitions and the legal jargon. 

The value created by the company is funneled to the workers, not C-level executives or external investors or a singular owner. In practice, the profit I generate as a laborer goes into my wallet. As a worker-owner, I have a voice in the direction and decisions of our company.
Keep in mind while reading this article that there are several other kinds of cooperatives in different industries with very different functions: financial co-ops, agricultural co-ops, consumer co-ops, housing co-ops, producer co-ops, and so forth. There are other types of worker-focused models too, like collectives. With a little research and creativity, it's actually easy to come up with unique ways that other co-op models could function in the games industry!

What is a Worker-Owner?

A worker-owner works for the worker cooperative and owns a share of it. They participate in democratic decision-making and help to produce value for the company...which they directly benefit from. I'm a worker-owner (hi!)
Each worker-owner gets one vote. We don't have one person making decisions or barking orders or steering the ship for the rest of us. This does not mean that everyone in a co-op specializes in the same skills or that there is always zero hierarchy, as structures vary from co-op to co-op.

What Worker Co-ops Look Like

Relatively, there aren't a lot of worker cooperatives specifically in the US- Democracy at Work says there are under 800 worker co-operatives specifically in the USA, probably closer to 500, but interest in this model is growing once again as workers want more control and agency over how their labor is used. There are fresh surges in popularity happening globally right now, including in game and tech. More than 150 worker co-ops have been founded in the US in the 21st century.
Other regions around the globe have significantly higher co-op concentration than the US. Italy alone has around 25,000 worker co-ops (for context, Italy’s population total is about one-fifth of the US population), and a third of a certain Italian region's GDP is produced by cooperatives! Hubs of co-ops exist all over the world, including France, New Zealand, Switzerland, and Canada, but the history of cooperative labor and collective benefits extends far beyond Westernized and capitalist countries. Synopses of cooperative history tend to occur through the Western lens- often stating the modern movement began in the 13th century in Switzerland, around the Rochdale Society in England in the mid 1800’s, or during the Industrial Revolution in Europe- but this tends to erase long-standing approaches and systems within what are often non-capitalist and/or non-Westernized societies, so keep an open mind!
Any business in any industry can be a co-op. Certain types of co-ops comfortably scale upwards to hundreds or thousands of people, but the average size of a co-op in the US is somewhat small: about 50 people.  The median size is 10 people (which is closer to Wild Blue's current size.) 
In some states, a company can be incorporated as a cooperative, but many US worker co-ops are formed as an LLC, S-corp, or otherwise and then function internally with cooperative principles. Guidelines in the US for what makes a co-op a co-op varies from state to state, and sometimes, it's easier to start the company as an LLC and then transition legally into co-op status or be set up as an LLC with equal worker ownership. 25% of co-ops formed in 2017 were actually converted from another business model.

Worker cooperatives are a constructive business structure that is an alternative to traditional capitalist hierarchies. They focus on funneling value created by workers to the workers that create the value. Co-ops historically have often come out of circumstances in which preexisting companies and governments were failing to cater to the needs of the many instead of the few. They are founded to benefit communities and laborers collectively, reduce income inequality, establish transparency, create fulfilling jobs, and balance power.
Co-ops = democracy in the workplace.

Working Through a Coop is Different

I'm often asked if I'm better off working at a co-op. Every co-op situation is different and I cannot speak for everyone, but my personal answer? Objectively yes. 
Having a team provides huge benefits over freelancing solo. My peers critique my work before sending it to the client, so my output is better and my skills have regular opportunities to improve. We negotiate as a team and have AMAZING fulltime producers making sure we're staying on track, so a lot of self-management work is taken off my plate, I don't have to hunt down clients or payments, and my pay is more fair than when I was working in-house. Working in a co-op model, I have a say in which contracts we take, how we structure the business, how much I and my peers are paid, and who we choose to work with.
My income isn’t magically higher just because we’re in a co-op. It’s the result of long-term democratic decisions about how we spend our resources, pay transparency in action, and our team collectively and responsibly choosing how we direct our time and labor.
The results are simple: transparency about pay and goals, a culture of care and mutual support, more mentoring opportunities, all while still having a degree of agency over my work and our company.
For-profit corporations are engineered to funnel profit to investors, owners, and stockholders that are not workers. Those people buy into power and workers don't get a vote.
Co-ops are engineered to maximize profit for all worker-owners. Each worker-owner gets one vote.

Co-ops are a Game-Changer and You Should Give a Shit About Them:

Workers in co-ops tend to be happier and more productive
Multiple studies have concluded that workers in cooperatives have remarkably higher job satisfaction than workers in conventional structures.
A study of American timber workers found that "co-ops are more efficient than the principal conventional firms by between 6 and 14 percent,” and these conclusions have been found across industries in multiple other studies and through other research. Co-ops also experience less employee turnover and company closures.
Studies emphasize that this is a result of workers in co-ops receiving the direct benefit of their labor- they're more emotionally invested in the work they're doing and they know they have to keep working to keep revenue up for their team. The labor done by worker-owners is also more than just work they've been assigned to by a boss- it's work they're choosing to do and a role that they've chosen to take on based on their strengths, values, and passions.
Time and time again, having democracy and agency in our jobs has proven to be an essential part of worker fulfillment and productivity. I think laborers being happy and finding joy in their work is the most important, but there are huge financial benefits to working democratically and removing dehumanization from the workplace, too!

