Author Topic: Patreon Changes - What They Are, What You Can Do  (Read 11350 times)

Jubal

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Patreon Changes - What They Are, What You Can Do
« on: December 07, 2017, 03:30:47 PM »
EDIT 13th December: Patreon has decided not to roll out the changes described below. I'll likely split the "Patreon Alternatives" into a separate post/guide in the coming days which I'll link from here, and will leave this guide up for the sake of keeping record.

OK, so Patreon has changed its pricing structure in a way that disproportionately hurts the smallest creators and donors. Here's an overview of that change, what you can do to let Patreon know about it, and suggestions for other actions you could take.


What does the new system look like?

Previous system: Patreon took variable processing charges (plus 5%) out of people's pledges. You pay a dollar, patreon takes maybe 15-20% overall in processing charges.

New system: external per-pledge processing charge of $0.35, plus 2.9%. No internal charge except the 5%. So the way patreon puts it, if you pay a dollar, patreon charges you $0.38 to pay that dollar, so you now pay $1.38. Or of course you reduce your pledge, though $1 is the lowest possible so in fact $1.38 is the lowest someone can spend on the site. In short, creators, for the lowest possible pledge paid into the system, just went down from 80% to 70% profit margin.

Now, of course that's reduced if you have fewer bigger donations because the flat rate is lessened. The trouble is that Patreon's small creators rely on a wide network of single-dollar donors, and this is going to cripple the profitability of that model. Someone with $5 can now realistically only support three creators for that money, instead of five. Patreon's math is predicated on the idea that donors will just fork out more, most of which doesn't get to creators: in fact, especially for small donors, many are already at their limit and will simply end up reducing their number of pledges.

Under Patreon's old system, transaction fees to patreon were paid via a lump - they transact all your pledges at once at the end of a month, essentially. On the new system, though, they charge you the fee per pledge, and may be switching to a rolling system of transactions. Whilst there are hypothetical advantages to up-front charges - it stops new users pledging, getting free content, then cancelling before having to pay, for example - removing the main aspect of payment streamlining is a terrible way to do it as opposed to, say, up-front charging only for the first month someone pledges and then moving to a consolidated system for easier handling on subsequent months. If Patreon's explanation is true, they're literally making the whole system vastly more inefficient in order to deal with some comparatively minor problems. It's also unclear whether their real processing cost is exactly the same as the rolling fee, or whether additional money is being skimmed here on those small donations.

Other articles/explainers on the change include -
This on the maths behind it (this is the most up to date one I've seen on the maths + patreon's statements): https://www.patreon.com/posts/obligatory-fee-15779410
This from SFF reviewer Natalie Luhrs, with some other calculations/maths on the money side: https://www.pretty-terrible.com/funny-money-patreon-style/
This writeup from TechCrunch: https://techcrunch.com/2017/12/07/patreons-new-service-fee-spurs-concern-that-creators-will-lose-patrons/
This writeup, with an alternate explanation for Patreon's actions: https://subfictional.com/my-theory-patreon-doesnt-want-to-be-a-money-services-business/


Why is Patreon doing this?

That's the million dollar (or $1.38, perhaps) question.

On the possibility of Patreon doing this as a revenue boost, Chris Buecheler (https://twitter.com/cwbuecheler) provided the following explainer which may shed some light: This year Patreon raised $60m in Series C venture funds at a valuation of $450 million (after raising $30m last year and more than doubling the company's size - almost always a mistake). Yet they make about $8 million per year. Most sane company valuations are 10x-20x revenue, with 20x being a high-end for desirable acquihires by Google/etc. Under that math, Patreon should be worth $80-$160 million. Yet they raised at $450m. 56x revenue! This means they're under intense pressure to increase revenue - hence, changing the pricing structure, which allows for revenue increases.

