I’ve got some exciting news! Patreon has just secured an additional round of financing ($60M!), which means we will be scaling our team, building faster, and building more — all in service of getting you paid what you deserve to be paid, for the value you give the world. YESSS!
So why is Patreon changing their fees now, when they just got a ton of money and can basically do whatever they want in order to grow? Their Zendesk article (https://patreon.zendesk.com/hc/en-us/articles/115005631963) isn't much help:
Q: Why is Patreon doing this now?
A: Patreon exists to allow creators to get paid what they deserve to be paid, for the value they give the world. This is awesome and to continue this vision, we need to constantly evaluate our processes. As we work to deliver bigger and better features for creators and patrons in 2018, we felt like sooner than later made sense to put this change into effect.
This doesn't actually answer the question: why do the fees need to be changed at all, whether sooner or later? Were creators asking for this change? What was wrong with the way it worked before?
The obvious answer is that Patreon needs more money for some reason. But… they just raised a bunch of money. So I really don't understand how this change makes sense or helps anyone.
Kickstarter is a Public Benefit Corporation, so I'm slightly more enthusiastic about the potential of their offering (Drip).
I'm sort of suspecting the same will happen with drip. While the sentiment of a PBC is nice, it doesn't really do many of us much good since we figure we have no chance to host there anyways. Even at the current fee structure, Patreon is still far better than past tries at adult related crowdfunding services, like Offbeatr (which you had to pay to even be considered for).
An Open Letter to Patreon | https://news.ycombinator.com/item?id=15547801
HBomberguy is a favorite of mine - he publishes high-quality, researched, edited videos, an average of once every few weeks, gets 100k-350k views per video, and via Patreon makes $6k/video. There's no way he'd make even close to that much via YouTube.
edit: Nice, you're 'nemothekid' - part of my last name is in your username :D
What perverse incentives are you talking about?
What are the payment processing fees?
The fees depend on the payment method as well as the currency.
When adding money into Liberapay the fees are:
Card (EURO): 2.106% + €0.21
CARD (USD): 2.925% + $0.35
Bank wire (USD/EURO): 0.585%
Direct debit (EURO): €0.59
Direct debit (USD): not supported
Withdrawing euros to a SEPA bank account is free, transfers to other countries cost €2.93 each.
Withdrawing US dollars costs $3.51 per transfer regardless of the destination country.
Nope. And the absolutely universal response, from tiny artists all the way up to Chapo Trap House (the largest Patreon creator by far) has been firmly against this change.
But investors put in money expecting to get more money out. That's the only credible explanation I can see. They're lucky that Drip isn't up and running yet so there can't be an immediate reaction.
I currently give $38 a month to 19 creators ($2 each, I don't really have much to give). So that is like what $13 in fees for me. I think not.
This just kills $1 donations (and in my mind: anything up to $10)
No, 19 * .35 + 38 * .029 = 7.752. Still quite a lot of course. This change really disincentivizes making multiple small donations (no shit). If instead you'd pick 4 creators to give 9.5 to, the fees would drop to under a third.
> how will this earn Patreon more profits? Am I doing the math wrong?
Most patrons provide many small donation amounts. Patreon will, as called out in the article, get a lot more money from those patrons.
If you assume a 2.9% + $0.30 CC charge fee (i.e. Stripe), and a patron giving $1 to 100 artists:
Before: Patreon gets $5 from their cut from the artists; the patron is charged $100, the artists each get $0.67.
After: Patreon gets $5 from their cut from the artists, and $34.70 from the additional fees; the patron is charged $137.50, the artists each get $0.95.
Drip is currently in an invite-only period for creators. We plan to open up more early next year, and you can drop your email in at the bottom of the homepage to be notified when we do.
From the end user perspective, as a result of this latest change they will be charged five transaction fees. However, from Patreon's perspective, that's not an efficient way to process the payments. What Patreon can do is bundle up the five $10 payments into a single $50 payment. What this means is Patreon will only pay for one transaction fee, but they'll charge this user for five transaction fees. The four extra transaction fees that Patreon have charged for are then used to boost Patreon's profits.
Which is frankly insane, but does explain the change.
The only real winner in this will be Stripe and its ilk.
Thanks for finding and posting that.
I want Patreon to be different. I want creators to feel understood by Patreon.
The only way creators will feel understood is to include them in the decision-making process. If I were a creator making money on Patreon, I'd be organizing a new site, co-owned by other creators, where everyone is involved in the decisions made by the company.
It just takes someone to launch this, and very hard work
Filthy communist ! /s
Today they are still 6th but with 4million members.
BTW: They recently been running a hilarious advertising campaign on tv, based on a story about a pivoting SV company that decides to do just this with a pilot in Norway.