Co-ops are equally or more resilient than other businesses
It has been found that, if anything, cooperatives actually outlive their counterparts. The world’s largest worker’s co-op, Mondragon in Spain, has credited the flexibility and democratic nature of their co-op model to survive recessions since they were founded in the 50's.
In 2007, the World Council of Credit Unions found that "after 5 years, 90% of cooperatives are still in business, while only 3 – 5% of traditional businesses are still operating after 5 years."
In the COVID-19 era, worker-owned businesses in San Francisco are currently experiencing lower layoff rates than those with traditional structures.

Worker-run companies are founded upon and act on values that benefit the community
When a company is truly created to benefit the community and workers instead of to funnel profit, it behaves as such. Credit unions are more willing than corporate banks to approve mortgages for low-income and non-white households. Money spent at local cooperatives is being circled back into the community. More than half of cooperatives in the US were created with the intent to help vulnerable and low-income workers.
An excerpt from Benefits and Impacts of Cooperatives by Jessica Gordon Nembhard:

Cooperatives address market failure and fill gaps that other private businesses ignore; such as: provision of rural electricity or other utilities in sparsely populated areas, provision of affordable healthy and organic foods; and access to affordable credit and banking services, to affordable housing, to quality affordable child or elder care, to markets for culturally sensitive goods and arts.

Co-ops have astronomically lower pay inequality 
Mondragon has salary ratios between their highest paid and lowest paid workers that max out at 9:1. This ratio was determined democratically by the workers to reflect the experience of each worker and assign salaries appropriately without becoming exorbitant. 
By contrast, CEO to worker compensation in the US varies, but is around 271:1. Other estimates reach 312:1 or higher. The money that goes to CEOs pockets doesn't magically appear. It is income that could be going to workers that are creating the profit and should be benefiting from it.
When income for the business is consistent, the co-op model can solve the issue of pay inequality. During rough patches, the members decide collectively how to mitigate risk and stay in the game. Balanced pay scales can be a big part of why workers in co-ops may be paid more than workers in corporate structures, which is how it has played out in my personal situation.

Employees at worker-owned companies have agency over their pay
Worker-owners at worker cooperatives collectively decide on what people get paid. Focus on humans over profit has positive effects on pay rates, as well as overall compensation packages that include healthcare and other benefits.
As pay inequality is reduced in the workplace, balance in pay can be reached and, as a result, the majority of workers might make more income. If Apple paid all of its employees at the same rate in 2013, all 98,000 of them would have made 6 figures. When the cooperative thrives, the workers reap the benefits. I have gained value as a worker since working in-house AAA a few years ago and am in a unique position, but I have personally witnessed and benefited from this.

Challenges of Starting a Co-op

There are certainly unique challenges to founding a co-op, but many commonly brought up obstacles apply to the founding of any new company. Starting a co-op is neither easy nor quick. The realities of bad actors, growing pains, funding issues, and the necessary unpaid labor to get any new business off the ground can apply in the majority of startup situations, but I do want to highlight some things that stand out. 
The most obvious universal challenge for new businesses is developing streams of reliable, consistent income. What value are you providing to customers? What markets are you catering to? What are the strengths and roles of each worker? How are you advertising your product? Just like I recommend to new freelancers, you must be strategic in such an absurdly competitive marketplace.
The next comes from networking. Do the co-op members have strong enough professional networks to get the team's message/goods/services noticed? We have been able to rely heavily on preexisting industry relationships and found that to be essential for having a strong network to stand on when we're able to take on more contracts or clients.
Are you offering something strong + unique enough to generate income for multiple people? As outsourcers, we compete with a global market. We need to prove that what we offer is worth our price tag when potential clients could go with cheaper outsourcing corporations that might exploit their workers or function in areas with a lower cost of living. 
Building a constructive team of people that share values and are invested in each others' success is always difficult. It's especially important to find long-term allies and be very intentional with who you add to your team in the case of a co-op. Does everyone truly want the best for each other? Is there trust and respect between members? Are workers willing to make sacrifices to help each other out?
It’s important to re-emphasize that all of the points above apply to any new business, not just co-ops.

Here are the common criticisms/concerns regarding co-ops specifically:

Difficulty to acquire start-up capital:
The reality is that VC funding and investors usually just...aren't interested in co-ops because we generally have conflicting motives. We as worker-owners are literally using a model to direct produced value to the workers. Investors invest in order to get value from workers.
There are other methods for co-ops to get funding. There are grants available and financial support by non-profits that are founded to support new cooperatives, as well as loans for cooperatives by co-op banks, like the National Cooperative Bank. Crowdfunding is often an option. You can see a list of potential funding sources at 13:21 minutes into the Own the Change video that I also link below in resources.