It's also worth noting that Patreon's strategy documents indicate that they want to refocus on those who are getting "life-changing" (in their view) amounts via Patreon; aka, they'd like to make something that works better for a smaller class of higher-value professionals, and are less concerned about supporting the vast number of low-end dollar creators who make up the bulk of the platform. They may have made the change on the genuine assumption that their small professional cadre may do better from it in the long run, and that they decided they were happy to drive a truck through the small donor base on the way there.

Other theories floating include that the pressure may come from Patreon's transaction handlers who might be eating more of the new fee than we know about, or that it's an attempt to cut down on microtransactions that could be used in money-laundering, or that it's simple incompetence. As Patreon is sticking with the "it's all for the creators" excuse, though, we ultimately can't be wholly certain.


So how much of a problem is this?

It depends how important you think supporting the smallest-scale creative project is! If you think that's a good thing to do, then this is a big problem: creators are already reporting losing numerous pledges over the changes, which can be a significant loss to people's monthly income.

This sounds grim! How can I let Patreon know how I feel about it?

Various ways, as detailed below!

  • Use the Patreon feedback system. If you're a Patreon user, this should be your first port of call, as it confirms to Patreon that you are in fact a user of their services and you're upset about this.
  • Tweet at them! The more @Patreon and @PatreonSupport are flooded with messages and people threatening to quit the platform, the more they might think again.
  • Sign the petition! There's one going at https://www.change.org/p/patreon-patreon-drop-the-external-service-charge against the charge.

Some patrons have of course protested by leaving the platform altogether. If you want to do this, firstly ask your creators two questions, if you can. One, can they survive without you, and two, is there any other way you can get funds to them? It's worth remembering that some creators on Patreon rely on the income to pay very basic food bills etc, and may need you to keep supporting them if they're going to keep functioning let alone creating content. If you can find alternative ways to send creators money, or if creators have indicated they can afford to take the hit of the protest, those can be good options, but I think a note of caution is needed about simply walking away, to make sure that a very reasonable desire to leave Patreon out of pocket doesn't end up hurting the most vulnerable creators on the platform.

I'm a creator - anything extra I can do?

Some options people have suggested include temporarily suspending accounts as a Patreon "strike", but this is unlikely to work unless mass organised effectively. Some creators are reducing their funding levels so Patrons don't pay more, but this just bites further into your profit margins to Patreon's benefit. Encouraging patrons to make fewer, larger pledges might be the best bet for now, to avoid Patreon getting all those replications of the flat $0.35 fee. Whatever you decide on, make sure the maths works out and be sure it's something you can afford if it means biting into your margins at all.

What about alternatives to Patreon?

There are several - unfortunately, there's no perfect federated FOSS alternative (yet), but here are some things you could look at and think about if you want to try an alternative funding service:

Kickstarter Drip (https://d.rip/) is currently invite-only, but it's a potential future alternative and likely to have all the features you need. There's always the question of whether you trust Kickstarter any more than Patreon, though.

Liberapay (https://en.liberapay.com/) is probably the best non-profit alternative. It lacks some of the features of Patreon such as the ability to provide donor-only content and some of the tax side, but as it's a non-profit with an explicit mission to support commons creators, it's likely to be a more trustworthy alternative for those who can deal with the lack of flexibility.

Gumroad (https://gumroad.com/) doesn't include charging for open content like Patreon does, but is a way of selling private content via membership/subscription systems. They take a $10/month minimum fee, plus 3.5%+30cent processing charge per transaction paid by the creator (so not perhaps ideal for dollar-size donations, though at least that fee is creator-side so doesn't directly penalise the small donors) OR have an option for 8.5% + $0.30 processing charge without the $10 "premium" fee, which may work better for the smallest donations/those who can't afford the $10 charge. Also worth noting that they announced recently that they're going to give people the option to plug in PayPal or Stripe directly (allowing users to pay the potentially smaller direct processing fee from PP/Stripe), and that the whole platform is going open-source, which may pave the way for more similar alternatives.

Thrinacia (https://www.thrinacia.com/) offers a more DIY crowdfunding solution that you could deploy to your own website, but it lacks the centralised nature of Patreon and so may be harder to get subscribers to use.