For what I know it might be a similar agreement as the one Mozilla uses but I don’t know.
Investors clearly want them to be profitable; maybe not now but eventually.
They have a $450m valuation and $150m in sales, for which they get 5% ($7.5m) . According to Crunchbase, they have 50-100 employees. Assuming only 50 employees, they are spending at least $15m in wages (plus health insurance, etc.), plus fixed expenses (SF building, AWS, etc.) and advertisement.
So there is no way they would be making ends meet with their 5%. Even assuming they become 5x bigger while keeping the same expenses, they might still be losing money. The only way for them is to raise fees.
Sure, another option is to keep costs down, everything streamlined, don't spend on advertisement, etc. but as others pointed, you can't pick that route if you have investors.
> In consumer (markets), even a great product will often get blown out of the water if a competitor with a worse but good enough product has a deep, deep marketing war chest. If you space has a VC backed competitor, you have no choice but to also raise money and fight a war of attrition
I could well imagine investors to occasionally say that. The fees may have been a condition for getting the capital.
The backwardness of the timing is well within the range of weirdness that can be expected from a compromise that was a difficult struggle to get.
This fee feels a lot like the fee a merchant would be charged for a credit card transaction, so in essence Patreon is passing on their fees.
I wonder why they don’t have a structure akin to micro transactions, where there is no fixed fee but a slightly higher variable fee. I’d guess most of their transactions are probably small enough.
And it worked pretty well! A lot of creators got paid, myself included.
And now here's Patreon with a new fee structure that appends a percentage plus a minimum fee to every single transaction. So much for micropayments.
I think it's way more likely that Visa/MC came knocking on Patreon's door and told them to stop doing that, forcing them to either eat the fees, or pass it on to someone else, and now Patreon has to eat the bad PR.
I'm not saying you're wrong- I just don't understand what leverage the CCs would have.
They're doing it because of demand for instant-charge because their main business is being a paywall service.
Capital != revenue
> The obvious answer is that Patreon needs more money for some reason.
Probably because like pretty much all other businesses, they'd like to see a profit some day.
They are doing it because a large portion of creators use Patreon as a paywall service not a donation platform. Using it as a paywall is the source of the demands for instant charge (not waiting until 1st of the month). The changes are just Patreon bumbling through stupid decisions trying to deal with that issue.
More details https://wiki.snowdrift.coop/market-research/other-crowdfundi...
"The extra cost isn't tiny if you pledge small amounts to many creators. Pledging $100 to 1 creator will now cost $103.25 which is reasonable. Pledging $1 each to 100 creators will now cost $138 which is not reasonable"
So typically I see two charges per month. They can't charge me $0.35 per charge because the # of charges varies without any ability for the customer to predict and cannot be defended reasonably to customers.
Instead of revamping their billing groupings to ensure that each patron is charged once per month, they are charging $0.35 per creator, which is the absolute worst case scenario here.
So to me, the ripoff is that they charge me for two credit card transactions, but instead of $0.35 per transaction, they charge $0.35 per creator within a single credit transaction - when that $0.35 is not charged to them by their merchant processor for those individual creators.
I would have been fine if they'd simply tell me "X creators = Y transactions @ $0.35 each + 2.9% of amount", where Y is virtually always some tiny fraction of X, but that they instead say "X creators = X transactions @ $0.35 each + 2.9% of amount" to avoid regrouping their billing is a misuse of the word 'transaction' as they implement it.
EDIT: If Patreon has been charging $0.35 per patreon to their creators, then this is not new profit for them, but is instead the same profit now collected from patreons instead of creators. It's still unacceptable to me, because they're charging the worst-case scenario (one transaction, per patreon, per creator) and then optimizing for less than that and not crediting the excess (Y-X) x $0.35 back somehow. If their 5% take isn't enough to cover transaction costs, hiding a profit in (Y-X) x $0.35 is not the correct way to solve that.
EDIT: It's possible that Patreon was censured by Stripe somehow and is going to stop batching charges period full stop come January, and so then Y=X for all cases, at which point this all starts to make a lot more sense.
A reasonable change is to make one charge per month for the total you've pledged. The CC charges for $100 would be $3.25.
No one would object to $3.25 per $100.
EDIT: "why they're" -> "why they appear to be"
EDIT: I filed a support ticket asking if my 2018-Jan charges will be batched or not. We'll see.
If Patreon is being treated as or claiming to be a payment service provider (i.e. it passes money through to authors without owning it in between, the only revenue on their balance sheet is the fee they take) then it'd be wrong to state that Patreon is the beneficiary of a particular payment, since it's not; and they'd be required to list all the actual beneficiaries on every payment, which can't really be done for reasons, so they need to charge many small separate payments.