Difficulty to scale:
Outside of some enormous cooperatives like Land O' Lakes (10k employees), Ace Hardware (7.5k employees), and others that are mostly in agriculture and service, most worker co-ops in the US are under 50 members. Many larger co-ops have democratic systems in place in order to ease communication and inter-team needs and concerns as a large company. More resources are being formed to help co-ops scale upwards, but do keep in mind the different types of co-ops while reading about scale.

Workers used to a capitalist system can struggle to adjust to a democratic workplace:
Leaving corporate America and adjusting to a democratic environment presents interpersonal difficulties. Workers need to be willing to adapt to a new structure, new "normal," and new values. With this, the team needs to be able to balance human development of the members and business development of the company in order to keep workers happy and profits coming in. This challenge is especially important and can be easy to underemphasize. Communication is absolutely essential.

Adjusting to a democratic workplace

This is a unique challenge that is especially important when founding and participating in a co-op. Democracy doesn't happen once every four years in a voting booth- in a co-op, democracy has to be practiced every day. Worker-owners have to learn how to act in their workplace in new ways- they need to be self-motivated, humble, willing to speak up, and engaged. When workers don't participate, the democratic process that co-ops rely on gets messy and unbalanced. It results in mistrust, resentment, and frustration between workers.
We're used to showing up at work and being told what to do and how to do it. This doesn't happen in the same way in a worker co-op. It's important to learn how to participate in meetings, understand the bylaws that you're helping to write, speak up, engage in decision-making conversations, and take initiative in your work.
Worker-owners also have to adjust to a new format of hierarchy and power. Experienced workers entering a co-op and acting like a task-giver in a capitalist corporate structure doesn't work- they need to learn how to trust their peers and acknowledge what they do or do not have control over. This can be really challenging for folks that have never worked in a truly democratic workplace, and it requires practice and patience to relearn how to communicate.
Being trained as an organizer through a union can help with this. I've found my organizer training through CWA and GWU to be incredibly effective in teaching me how to participate in meetings and share my voice and labor (I'm still learning and always will be!)

What could co-ops look like in games?

• Indie teams
• AA studios....or AAA studios!
• Freelancers working collectively
• Teams of developers porting games 
• QA or localization outsourcers
• Art, writing, programming, etc outsourcing studios (like us!)
• Indie publishers
• IT professionals
• Hardware producers
• Digital storefronts
• Groups of streamers or journalists

Or a hybrid of any of these, or a million other formats. The possibilities, I cannot emphasize enough, are endless. We cannot be restrained by what we cannot yet see- we can build the future and create wonderful new things.

Sooooo what is Wild Blue Studios?

Wild Blue is an art outsourcing house in the entertainment industry. We've worked with a slew of clients in games, including Riot, Wizards of the Coast, Phoenix Labs, Proletariat, and more. We pride ourselves in the quality and adaptability of our work, as well as our values and collaborative nature.
We are hired and we work as a unit. If someone wants to hire me as a freelancer, I direct them to Wild Blue. We create art together, feedback each others' work, share resources and critique in a constructive setting. We work hard and play hard together. We have a core team of about 6 people- a mix of artists and producers- and then have a wider pool of artists that we lean on, network for, and collaborate with depending on the ebb and flow of our work. Everyone works remotely and communicates digitally, so I get to stay in the Midwest and our profits don't have to pay for renting an office space or other large expenses (AKA more money in our wallets.)
I feel confident saying that we do our absolute damnedest to be proud of what work leaves our studio, and as well as the communication and relationships that occur within it. We're constantly learning along the way, but we're all incredibly invested in doing things the most darn right that we can. 
[The Wild Blue website] [Wild Blue on Artstation]
Thank you all for reading, I hope this helps paint a clearer picture about what co-ops look like and do! Seize the means of production, etc etc. 

Resources:

Here are some of my favorite links for learning more about co-ops:

• Democracy at Work's FAQ
• The Creative Independent: How to Start a Cooperative 
• GWU's Worker Coop Resource <- this includes more international resources.
• How indie devs can form their own worker cooperative
• A Technology Worker's Guide to Starting a Worker Cooperative
• Lessons from KO_OP: Surviving on the Fringes 

Coop-starting resources and organizations in the US:

• US Federation of Worker Cooperatives
• Democracy at Work
• The Democracy Collaborative
• Tech Co-op Network
• Shared Capital Cooperative
• National Cooperative Bank
• start.co-op

And further media:

• Unions and Worker Co-ops, Old Allies, Are Joining Forces Again
• Wage inequality in workers’ cooperatives and conventional firms
• The resilience of the cooperative model
• Overview: Worker Cooperatives by Community Wealth
• Worker Cooperatives: Pathways to Scale
• Own The Change: Building Economic Democracy One Worker Co-op at a Time (video)
• International Co-operative Alliance: Facts and Figures