
Patreon ups its revenue cut, but grandfathers in old creators - pseudolus
https://techcrunch.com/2019/03/19/patreon-ups-its-revenue-cut-but-grandfathers-in-old-creators/
======
stefan_
Patreon is a classic VC tragedy. They are already a monopoly. They could be
fantastically profitable right now. All the growth that is there to get in
their market segment, they are already getting.

Instead of realizing just one of these things, they are escalating headcount,
exploding costs, manufacturing imaginary growth and squeezing their captive
audience for absurd "revenue cuts". Only to wake up one day and realize their
audience has left, pivot, straggle and fail.

~~~
irq11
Not to mention the fact that the product is objectively terrible.

It’s unbelievable how slow Patreon is, given that “website that shows images”
is a well-solved problem. Couple that with the all-dynamic-all-the-time,
continuous-scroll-all-the-things UX, and it’s one of the worst websites I use.
There must be serious network effects, if nobody has risen to eat their lunch.

~~~
seanieb
Complaining that their service is terrible while also complaining that they
are trying to generate more money to further invest in that
service....riiiighhht!

~~~
sitkack
It isn't linear, they could have spent less to have a more usable service.
Just look at the self inflicted mess that is AirBNB, the front end basically
crashes if you type too fast on a slow connection.

The complaint is about forced inefficiencies that Patreon then foists onto its
customers. They are balancing their books by upping their fees, not
streamlining their business and they can only do this (in the short term)
because they have a fairly captive audience.

We are about to see a whole sea of Patreon competitors.

~~~
stcredzero
_We are about to see a whole sea of Patreon competitors._

I really hope so! I had been using Patreon as a "poor man's microtransactions"
with $1 subscriptions (contingent on actually producing content, if possible)
on something like 40 creators. I moved over to SubscribeStar, but they don't
have the default $1 option.

~~~
tedmcory77
The default cost of a transaction is typically ~$.30 cents. Thats just payment
processing. Not alot of margin there.

~~~
stefan_
He has $40 subscriptions and presumably none of the creators only have his $1
subscription. At no point are they actually eating the fixed cost on a $1
transaction.

~~~
stcredzero
Actually, while Patreon did such aggregation, SubscribeStar seems to do each
transaction individually. I wonder if they aren't over a barrel because
insiders in the payment processing industry are locking them out.

------
TicklishTiger
It's stunning, that over 20 years of building the Web, we still do not have
the equivalent of cash.

Most creators that make big bucks on Patreon do not use it for donations. They
simply use it to sell stuff. Like
[https://www.patreon.com/PokeGo20](https://www.patreon.com/PokeGo20) who have
62k "patreons" paying for a "fake my Pokemon Go position" software. Or
[https://www.patreon.com/chapotraphouse](https://www.patreon.com/chapotraphouse)
who make over $100k/month by selling access to their premium content.

Patreon is needed because selling on the net is such a hassle. Nobody wants to
fiddle with their credit card unless it is important. Nobody wants to give it
to "someone on the internet".

It's funny, because it would be so totally easy to create something like cash
on the web. It just needs someone to start a business of selling tokens for
$1.10 and buying them back from whoever comes first for $1. Voila - internet
cash. Sell sealed tokens in stores (over the counter or via a machine that
eats coins) - voila! anonymous internet cash.

~~~
skybrian
What you describe is basically a gift card. But there are restrictions on them
because they could easily used for money laundering.

The reason we can't have nice abstractions involving money is basically
because it attracts criminals. Any business dealing with money has to figure
out how to deal with fraud or they don't last long.

~~~
TicklishTiger

        figure out how to deal with fraud
    

The token issuer would just has to stoically do two things and two things
only:

1: Sell tokens for $1.10 each 2: Buy them back for $1.00 each

Done. No fraud issues.

~~~
toast0
What does your token issuer do when the purchase of a token is revoked?

That could be from a charge back, bounced check, or because the cash was
determined to be counterfeit when deposited.

A big problem is the costs involved may be 10% at scale, but are certainly
more than ten cents per transaction, so you need to get a deposit, but I'm not
buying $50 worth of flooz to pay someone $1, because I don't know when flooz
is going to stop working. Anyway, it's not that hard for someone to run a
PayPal shop, as long as the product fits PayPal's tos and doesn't look
suspicious.

~~~
TicklishTiger

        What does your token issuer do
        when the purchase of a token is revoked?
    

Nothing. The token issuer is not involved in that. He just sells and buys
tokens.

When Joe buys an apple from you with a dollar note and you bring that note to
your bank - what does the bank do when Joe returns the apple to you? Nothing.

