Kapwing has shut down Tess.Design, the artist-royalty AI image marketplace it launched less than two years ago, after failing to build enough supply or demand to survive. CEO Julia Enthoven published a detailed post-mortem this week laying out what went wrong — and the picture is not flattering.
The concept was genuinely inventive. Launched in May 2024, Tess.Design offered a marketplace of fine-tuned Stable Diffusion models where every generated image was tied to a specific consenting artist, who earned half of every royalty. To get artists on board early, Kapwing offered advances of $300 to $4,000 to 25 founding contributors. The legal scaffolding, built with law firm Fenwick, rested on a creative copyright argument: because outputs were stylistically transformed into a given artist's aesthetic, that artist could be considered a copyright holder of the derivative work — and could license it downstream to enterprise clients.
In practice, getting artists to sign up was miserable. Kapwing spent roughly six weeks cold-emailing 325 high-end editorial illustrators — the kind published in The New Yorker — and converted just 37 of them. Enthoven describes the resistance as intense: artists who opposed AI on principle, others worried about brand dilution or peer judgment, and a creative community she characterises as deeply hostile to AI throughout 2024. Every one of the 11 illustration agencies Kapwing approached turned them down, killing any hope of a label-style deal that could have aggregated supply quickly. Without that infrastructure — the kind that accelerated Spotify's early licensing — the platform was stuck signing artists one by one.
The demand side had its own problems. Major media companies including Rolling Stone and Fortune were genuinely interested in a legally clean AI image solution. Their lawyers were not. With Getty Images vs. Stability AI and similar cases still working through the courts, enterprise procurement teams would not sign off. One unnamed US media outlet came close to an enterprise contract before its legal department killed it. No amount of novel licensing architecture could substitute for settled law.
The final numbers at shutdown: $12,172 in gross revenue against $18,000 paid out in advances. Not a single artist earned enough in usage royalties to recoup their advance, let alone turn a profit.
Enthoven is candid about what she'd tell anyone attempting something similar. The editorial illustration market, unlike music or stock photography, has no label or agency layer willing to aggregate supply — which means every artist has to be courted individually, a process that resists the kind of speed a startup needs. And counting on enterprise buyers to look past active copyright litigation, she writes, was wishful thinking. For the broader AI tooling industry, Tess.Design is a concrete early example of how two constraints — hostile creator supply and unresolved legal risk — can quietly compound until a product has nowhere left to go.