On the other hand, if Patreon is being treated as or claiming to be selling a service (i.e. it takes all your money, and pays it out to authors as a business expense) then that has major tax implications, namely, all the amount (as opposed to just their fees) is their revenue and thus subject to various sales taxes and VAT worldwide. This seems to be the current option, since they're charging VAT on the full amount for EU patrons.
It might be plausible that they're currently switching from option 2 to option 1 for financial reasons, and this precludes them from batching in the future.
How so? If they can list the beneficiaries on the individual payments, why can't they lump them into my single-payment?
(just a guess)
If you haven't, I would suggest emailing support and noting your case. I think the more people that remind them about backers who back many creators.
I just cancelled most of my lower monthly pledges, but I suppose it doesn't hurt to speak in action _and_ words.
I was watching the train wreck on Twiiter last night and I've seen what Lazy Game Reviews, and others, have witnessed since Patreon announced this change. They back peddled in April, so I'm hoping they'll do so again this time.
Visa has a microtransaction(sub $10) framework where you can roll up 3 auths into one interchange but most processors don't support it.
$0.30 or so per credit card transaction (+ a percentage) is totally expected and what they did until now.
Yeah, from what I understand they are planning to stop that.
So that's the end of patreon as a micro payment platform.
Steam does some something similar with an account balance but I don't think it refills. I believe a lot of businesses have a similar concept. I think you can maintain an account balance at Amazon (and probably other retailers) too.
Unfortunately, changing the payment structure to what they're proposing - while easier to understand - removes any payment-processing value that Patreon was providing. Putting the friction back into these kinds of micro-donations.
Seems like a bad business move to me. The hard problem here was making micro-donations cost-effective, not creating a website where creators could host links to content.
Edit: The relevant paragraph.
> To do that, we need to move our payments system to treat your pledges like any other subscription service. In other words, we need a system that charges patrons at the time of their initial pledge, and on the anniversary of their pledge each month thereafter.
So every individual monthly pledge will result in a CC transaction now. I'm guessing in cases where two pledges fall on the same day Patreon will still do one CC transaction and pocket the $0.35 they saved?
But they missed the BIG OBVIOUS solution: charge a pro-rated "first month" pledge, then combine all subsequent pledges like they do now.
For example, if I become a patron at the $10/month level, on the 15th of the month, they can charge me $5 immediately. Then the $10 gets added to my regular charge on the first of the month, and everyone saves in processing fees.
As a patron, I would much rather get one charge per month on the first. The current schedule works great.
I'd like to take Patreon in good faith here and assume they've just blundered into a huge mistake which benefits nobody except for the payment processors. If so, they should be correcting course in the next few days. But until that happens, I remain skeptical.
I stopped using Patreon a while back when they got hacked and leaked my personal information, but before that I was donating $1 a month to a handful of creators. I feel like that isn't an atypical use case at all - maybe even the most common pledge amount for a lot of creators. And there is absolutely no way I would have been willing to pay a $0.38 fee to pledge $1.
Effectively, it flips the first two months so you pay the full amount immediately but if you stay on for at least two months it all balances out in the end.
EDIT: Ninja'd by sibling comment
The problem there is for creators who post high-value content - Jimmy McThief can sign up on the 29th, pay a fraction of the subscription tier, snarf all the content on the 30th, then unsubscribe.
Patreon could offer a "only allow patrons access to [certain content] after a full monthly payment has been taken" option but that would be the simple solution...
Patreon has been doing great; even the porn stars who charge large fees apparently have overwhelmingly honest patrons. It's much more of a theoretical problem than an actual one.
Exactly - this undermines the entire point of Patreon's existence in the first place.
I've already removed most of my low dollar pledges, and will be watching the people I follow to see if they move to alternate platforms or have a direct donation link I can use.
The $0.35 / donation fee doesn't make sense to me. It sounds like a credit card transaction fee. But Patreon charges my CC once a month. So why not charge me the $0.35 once a month? Why once per donation?
The 2.9% part seems fine to me. So does shifting the costs to the donators. But why charge me per donation instead of per credit card transaction?
Edit this article has a nice analysis: https://www.pretty-terrible.com/funny-money-patreon-style/
If they had this 2.9%+$0.35 fee get charged when they charge my card, I would be fine with it. Its the per creator charging of it that is ridiculous. Most of the people I back is at the $1 level, which would be not viable with the new fee.