~~~
toast0
If you give me a token when I give you a fake note, and then you give me a
real note when I give you a token, how do you stay in business? And how do you
not have to deal with fraud issues?

~~~
TicklishTiger
That is not related to tokens. You could ask those question to any merchant.
No matter if they sell chewing gum or tokens. A merchant better watches out to
not take fake notes.

The token issuer sells a box of 100 tokens to a store. And charges the store
$110. Just like a chewing gum merchant sells a box of 100 chewing gums to a
store.

Last time I checked, there _was_ chewing gum in stores.

~~~
manigandham
...what?

So now all you're proposing is just a different currency with these tokens.
This solves absolutely nothing. Nobody needs to use tokens when they already
have real currency to use along with various transfer services to move money
physically and digitally.

------
no1youknowz
Frankly I am pretty happy about this.

Patreon has over leveraged themselves via VC investment and they have nowhere
to go but up.

Creators are not wedded to middlemen, especially those who provide little
value.

Other companies such as BitPatreon, SubscribeStar, etc have recently started
to gain marketshare, albeit a small one. It continues to grow.

Princess Leia said it best: "The more you tighten your grip, Patreon, the more
creators will slip through your fingers."

~~~
Buttons840
Speaking of slipping through fingers. I signed up for Patreon and started
donating $5 a month to the Godot game engine which I'm interested in. Soon
afterwards I got a message from Patreon saying that my account was suspended
for suspicious activity, and support told me I had to show a lot of personal
documentation to get my account reinstated. "You must go out of your way to be
our customer" they told me (in effect), I hope that works out for them. I just
donate to Godot directly now.

~~~
Traster
What you're describing there sounds like normal anti-money laundering
regulations that they are required to fulfill. Due to the nature of their
business there will always be a certain number of cases where they have to
investigate and seek documentation to show they're not just mindlessly
laundering money, as they scale up those processes will scale up to. In the UK
you basically can't deposit money into an online gambling website without
submitting a photographic ID - it's just regulation.

------
idlewords
Patreon somehow has _90 engineers and product managers_ [1]. This is a
ridiculously bloated payroll for a simple website serving ~1 million active
users. In a sane universe, they would be fine with a core engineering team of
3-5 and a couple of dozen staff to handle support, compliance, and stock the
office vending machine with snacks.

I conjecture the reason for the ridiculous headcount is that outside
investment requires it, in order to be able to continue to sell a story of
explosive growth.

I've seen this dynamic with rivals in the bookmarking space, where a project
that would have killed Pinboard dead with 3-5 engineers safely bloats itself
into failure by taking ambitious outside funding. Patreon is a good example of
an excellent mid-sized idea crippled by grandiosity, a recurring dynamic in
computerland.

[1] [https://techcrunch.com/2019/02/12/patreon-
product/](https://techcrunch.com/2019/02/12/patreon-product/)

~~~
charlierguo
Do you mind sharing examples of overfunded rivals? I'd be interested in
reading about their trajectories.

I'm also working on helping creators monetize their audiences (but
bootstrapped), and it often feels like Patreon is either going to vacuum up
all the creators or explode in a VC-funded blaze of glory.

~~~
idlewords
My favorite example is Kippt, who decided that dominating bookmarking was not
enough, and that they needed to compete with email. I had a beer with the
developers and came away quite worried, because they seemed energetic and
capable. Luckily, they took VC funding instead of focusing on the narrower
bookmarking space, and soon enough were drafting an "incredible journey" blog
post.

Start: [https://techcrunch.com/2012/06/14/yc-backed-kippt-goes-
colla...](https://techcrunch.com/2012/06/14/yc-backed-kippt-goes-
collaborative/)

Finish: [http://blog.kippt.com/next-chapter/](http://blog.kippt.com/next-
chapter/)

Something similar happened to trunk.ly, which had a lot of momentum and then
got harmlessly acquihired away by a lavishly funded competitor, AVOS systems,
who cratered so hard a few years later that I was able to buy the remains of
Delicious, my original VC-funded competitor, from them with my Pinboard
profits. Sic transit gloria fundi.

Compare both to historio.us, which has been chugging along for about as long
as Pinboard without VC funding and hopefully makes StavrosK some money.

------
Kye
The worst part: the plans are fine! It's fine. I understand the need to fund
what they do.

But, once again, they spin. From the FAQ: "Why the new plans?[...]The new
plans better serve new creators by offering options, including more powerful
tools for those that are ready for them. And they allow us to develop new
features like Team Accounts and Merch for creators who really want them. We
want to be around serving creators for decades to come. These changes set us
on a solid path toward that goal, and will fuel investments in core product
quality to improve the experience for all creators."

