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It's worth remembering that less than three months ago, Patreon raised $60M in a series C (https://patreonhq.com/new-round-funding-816d5a592477):

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.




Patreon is a startup which is a conduit for and yet a leech upon the incomes of struggling people[0]. An service of its kind should not be a for-profit operation, the incentives are perverse.

Kickstarter is a Public Benefit Corporation, so I'm slightly more enthusiastic about the potential of their offering (Drip).

[0] https://theoutline.com/post/2571/no-one-makes-a-living-on-pa...


One of the divisions here is that while Kickstarter is a public benefit corp, they've also had an extremely negative view of adult related material, something that a lot of us on patreon base our campaigns on. This is why a lot of adult product campaigns end up on indiegogo.

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).


Post-C-VC Patreon is trending away from NSFW too...

An Open Letter to Patreon | https://news.ycombinator.com/item?id=15547801


Thats a pretty insightful article - I has always assumed that Patrons that could live off Patreon were concentrated at the top, but I never realized just how few of them there were. It's soured me a bit on Patreon, especially as it garners more comparisons to YouTube's ad related model. To acheive minimum wage on YouTube, you have to earn between 300,000 - 1,000,000 views per month (depending on how much the algorithm likes you). Comparing some of my favorite YouTubers to the data on Graphtreon, it seems to me YouTube is still more lucrative while Patrion does contribute a non-negligible amount of money.


IMO Patreon is better for more niche creators who have a smaller but more passionate audience. Sure, you can make a ton of money off of YT ad revenue if you're pulling in a few million views per video and putting out multiple videos a week, but there are a lot of YT creators who don't pull in those kinds of numbers and can make a lot more via Patreon.

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


Nothing that is a utility should be for-profit (relating to basic survival and quality of life), however the VC model requires such fast scaling (as part of this VC money can help kill what would otherwise become a successful service through copying and scaling faster/competition); this is ultimately why subway systems, which started off as individual privately owned lines, were bought by the public. The issue is always capitalism and competitive factors, people who want to get ahead in the world - to make the world a better place - without having a collaborative mindset or understanding their actions. Facebook would be in the best position in the world to facilitate this, however current leadership hasn't ever shown the compassion necessary to understand and guide this. Part of the issue is that such a platform or ecosystem requires understanding that you need to share - meaning that value created can't all be captured/controlled or measured. Short-term scarcity vs. long-term abundance thinking.


Where is that article getting their hourly wage estimate from? It sure sounds like they are just basing it on the monthly numbers, and assuming that all creators on Patreon are working full time (or some particular number of hours). If so, that's obviously ludicrous.

What perverse incentives are you talking about?


Speaking of Kickstarter, do you think this change will push creators over to Drip[0]? Is Drip a PBC as well?

0. https://d.rip/


> Ⓒ2017 Drip U.S., LLC. By Kickstarter, PBC.


Drip was acquired by Kickstarter, maybe 2 years ago.


You can use liberapay (https://en.liberapay.com)


even better than a Public Benefit Corporation, could be run as open-source project like Librepay, Gratipay, or FOSSPay:

https://github.com/liberapay https://github.com/gratipay https://github.com/SirCmpwn/fosspay


Liberapay unforutnately isn't able to handle USD as cheap as EUROS...according to https://liberapay.com/about/faq:

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.


> Were creators asking for this change?

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.


This was likely the strategy. The board wanted more profit, knew they needed to change some things, and decided to do it before a real competitor made it to the scene.


Amen. Like always it is all about the Benjamin's. They are a for profit business. The best thing you can do is switch to another service with better rates. Most people wont do that.

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.


Patreon would only need to bill you once, not sure why they need to add processing fees to each pledge?


I agree. Without an efficient micropayment system available, I can understand a charge per transaction. But adding a transaction fee to each pledge, when the patron is making one monthly payment, is a bad idea. Maybe they want to get rid of patrons supporting lots of people at low levels for some reason.


They could argue they're potentially paying a transaction fee when they're paying the creator if you're the only patreon. That's a silly argument though. I'd be happy to pay a single 2.9% of my total pledges + a single 35c fee.

This just kills $1 donations (and in my mind: anything up to $10)


Because it lets them extract a lot more cash from their users under the cover of processing fees.


It seems that they might also be de-aggregating pledges - which means not only will you be paying the 2.9% + 35c on each pledge, you'll also get N charges on your card rather than one. There was also some other hint that pledges would continue to be charged on the day you signed up rather than the 1st - just to make a triple whammy of idiocy.


>So that is like what $13 in fees for me.

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.


I asked this elsewhere and got no answer so far:

> how will this earn Patreon more profits? Am I doing the math wrong?


EDIT: Due to a blog post I was unaware of, the rest of this post is incorrect. Patreon will still make a bit more money than before, but with the new structure of billing each pledge on its own schedule, not nearly as much as I had outlined.

https://blog.patreon.com/updating-patreons-fee-structure/

ORIGINAL:

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.


