Over the past four years Patreon has grown to become the de facto funding model for independent creators online - a platform where supporters pledge small monthly recurring donations that better support an enduring career instead of the need Kickstarter or GoFundMe's per-project setup fills. But an overhaul of its fee structure announced yesterday has creators furious and patrons leaving in droves.
CEO Jack Conte. Image: Getty
Patreon - which supports YouTuber channels such as Binging With Babish ($US11,000 [$14,641]/month), animators such as David Firth of Salad Fingers fame ($US10,000 [$13,310]/creation), and podcasts such as Chapo Trap House ($US87,000 [$115,800]/month) - has long relied on a simple financial arrangement that allowed creators to receive a lump sum at the beginning of each month. Of course, that paycheck might vary somewhat because creators were obligated to eat payment processor fees in addition to the five per cent take the platform shaved off the top.
The new structure - and why everyone is so angry - passes those processor fees on to patrons instead.
"Starting on December 18th, a new service fee of 2.9% + $0.35 will be paid by patrons for each individual pledge," the company's announcement post reads. "Streamlining these fees for creators and patrons ensures that creators take home as much of their earnings as possible."
Sure, that maths checks out - until you factor in a mass exodus of pledge-makers.
— Inceltic Frost (@jephjacques) December 8, 2017
Well, I'm down 15 backers on Patreon so far. Great job, guys!
— Jess Nevins (@jessnevins) December 8, 2017
— Charlie in the Box ????????⭐???? (@CharlesCDowd) December 8, 2017
I lost FIVE people just TODAY ALONE @Patreon @PatreonSupport because of your bad business decision!! This is so awful for fans who are donating small amounts, which matter just as much as larger Patrons! Please reconsider this silly thing you've done, Patreon! pic.twitter.com/ze55tjb4sy
— VoidBurger ???????? (@VoidBurger) December 8, 2017
Beyond making the platform demonstrably hostile to donors' wallets, creators were confused by when exactly they'd be getting paid now. Rather than at the beginning of each month, charges now appear on a monthly basis starting whenever the patron agreed to fund a creator. On its face this is intuitive, although many patrons fund multiple creators, leading to a splattering of credit card charges across a billing cycle.
Patreon responded by updating their announcement with two charts meant to illustrate what to expect. For many, this further reinforced that the change from a monthly to an anniversary model would be more of a headache.
Publicly, YouTube musician and Patreon co-founder Jack Conte is the face of the company, giving the service its for-creators-by-creators credentials. But behind the scenes, Patreon isn't quite the scrappy operation it projects. Its other co-founder and CTO, Sam Yam, is a Stanford grad and serial entrepreneur. Among other investments, his company AdWhirl was (somewhat indirectly) sold to Google for $US750 million ($1 billion). Patreon has raised four rounds of venture capital funding in as many years, totalling over $US100 million ($133 million), and it used a portion of that money to acquire competitor Subbable, a platform created by YouTube early adopter Hank Green. Among those on the company's board is former Twitter CEO Dick Costolo.
Here's what I think is happening with @Patreon - this year they 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. 1/10
— Chris Buecheler (@cwbuecheler) December 7, 2017
file the patreon thing under A Not Surprising Consequence of Buckets of VC Dollars and Barely Any Revenue
— Amy Hoy ✨ (@amyhoy) December 8, 2017
With all this in mind, many speculated the new fee structure's purpose is to drive up Patreon's profits, perhaps at the behest of those who invested so heavily in the company. For its part, Patreon wrote in its announcement that "[t]his was never (and still isn't) about making more money for Patreon as a company".
Then again, the same announcement muses that "we want a Patreon where your patrons never have to wonder when they will be charged, or how much they will be charged," which, by the response these changes have received, could not have been further off the mark.
I have deleted like four tweets about this today. It's hard and complicated and I know that Patreon is attempting to solve a problem right now, I just don't know which problem is worse...the one they have, or the one they're creating.
— Hank Green is Dreaming of a White Christmas (@hankgreen) December 8, 2017
In hindsight, it's difficult not to consider CEO Jack Conte's August tweet as an omen.
Patreon, the company, is literally on fire https://t.co/vK5CrXFHBb
— Jack Conte (@jackconte) August 2, 2017