Steady (https://steadyhq.com/) specialises in the blogs, podcasts, e-zines, and videos market (so not gamedevs, artists, etc). It seems to be an independent business with around 8 staff, based in Germany; it offers a range of subscription plans for donors. Their fee is 10% (higher than Patreon's 5), and processing/payment fees are absorbed or handled by creators on top of that.

Tipeee (https://www.tipeee.com) is a French offering that is open to all content creators who provide regular free content. It charges an 8% fee, plus relevant processing & PayPal charges.

Flattr (https://flattr.com/) is owned (after an acquisition deal) by the guys who made AdBlock Plus; it's a model where you have a browser extension and you split a block total pledge algorithmically depending on what content you actually view, which may not be ideal as it gives you less fine-tuned control over your money, but it does have obvious and significant advantages in terms of ease of use. Flattr takes a 7.5% fee themselves from creators, with a 9% fee for processing charges and a $3 withdrawal charge.

Padrim (https://www.padrim.com.br/) is one of two Brazilian offerings, dealing mainly in Brazilian real in terms of currency. Their fee of 12% may seem high, but it includes payment processing, which means that in practice this is a pretty competitive offer and gives quite a lot of security to creators thanks to the easy-to-estimate percentage charge.

Apoia (https://apoia.se/) is one of two Brazilian offerings, dealing mainly in Brazilian real in terms of currency. They operate similarly to Padrim as far as I can tell, with a 13% charge covering processing and fees.

Ratafire (https://ratafire.com/) seems to specifically focus on creators with below 50,000 followers. Their pages include a lot of random motivational-sounding quotes and seem to promise a gameified interface, but it's actually really quite unclear what the underlying business and funding structure is unfortunately. I've had one report of someone who said she needed to set her comic to be a several year long project and gain approval for it, so there may be a long term lock-in as part of their price structure.

PodPledge (https://www.podpledge.com/home) is a specifically podcast-focussed service, though it also does blogs, YouTube channels, and other forms of ongoing content. The fees are only 5% which is toward the low end of the range; the creator also absorbs processing fees. The system seems to be designed around funding specific seasons of content.

Zarf (https://zarf.co/) is a subscription-style service for writers only, with a low (4.9%) charge, plus service fees absorbed by the creator. It's currently in beta and invite-only, but the low charge may make this worth a watch for writers.

GameWisp (https://gamewisp.com/) promises easier ways for game streamers to sort out their twitch pledges. I can't find info on the fee structure here and I don't know much about streaming pledge structures, but this may be worth looking into if twitch streams are your area.

Ko-Fi (https://ko-fi.com/) is unlike the rest of these as it's not a regular transactions site, so it's probably not a good replacement for Patreon. However, it doesn't take any fees, which is a nice upside; it's basically a way of creating easy-embed PayPal donation buttons on your website.

WithFriends (https://withfriends.co/) is a site looking to support membership subscriptions and event donation systems for communities and music or arts groups, specifically for funding for hosting events and supporting event organisation. It's still in beta, but looks like a good initiative that may well be worth checking out if that's the area you focus on.

Do it yourself! If you've got (or can afford) a simple wordpress-style or other website, it's not too hard to embed PayPal payment buttons into it which can provide you with a lot of user control and flexibility, and of course no service fees beyond money handling. I've got a guide written here if you're interested and want help with setting up your own Micro-Patron system.






Can I suggest a change/info to add to the above post?
Yes, I'd love you to! Drop a comment below, PM me, email megadux (at) exilian dot co dot uk, or shout at JubalBarca or ExilianOfficial on Twitter or Mastodon (same usernames).

I liked this post! Can I thank you?
Well, I certainly don't have a Patreon, I've got an income (somehow people pay me to poke computers and find out things about the middle ages) and other people need your money more! If you liked this and want to make my day week month, drop a comment below this post or shout at me on Twitter @JubalBarca.
« Last Edit: December 13, 2017, 06:16:37 PM by Jubal »
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