There is no good reason for this, as even paying to the creator should be lump sum via ACH, rather than hundreds of $1 transactions. ACH (a electronic check system in the us) charges a very minimal amount for a connection to the network to cover admin costs. Current fees are $264/yr+$0.000185/transaction. Even with paying ACH fees for both ends (creator and the patreon) and refusing to aggregate, ACH fees are still a rounding error.
What they should be doing is offering you to pay via ACH to reduce fees so the creators can actually get a bigger share of the $1 you spend.
That's decidedly false. The entire point of Patreon is to support creators, and to make it easy for creators to get that support.
> There is no good reason for this,
There are. Legal reasons. Banking reason. Simply put, lumping together transactions is dangerous. Dangerous for creators, dangerous for patreons, and dangerous for customers. I'm surprised they did it this long.
> as even paying to the creator should be lump sum via ACH,
What does this have to do with the majority of people paying via CC?
You still keep records of who paid who (eg: This dollar in creator X's account came from backer Y), they are "lumped" as far as the CC processor is concerned so you don't have to pay that per-transaction fee for each creator backed. Basically, as long as the transactions are internal to Patreon, the transaction fees should be inline with the cost of a few rows in a database.
> What does this have to do with the majority of people paying via CC?
If they really were interested in reducing fees, they would let people pay via ACH, which it currently does not look like they do.
You seem to assume that each pledge is a separate transaction. But the entire advantage of patreon over doing pledges directly is that all my pledges are one transaction with them, and all pledges someone receives are one transaction. Sure, charge me 0.35+small % once a month as transaction fee.
Incorrect. I know how Patreon used to work before this announcement. My understanding is they are splitting it up into separate transactions, which makes sense if you understand how credit card processing, monetary transactions, and all the legal ramifications around them operate.
What I do hear is a lot of people who haven't worked in the CC industry making baseless assumptions about how all this works.
What most of us are unhappy with this that they plan to split the pledges into one transaction per pledge.
Which will make micro payments unfeasible.
Reduced complexity does not plausibly explain such a huge overhead increase.
The Stripe fees were previously taken out of the creators' portion, so it made a big difference to a creator whether they had one patron for $100/month or 100 patrons for $1/month. But that was hidden from patrons, who could easily and happily pledge $1 to a dozen creators.
Can I now pledge 63 cents, so that the cost to me is $1?
Also, I'd be shocked if me pledging $1 to a dozen creators resulted in a dozen Stripe charges. Clearly Patreon should run those charge once, so my $12 costs only 70 cents from Stripe.
When I pay $17 for my monthly pledges, that comes out of my card as one single transaction, with one single $0.30 Stripe per-transaction fee.
Stripe also offers high-volume clients a discount on the 2.9% rate, which Patreon must be big enough to get.
Yep. They pay 1.9% (source: https://patreon.zendesk.com/hc/en-us/articles/204606125-How-...)
Also, Paypal offers a 5 cents + 5% micropayments rate that they take advantage of.
The 35 cents plus 2.9% is clearly designed to make you think that they are processing fees and I'd be very surprised if Patreon wasn't putting at least half of that into their pocket.
I don't give authorization for recurring charges to companies that unilaterally decide to foist price increases on me.
Not surprisingly, the look nothing like Patreon's graphs. For any pledge of $4 or less (and probably a lot more than that), Patreon is now taking more of the pledge for themselves. Since this likely represents the vast majority of pledges, Patreon is effectively raising their prices without admitting that that's what they're doing.
So, under the old fee system, for a $1 pledge, the service fee was either $0.32 for Stripe or $0.10 for PayPal. On a $10 pledge, it was $0.50 for Stripe and $0.55 for Paypal.
Edit: I'm not exactly sure how to calculate the fees based on the info in their FAQ. Taking Stripe as the example, they say the fees are 1.9% + $0.30 per transaction. So if I pledge $10, I guess that means that Patreon charges me an amount $X such that X * 1.019 + 0.3 = 10? And if so, do they take their own 5% cut out of $10 or out of $X?
Edit 2: I took my best stab at it and replaced the min/max with specific entries for Stripe and Paypal.
that's probably because the average pledge size is probably much closer to $10 than $1
> I'm not exactly sure how to calculate the fees based on the info in their FAQ...
What you're guessing seems spot on. If you pledge $10 under the old system, then Patreon took a 5% cut of $10, and Stripe took 1.9%*$10 plus 30¢. So, the patron paid $10, Patreon got 50¢, Stripe got 49¢, and the creator got the remaining $9.01.
I heard about this entirely through people talking about it on Mastodon. Didn't get any email from Patreon about this, not even lost in my spam folder; the only email I have from Patreon going back for a while is "hey you got paid", "someone made/changed a pledge", and "someone commented on one of your posts".