The structure to avoid increased fees is dumb. Charge once, wallet the money, distribute as needed. Steam can handle this. Bitcoin can handle this. Why can't Patreon handle this?


Drip? Is it this: https://d.rip/


Currently invite-only:

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.



Forgive me, how will this earn Patreon more profits? Am I doing the math wrong?


Imagine you have a user who supports five different creators, each with a $10 donation, and the money they are charged comes out on the same day every month.

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.


Actually, from Patreon's update, it sounds like Patreon will, in fact, run five different transactions:

https://blog.patreon.com/updating-patreons-fee-structure/

Which is frankly insane, but does explain the change.


Yikes. That is an insane way to do things. Silly inefficient to boot.

The only real winner in this will be Stripe and its ilk.

Thanks for finding and posting that.


It is insane, but they are doing it because they thought it made sense with their business model, namely Patreon is not a donation platform, it's a paywall service.

https://wiki.snowdrift.coop/market-research/other-crowdfundi...


Are they doing that? It sounds like they explicitly are NOT doing that.


They are proposing multiple charges each month, super wasteful. It's because they are first and foremost a paywall service.


Also, I'm going to reply to my own comment to point out a quote from that patreonhq.com post (by Jack Conte, a co-founder):

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.


That would be really great, an organization, owned by its members, that would manage the site.

It just takes someone to launch this, and very hard work



That's huge! Thanks


You mean like a cooperative or an union?

Filthy communist ! /s


It was the Co-Operative Society in the UK that joint funded the Manchester Ship Canal, first national UK distribution service, first to promote Fairtrade goods. They were the UKs largest grocery retailer by far.

Today they are still 6th but with 4million members.


Coop in Norway is owned by the members and is one of Norways 3 large chains together with Reitangruppen and NorgesGruppen.

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.


Is this not just a marketing pitch, though? Where is your cut from Coop Norge Eiendom AS? [Coop Norway Real Estate]


Not sure. I'm not too much into it I just find the ads hilarious.

For what I know it might be a similar agreement as the one Mozilla uses but I don’t know.


Back of the envelope calculations:

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) [1]. 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.

[1] https://techcrunch.com/2017/09/14/patreon-series-c/

[2] https://www.crunchbase.com/organization/patreon


Why do they have so many employees? Seems excessive and totally unnecessary.


Can't be a Real Silicon Valley Start-Up™ if you aren't wildly over-capitalized and constantly adding unnecessary headcount.


More importantly, why is a company that's not doing anything super cutting edge in SF? That's like a textbook case of a company that should be somewhere boring and CHEAP.


Exactly. It's also not clear why it's taken VC- seems like it should be bootstrapped somewhere in the Midwest.


A bootstrapped company somewhere in the Midwest takes about 3-5 years of bootstrapping to be heard about on the east coast. A capitalized startup can hit the PR drum immediately. As put earler at https://news.ycombinator.com/item?id=15658756

> 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


“We will invest to help you growing if and only if you stop acting like a VC bonfire charity and start operating like a business"

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.


Unfortunately raising money isn’t a proxy for profitability. In many cases it’s the opposite. It could be seen as a proxy for potential, but potential alone doesn’t pay the bills.

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.


Originally half of the entire value proposition of Patreon was "backers pledge small amounts to multiple artists, Patreon bundles these up under one monthly charge, thereby spreading transaction fees fees around". Or in fewer, longer words: Patreon is a micropayments aggregator.

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.


Do you know where Patreon said that? I had a hunch that what was what Pareon was doing but I could never find a source for it.

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.


Why would Visa/MC do that? It doesn't seem any different than metering any other service (eg Mailchimp invoicing monthly vs per email).

I'm not saying you're wrong- I just don't understand what leverage the CCs would have.


I don't even understand what they're using all that money for. The recent site and app redesigns have been a huge downgrade in overall UX (to the point I uninstalled the app as nearly unusable), and the site is just as slow and buggy as it's ever been (except now it's hard to navigate to boot).


If they simply need more money, they can simply raise the price directly and proportionally - this doesn't justify a major change to the pricing system that makes a previous use case (many $1 pledges) unviable.


They took money now are in debt and now need to make their investors happy. The same way every good idea died.


But the fee change won't make them much money, it just throws away patron money and gives it to Paypal/Stripe.

They're doing it because of demand for instant-charge because their main business is being a paywall service.


It helps the funds that gave $60M to patreon. Pretty simply imho. You know, follow the money.


> they just raised a bunch of money

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.


Probably too late in the thread to be noticed, but I have the real answer for you. This change doesn't make Patreon more money, it just costs patrons a bunch in Paypal and Stripe fees effectively. Patreon proposes to charge every donation to different projects or even each release of per-release things as separate charges, thus wasting everyone's money. It doesn't make them much profit.

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...


It's cash flow vs cash on hand. If they are doing this as a part of getting positive cash flow, then good for them.




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