Patreon Is Putting Up Money For Projects Now, But It Expects A Return

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Patreon, the beloved subscription platform whose independent media creators would really like it to stay the course, is following what seems to be the inevitable trajectory of online payment processors and giving out small loans–in this case, cash advances for upcoming projects. This may be getting into hairy don’t-mix-friends-with-business territory for a company which is built on goodwill (namely, a relatively liberal 90 per cent payout of all revenues to creators). But, as Patreon business owners know, everybody needs to get paid, and Patreon is a business.

As Nicholas Quah has reported in the Hot Pod newsletter, Patreon Capital gave an inaugural $US75,000 ($112,200) to the podcast collective and production studio Multitude, which is expected to pay it off, and a little more, in two years from their Patreon income. Multitude and Patreon both confirmed the advance in an email to Gizmodo, though both declined to share the amount of the additional fee. Patreon would take the revenue from Multitude’s previous Join the Party podcast in the event that Multitude is unable to repay the funds.

Multitude CEO and podcaster Amanda McLoughlin, who’s been using Patreon for around five years, told Gizmodo over the phone that alternative funding sources are thin: crowdfunding campaigns consume time and resources, highly competitive arts grants often require professional grant writers, banks are sceptical of membership-style funding models, venture capital is predatory, and partners often turn down smaller shops without an influencer attached. In Patreon, McLoughlin found a sympathetic ear. Plus, she trusts Patreon founder Jack Conte, who often talks about his own troubles trying to support himself as an independent musician on YouTube.

“This way, I don’t have to promise investors that I’ll ten-x my growth or prove to a bank that my earnings are real,” McLoughlin said. “This is someone who’s looking at my and all my colleagues’ track records in order to make real financial projections. It’s not a high-interest loan; the amount of money I’m paying back is all predetermined. Even if Next Stop makes no money, we know for sure that Join the Party, a project that we worked on with the same team, will be able to pay that back.”

“A bank doesn’t view community support as a real asset,” she added. “Patreon does.”

McLoughlin adds that there’s not yet an industry standard for fiction podcast budgets, which is why Multitude is publishing the full budget for Next Stop along with a resource on how they produced the show. “We want to show other studios a fair floor for fiction podcast budgets. It takes a lot of highly skilled workers to get something like this made.” Currently, Multitude runs on funds from Patreon and Memberful supporters as well as studio rentals, a familiar strategy for small creative Brooklyn-based enterprises.

In an email to Gizmodo, Patreon declined to share details but said that “each advance is different based on the creator.” They also clarified that each agreement is different. Patreon was careful to differentiate that the money is a “cash advance” and not a “loan,” since “that gets into bank territory and we aren’t a bank.”

This comes one year after Patreon CEO Jack Conte told CNBC that the company “needs to build new businesses and new services and new revenue lines” to be sustainable. They since launched two additional membership tiers with slightly higher commissions for perks like analytics, a partner manager for small businesses, and merch–a new addition for which Patreon acquired Kit. (Previous attempts to fiddle with the funding model sparked fire and fury.)

The term “payday lender” has come up. Fair: there’s plenty of reason to side-eye Square’s altruism in giving out small business loans as it vies for its banking licence but argues that it’s not a financial company when tax season rolls around.

On the other hand, it’s brutal out there for artists contending with student loans, rent, studio space, and a dearth of arts funding. Nor can small creative businesses rely on banks for small business loans that are considered higher-risk. Nor are all small lenders necessarily evil, though the good ones are sparse, and they don’t tend to look like tech companies.

Patreon added in an email that currently there’s no application system for cash advances, but they will be “rolling out more information around that soon.”

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