I'm not anyone huge, I make about $800 a month on a really productive month, and I don't make videos which is sometimes all Patreon seems to care about - I quit subscribing to their creator newsletter because it was nothing but chirpy articles on why and how you should be making video content!!11!! - but I kinda feel like, I dunno, maybe I should have had, like, some email in my inbox about this?
I really hope that everyone (including me) is misreading the detailed explanation of How This New Fee Structure Works, because it sure does sound like they're going to be imposing a 2.9%+35¢ transaction fee to every single pledge before they add up all of the pledges you've made to the dozen creators you might support on Patreon, instead of after. Which adds up really quickly.
If this is the case, I guess I get to see if being a Featured Project twice on Kickstarter is going to be of any help in getting into their new invite-only Patreon-alike d.rip...
edit: They updated the FAQ page on the new fees to address the concerns of the per-thing creators like me. https://patreon.zendesk.com/hc/en-us/articles/115005631963
>Q: How does this impact me as a per-post creator?
>A: As a per-post creator, your patrons will see the 2.9% + $0.35 service fee added to all paid posts. For example, if you are a per post creator making two paid posts per month, your patrons will be charged 2.9% + $0.35 for each paid post.
are they, like, completely unbundling all of their charges from each other now? Why are we even using Patreon any more if that's the case?
Your support is truly changing the lives of creators around the world. You give creators a reliable paycheck that enables them to do their best work. Thank you thank you thank you.
In order to continue our mission of funding the creative class, we’re always looking for ways to do what’s best for our creators. With that, we’re writing to tell you of a change we’re making so that all Patreon creators take home exactly 95% of every pledge, with no additional fees.
Aside from Patreon’s existing 5% fee, a creator’s income on Patreon varies because of processing fees every month. They can lose anywhere from 7-15% of their earnings to these fees. This means creators actually take home a lower percentage of your pledge than you may realize. Our goal is to make creators’ paychecks as predictable as possible, so we’re restructuring how these fees are paid.
Starting December 18th, we will apply a new service fee of 2.9% + $0.35 that patrons will pay for each individual pledge. This service fee helps keep Patreon up and running.
We want you to know that we approach every change with thoughtfulness for creators and patrons. By standardizing Patreon’s fees, we’re ensuring that creators get paid to continue creating high quality content. If you have questions or would like to learn more, please visit our FAQ here.
The Patreon team"
it's good to see how they're pitching this to the patrons, I've mostly just seen fellow creators running around with their hair on fire about this.
However, from their FAQ: "Liberapay is only for donations, meaning that transactions must not be linked to a contract nor a promise of recompense." So you can't provide things specifically only to your patrons.
I think this is what happens when you are a product not a customer...
The whole point of Patreon was to bundle small charges to avoid these fees, and to hopefully make support more reliable/consistent for creators. If they're going to fail outright on the former pledge, then I want nothing to do with them.
I strongly urge others to cancel pledges, as this is the strongest feedback we can provide. There are many ways to support creators.
I'm really thinking of dropping pledges and simply mail them some cash but I'm afraid I'd skip the last step and hurt the creators I love in the end.
I’m inclined to believe they’re already doing this.
AFAICT (from my charges) they have indeed been bundling charges. Charging the %+constant fee for each patron given that there is no individual payment-processor action for each patron on the debit side is absolutely nasty.
I'm not asking them to eat payment-processing fees, I'm not asking them not to make a profit, I'm simply asking them to not charge for fees for transactions that never happened.
I hope Hatreon (or any other patreon clone) steals half of their userbase because they absolutely deserve to be punished and chastised for this manipulative nonsense (along with their banning legal-but-NSFW content producers); because nothing else but people exiting from Patreon will make them feel anything.
I mentioned it not as an endorsement, but as a proof of concept. Since it exists there's no excuse for other people being unable to replicate it (without its political marketing, of course).
I can definitely see a Patreon alternative that might do better by folks getting some traction--Kickstarter as a PBC is interesting, I actually didn't realize Patreon wasn't. But I know a decent few NSFW creators and I can't imagine any of them going to where the Daily Stormer and Richard Spencer gets their funding.
Conflating self-declared Nazis with pornography is exactly what those Nazis would like people to do.
As for the audience of Hatreon, I guess I was just taking their about page  and community guidelines  at face value.
"Hate speech is protected speech. Hatreon exists in reaction to politically motivated no-platforming at sites like Patreon. Always consider your local, state, and national laws, but the site stands for free speech absolutism and will protect creators’ interests against sovereign and corporate threats. Do not abuse this protection."
In other words, "I disapprove of what you say, but I will defend to the death your right to say it." - which is a sentiment I can get behind.