But this is nonsense. None of this is new save for team accounts and
merchandise. They keep trying to pretend nothing has changed, but _everything_
has. They want to become a full-service membership site tool while acting like
they're still the tip jar/bonus content thing it started as. Just own what you
want to be and _become it_ without this corporate spin every time you make a
small change in this direction.

Pivot or get off the gimbal.

~~~
cyberpanther
The whole situation reminds me of the opposite of BaseCamp. They got rid of
all tiers and went unlimited to simplify the product. And they still rake in
the dough. You fundamentally make your business more complex and costly with
all this non-sense. The difference is BaseCamp doesn't have VC influence. So
the cult of growth and squeezing people for every penny isn't in their DNA.

I think the VC and Silicon Valley influence on Patreon may kill it.

------
a_imho
I dont understand how these middleman services can charge even 1%. What is the
value added?

edit: Also, why is it always a percentage? A transaction is a transaction,
independent of the amount. A fixed cost. I'm probably ignorant, but sounds
like greed.

~~~
ekimekim
The single biggest factor is that credit card processors charge flat fees per
transaction, which makes donating $1 to a creator in isolation unreasonable -
the entire donation will be eaten by processing fees.

Patreon allows you to support 20 creators at $1 each, and only make a single
transaction of $20. Not to mention ease of use - it's a lot easier to click
"pledge $1" for someone whose content you're enjoying than it is to go sign up
for some new service or enter your credit card info. Paypal could offer
something similar but they don't. Effectively, the value add is network
effects.

As for the flat fee vs % cut, you're probably right - in terms of costs to the
business, transaction costs are a flat fee. That said, a crucial part of their
model is making it easy to sign up and get a couple of people backing you for
a few dollars each. And it therefore makes sense to effectively subsidise your
small users by charging more to your large users who can most afford it (and
who are getting the most value out of your service).

~~~
Deimorz
They're going to stop doing that. From the FAQ at the bottom of their page
about the new plans:

> Is Patreon still using shared patronage between creators to combine
> transactions and give creators a break on transaction fees?

> Founding creators will still experience the same reduction in payment
> processing fees from shared patronage. For future creators we will no longer
> offer savings for shared patronage because it lacks transparency and it’s
> not equitable. Some creators save money and some don't, depending on a
> number of factors including how many patrons you share with others. As a new
> way to create savings for creators that is more fair and transparent, we are
> introducing the new low micro-transaction rate for pledges under $3.

~~~
ekimekim
Well, shit.

I don't understand why they're so bullish on this. They've tried to get rid of
the single-transaction model before. I just don't get it. All they're going to
do is give more money to paypal, at the expense of the creators _and
themselves_.

~~~
kbenson
I always assumed they pocketed that extra revenue themselves (why not, it's
the advantage of their platform and how I assumed they made money). I'm a
little surprised to hear they handed it back, but I also thought they subsumed
that cost within their own fees (like I assume the App/Play stores do). I
imagine they probably spend a lot of time explaining why the fees don't line
up exactly month to month because if this, since it can lead to different
numbers month to month even if your patrons and what they've pledged to _you_
doesn't change.

How many support requests about this, and arguments that have to get into very
specific details on accounts which bring in $40 a month in donations does it
take before any gains are lost? Or if not lost, highly variable and cause
support personnel staff needs to fluctuate (which I imagine is harder to plan
for and scale quickly than hardware/servers)?

~~~
Dylan16807
It's really easy to explain, though. Especially when they can do a trivial
calculation to show how much less money a creator would get with predictable
non-shared fees. It's one of the less confusing parts about the site, really.
And it's one of the _biggest reasons people choose patreon_ , which they keep
trying to forget.

------
michaelbuckbee
I'd be concerned if I was Patreon: they're a somewhat classic example of a
"feature" rather than a standalone service.

We're already seeing services like YouTube implementing these low cost,
support a creator type subscriptions natively.

~~~
wiseleo
Content creators have been burned by YouTube more than once or twice. I
subscribed to several premium YouTube channels, then YouTube discontinued paid
service and caused me to lose access to my paid content, then it introduced
new paid service much later.

Patreon's appeal is being independent of YouTube's whims. Of course, now
content creators are subject to Patreon's whims.

Companies really should strive on being focused on stability for users. My own
product is modeled more on Salesforce API that has multiple versions available
concurrently. Users will not lose features even if they are no longer
profitable to support.

------
emilfihlman
Is selling a patreon account now valuable? Ie if a company holds a patreon
account, sell the company with just that asset to someone making similar
content with a small transition period to fool any possible rules >:)

