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.
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