But it's dishonest. Taking money for Nazis is not the same as ensuring their right to speak. It means you're doing business with them. You are providing them aid and assistance, not even merely a place to speak (which no private citizen is obligated to provide and no private citizen should be removed from judgment for so doing). That's money that doesn't go merely to "speech" at all.
In no place and at no time in history has enthusiastic, freely undertaken business with Nazis made you freedom-loving or high-minded; it has only and ever made you, in the best light of history possible, a sucker and a sap (if not a collaborator). But it might make you money, so...
Read more history. The tangent you're rambling on about both muddies the discussion and falls short of factual accuracy.
A man named Oskar Schindler enthusiastically and freely undertook business with actual Nazis and even became a member of the Nazi Party. His actions saved the lives of well over a thousand Jews and cost him all the money he had amassed prior to the war. Hatreon has nothing to do with this history and Patreon's poor terms even less so.
It is, perhaps, not exactly the hill you want to die on to go "b-b-b-but Oskar Schindler!". Stormfront wants heads on sticks and burning crosses on black folks' lawns. They don't care about Oskar Schindler and they don't care about the plausible deniability that Hatreon really wants suckers and saps to buy into. They know. They know it's there for them and only for them.
Don't use Patreon if you don't like their terms. Don't use Hatreon because they're for Nazis.
Psst. Had you grown up in that time and circumstance, you undoubtedly would have been, too. And it's unfathomably unlikely you'd have joined him as the second of only two ever to be honored with a burial on Mount Zion and visited by survivors for decades.
I see Hatereon and particularly Stormfront as grave threats and it pains me to see people such as yourself strengthening both through relentless snarking and bigoteering. You need only look in the mirror to understand why your society is where it is and why the politics has grown so rancid. And it's not just your society affected by your culture wars. American-style intolerance is threatening to boil over into the rest of the world, too. You are a wealthy and influential person, almost certainly in the 1% of the developed world, and the second order consequences of your actions matter.
Setting all of that to one side, speaking of "dying on hills" and trying to put a stutter in someone else's mouth is damned childish and more than a bit irritating.
Sexual content can be considered NSFW and should not be conflated with a "safe haven" for hate speech.
I guess I'll find out next time they run and I can count number of charges.
So instead of being charged once at the beginning/end of the month, you would instead be charged on the monthly anniversary of when you started backing someone.
I'm not sure they're (thinking about) switching over to this (yet), but I've seen mention of this in comments online, so, could be.
EDIT: They are:
> To do that, we need to move our payments system to treat your pledges like any other subscription service. In other words, we need a system that charges patrons at the time of their initial pledge, and on the anniversary of their pledge each month thereafter.
How to do a profitable micro transaction is still a mystery.
The question here really is - What is the distribution of backers and payment amount on Patreon?
If majority of their customers are, 1:1 ie one patron to one artist for $1. Then it is an issue which payment processor needs to look into.
But, if it is 1:50 ie one patron to 50 artists for $1 then I am sure Patreon will be creating a batch transaction.
Patreon's problem surely stems from the fact that 1:1 is more likely true.
They seem to deal with this problem by letting you fund a donation account and then disburse funds on a periodic basis. This is also similar to donor advised funds so I'm not sure why Patreon is doing this when other alternatives are available.
The process was surprisingly smooth and easy. We'll see how it works on the long run, but for now Liberapay looks like an excellent alternative. (Also they don't take automatic fees for their own finances; tip is on a voluntary basis).
For a $1 pledge: previously creators took home 85c at least, so Patreon was maxed out at 15c. Now they will charge the patron 37.9 cents and the creator an additional 5c. So now they are maxed out at 42.9c. If 15c was enough to break even this means 27.9c of pure profit. That's a _very_ nice profit rate! (The rent seeking is too damn high.)
Let's presume patrons decrease their patronage so they pay the same as before, so if they paid x before now they pay 1.029y+0.35=x ==> .97x-0.34. The patron takes home 95% of this, .92x-0.32 Previously they took home at least .85x. So we are looking at 0.07x=0.32 ===> 4.57
So if you were pledging below 4.5USD (let's be realistic: 5 USD, noone pledges cents, not sure the platform lets you) and drop your pledge such that Patreon charges you the same, then this hurts your creator. And many won't react rationally and do the .97x-0.34 calculation, just cancel because hot damn, did a company I authorized to charge me X amounts just unilaterally decided to charge me more without proper clear notice (I just checked my home page and I do not see a big read warning this month I will be paying more either on the home page or the pledges page.)