~~~
petercooper
Maybe, but I expect you'd rarely ever see it due to the personal element.
Podcasts are similarly valuable once they have a regular roster of advertisers
but you almost never see them getting bought/sold because they're too
associated with the hosts.

~~~
hayksaakian
I've registered a patreon account years ago that has no sentimental value to
me, and I assume many others are in the same boat.

Much like social media accounts, which are bought and sold regularly, there's
now a market for patreon accounts.

------
raiyu
There are times when companies really do need to experiment with their pricing
model because they are bringing something new to the market and the early
rates which were subsidized through venture capital no longer work.

A good example of a company doing this and finding it's footing is classpass.
The initial plans were quite the value to consumers, but also many studios
that were part of ClassPass felt the extra burden without really getting much
revenue. So they needed to update their pricing and they made some hard
decisions and saw that users fell into two camps. Those that barely went, and
those that went a lot so they ended up with a new pricing structure which
raised rates to consumers, caused a huge public outcry, but ultimately allowed
the company to settle into a good footing.

Here Patreon seems to definitely be raising rates as a response to the VC
dollars raised and the need to continue to grow their revenue. The challenge
for them was that when the initially raised, their valuation was far
outrunning their actual revenue. While the platform had many users, the actual
revenue that ended up in their company after paying creators didn't justify
the valuation or anything close to it.

So now they have to raise rates a second time, after going through this
process in late 2017. At the time there was a huge out cry publicly and the
company stated that they would not make such large moves without consulting
with their creators first, but obviously with something like this unless a ton
of creators are publicly saying, wow this is great, exactly what I needed, it
means going to the creators wouldn't work as they don't need these new plans.

Certainly getting on the VC train is a huge decision and one that ties your
business to ever increasing returns and a scale that is challenging for many
companies to meet.

They could have raised a smaller round, from more long term investors, that
weren't only interested in the VC cycle, given themselves some extra cash,
built out features, and continued to support their community, but obviously
they chose a different route.

Very likely that if this doesn't go well there will be another large
announcement in a 12-18 month window.

------
robertelder
I had been considering setting up a Partreon for a while now, and seeing this
headline was what pushed me to convert my existing account to a creator one
just now:

[https://www.patreon.com/RobertElderSoftware](https://www.patreon.com/RobertElderSoftware)

If you've ever seen my blog posts show up here on hn and you'd like to see
more of them, then this is one way to make that happen more often :)

------
rush86999
just switch to something else. [https://gumroad.com](https://gumroad.com)
seems fine. It might be hard to monopolize this business because patrons care
more for the content creators than where they keep their home base.

------
InterestBazinga
What is stopping someone like Twitch to have their own "Patreon" service that
allows donations?

~~~
Gamer1555
They do, it's not as robust Patreon's is but it does allow for tiered
subscriptions ie 5$ per month which is standard, and say tier 2 being 10$ and
tier 3 being 25$. The perks are getting badges and emotes which people seem to
accept well.

------
nkkollaw
They are absolutely desperate.

I give them 2 years.

------
benatkin
If Patreon is providing a similar service to twitch or YouTube, then then 8%
is pretty low. I have never used Patreon so I don’t know what their premium
content platform is like. Is it mostly just like a blog that requires readers
to be logged in?

~~~
ihuman
Patreon doesn't provide a service similar to Twitch or Youtube. You can post
links to videos hosted on those services, but you can't host videos on patreon
itself. You can only post text and images.

Patreon is basically a blog that requires readers to be logged in and pay for
access to each blog. Creators usually use Patreon in conjunction with another
public content distribution platform, like YouTube.

~~~
firloop
Patreon also hosts mp3s and provides RSS feeds for podcasters, whom of which
are among some of their largest users. It wouldn’t be inconceivable for them
to start hosting video content.

------
mercwear
This is effectively a price increase and a good move for the future of
Patreon. This is a fat cat capitalist opinion but they should increase the cut
for all existing customers too. Grandfathering is a nice gesture but the
additional revenue generated from applying this change their current customers
would allow Patreon to grow faster and roll out new benefits to all customers.

~~~
lostapathy
As someone who is only a consumer and not a creator, what benefits am I
waiting on Patreon to grow in order to reap?

~~~
Eric_WVGG
“commerce tools like CRMs and merchandise to try to stay ahead of Twitch,
YouTube and Google” apparently. I had no idea that Patreon was competing with
Twitch, YouTube, and Google, though… are they also competing with General
Electric and Proctor-Gamble?

Is the idea that everyone competes with everyone for every dollar and the
ultimately capitalism will be a pile of dead bodies with a confused Taco Bell
employee sitting on top?

------
dwighttk
Is this designed to push video creators towards YouTube’s channel memberships?

~~~
bpicolo
Doesn't YouTube take a 30% cut? That's drastically higher than the 8% Patreon
is pushing

~~~
delecti
While true, for many creators it's also closer to where the content is
actually created/hosted.