Oh and many creators have various perks at 5USD which now they need to drop to 4.52 USD (again, does the platform allow for cents?) and encourage their patrons to drop to that level. Patrons in this case pay 5 USD still and the creator takes home 4.29. Previously, the creator took home 4.25-4.65.
>That changes on December 18, when patrons will start paying 2.9% plus 35 cents for each individual pledge
>With this update, creators will now take home exactly 95% of each pledge with no additional fees
Suppose you're donating $1, the .35 fixed "service fee" alone is 35% of the pledge, not even counting the 2.9% variable amount. I don't understand how they end up with the 95% figure.
Soon: patron pledges $1, patron pays $1.38, creator ends up with $0.95.
from , the "previous" (current) situation the creator would receive 85-93% of the amount. So $0.85 from $1, vs .95 from 1.38? Unless I'm completely flobbing the maths, that's ~69% in the new system?
So transaction cost for a lot of 1$ pledges goes from 5-10% to 31%.
Even the state takes both income tax and sales tax.
Most other countries have sane regulation that foster competition and transparency.
But wherever it is listed directly up front or not doesn't change the fact that the state takes money on both sides. When you're earning it and when you're using it.
The actual tax in Germany is about 50 %, it's just hidden in several smaller percentages
Previously: Patreon made 0.05.
Soon: Patreon makes 0.104
2.9% of $1 is $0.029
$1 + $0.029 + $0.35 ~= $1.38
95% of $1.38 is $1.311
Clearly that doesn't make sense.
Or does it mean that Patreon gets 5% from the creator's share and then 2.9% + .35 cents on your side? So if I want to pledge $1 then I have to pay $1.38 and the creator really only receives $.95? If so that seems misleading. Also in this case it would mean that in that case Patreon ends up taking 31% of the actual money spent by the pledger.
The pledgee receives 95% of the pledge, $0.95.
The pledger is charged $1 PLUS the "processing fees", which are an ADDITIONAL 2.9% of the pledge (2.9 cents) and 35 cents fixed.
> Also in this case it would mean that in that case Patreon ends up taking 31% of the actual money spent by the pledger.
Yep, and batching charges means much of that 31% isn't actually going to real processing fees, but into Patreon's pocket.
Their recent (September) taking of $60M in VC money may provide a motive for this approach.
I for one don't want more than one email from patreon per month.
Nor do I want more than one CC entry.
I offer this to my supporters in addition to my Patreon page.
Have you considered putting up a hosted version that batches Stripe charges?
Handling chargebacks+fees might be a bit annoying as well.
Patreon is just an additional middleman.
I really hope that a better alternative comes soon. I've seen a lot of people using https://ko-fi.com/ (and I've used it to donate to them a few times), but it's not exactly the same.
Before: 7-15% net fees - $100 = $93 or $85 dollars
Now: 8%+ net fees with near 30% fees for $1 and 10% fees for $10
That math is using net fees when considering the amount the patron pays vs the person gets. Patreon is pulling some shady math by pretending that the patron isn't paying the original fees as part of the total amount.
To me, it looks like for nearly all cases, fees are going to increase. I would revise my statement to "loss, not gain", even if all patrons stay on the service.
Not everybody company is supposed to be the next Google, guys.
As far as I understand, this new scheme will punish the kind of pledger that I said above I'd prefer: who pledges a couple $ or so. If I want to pledge $10 monthly, I'd better give it to a single creator than to 5-10 creators. In this case as a potential creator I'd be happier with a bigger cut from what I receive in expense of free payments on the patron's side.
The federal ban on charging fees was lifted, but many states (including New York and California) also still outlaw this at the state level.
In addition, merchant agreements often prohibit it - for example, merchants that take American Express cannot charge fees for any transactions, even the ones that run on Visa or Mastercard.
From the FAQ at https://flattr.com/faq#23 :
We take 7.5% of received revenues (to keep Flattr running, develop further and handle chargebacks and fraud). Our payment provider (MangoPay) charges 9% of received revenues (please see this blog post for more information). These fees are withdrawn on the 1st of the month for revenue received in the prior month.
Whenever money is withdrawn (currently the minimum amount that can be withdrawn is $10) a $3 fee is charged.
Does anyone know what they're talking about with the "or perhaps one or two creators" part?
If so, that might explain why they want to effectively unbundle everything again, even if it makes everything worse for everyone.
The marketing-weasel language of their "robust question and answer page" is a little hard to take regardless of actual reason though.
The payments to creators are a separate series of transactions. If using ACH, there should be minimal fees.
On the one hand, Patreon probably needs to charge more to meet its costs. On the other hand, it's doing so in an incredibly poorly-conceived and messaged fashion.
The most likely reason for the change in fee structures is that Patreon simply needs to charge more money.
Could also have been something contractual with the payment processors relating to fraud detection or prohibited item/services, but it seemed like it might threaten their current payment setup.
I'll see if I can find anything, but something in the firefox 56-57->52 ESR downgrade appears to have eaten all of my profile's History, and I'm not sure I can be bothered rummaging through external backups :)
Consumers really love knowing up front what they're committing to pay. Adding extra charges on is not going to help at all with adoption.
When I pledge 1$ to some creator, I was unsure whether the creator would get the whole money and I would pay fees in addition, or if patreon would take the fee on those 1$.
OTOH, on Patreon the messaging is that you are paying the creator, so I am kinda dealing with the creator with Patreon as the intermediary, and when it says I pledge $1, it feels like I am paying the creator $1 for their service.
When you check out in Walmart how much is the fee Walmart pays? You have (basically) no idea.
And you're wrong about NGOs, usually they do provide how your money will be used, what is the amount of money that will go for their internal costs, and what will be used really for charity.
I wouldn't absolutely not give to a charity that would not provide me those details.
So you can choose to be charged every month (and have ~2% of banking fees), or to provide money for the next 3 months (and the banking fee will be less). Money will be redistributed to creators once a week (or once a month) anyway.
Plus they only charge banking fees, nothing for themselves (tip is voluntary).
You need to send an email to:
So, 4 x $1 pledges that are taken as one charge will now cost me $5.52 ($1 + $0.35 + $0.03) * 4))?
Patreon used to have PayPal charges 5% + $0.05. So let's presume they're paying the same.
They charge you once for $5.52. Paypal gets $0.326 + $0.05 out of it. $3.80 goes to creators. Instead of Patreon making $0.20, they now make $1.344.
Yes, you read that right, Patreon is making $1.344. ~35% profit margin vs 5% off your donation. They've multiplied their cut several times over.
The basic problem is that it would be cheaper for everybody involved if Patreon would charge each patron a bundled amount for all their supported campaigns, and then pay out to each creator everyone's support to them. This means that there are N + M transactions, where N is number of patrons and M is number of creators. However, due to a myriad of rules, they actually need to pay out N * M transaction fees, because each patron's contributions will be going more or less directly to each creator (minus Patreon's cut of course). The extra fees more accurately represent the cost of doing business with credit cards.
This article explains the AML rules in this area: https://www.trulioo.com/blog/transaction-laundering-a-growin...
I doubt this. If I buy 10 1 euro iPhone apps in a day, Apple will charge me $10, in one transaction, then eventually pay out a euro less their fees to each developer. I don't really see why this would be different.
Patreon already does bundle payments to creators.
I get billed monthly for my various followings. That won't change at all under the new system (AFAIK).
What changes is that Patreon charge me for every pledge instance that I use, which is basically crap as it doesn't cost them any more if a creator has 1, 5 or 10 pledges per month, they bundle it up and make one payment to the creator.
I have no problem with the idea of Patreon charge patrons rather than creators for fees, but the "per pledge" billing is terrible.
Though this one seems to have gotten more attention.
The only way to lower the fixed fees is to convince people to transact larger amounts at a time, eg to load a patreon "balance" with $50 that gets deducted from instead of individual transactions of $1
This is what you are looking for. Its built into the Brave browser as well so you can automatically send tokens every month to the sites and video creators that you visit.
You would think YouTube would finally eat their lunch here but then the CEO over there can't even update her own recently launched channel so fat chance.
Sure Patreon raised funds, but those funds can't subsidize them for a lifetime, they gotta get sustainable and do it fast. There is not a chance they will be wasting time to build their own credit-card processing, so Stripe fees are here to stay.
Although contributors are important, Patreon would have nothing without their creators. Creators make the content which people pay for, and creators need to put food on the table to keep doing what they are doing.
If you are a creator making $2,000 a month, for example, then an extra $100 is an extra trip to the grocery store, and that's important. If someone wants to fund a creator, they will, and the extra couple of bucks isn't going to discourage that.
Furthermore, I suspect Patreon has data on how much is being contributed by each user. I doubt, like the top comment suggest, that 1 person on the platform would fund 100 creatives. Probably 1:3 ratio, with a couple of outliers, is most likely.
This is a good change.
p.s. If they don't have it yet, expect Patreon to start partnering with places like Teespring to offer merch by their creators. It just makes sense.
I'm explicitly hearing the opposite from creators on Twitter. People are already seeing patrons defecting from projects over this.
This is the end of Patreon if they don't course-correct very quickly.
An awful lot of patreon users give a dollar or two a month to a bunch of creators. It won't just be an extra couple of bucks for them; it'll be an extra 30% or so.