Patreon to shift payment processing fees from creators to patrons
December 7, 2017 1:37 PM   Subscribe

Patreon has sent an email to patrons today stating that, "Starting December 18th, we will apply a new service fee of 2.9% + $0.35 that patrons will pay for each individual pledge. This service fee helps keep Patreon up and running." [FAQ] Vice: It will now cost patrons around $1.38 to give a creator $1 per month, instead of $1, which some creators believe could lead serial backers—those who support a lot of projects but at a very low monthly fee—to pull support.

Engadget: Because the fee is charged per pledge, it will affect those who give small amounts to many creators much more than it will those who pledge the same amount but to just one or two creators. For example someone pledging $10 to one creator would see their payment increase to $10.64. But someone paying $1 to 10 creators each would see their payment increase to $13.79. Many creators are, therefore, worried they'll lose a lot of their $1 to $5 pledges.

TechCrunch: Creators don’t have the option to cover or remove service fees from their pledges.

Patreon says the reasoning behind its new policy is to let creators keep a larger cut of each pledge. “With this update, creators will now take home exactly 95% of each pledge with no additional fees,” the company explained on its update page. “In the past, a creator’s income on Patreon varied because of processing fees every month. They could lose anywhere from 7-15% of their earnings to these fees. This means creators actually took home a lower percentage of pledges than their patrons may have realized.”

The Outline: No One Makes a Living on Patreon
Patreon now has 79,420 creators, according to Tom Boruta, a developer who tracks Patreon statistics under the name Graphtreon. (He has his own Patreon — “Graphtreon is creating Patreon graphs, statistics, and history” — which earns more than $500 a month.) Patreon lets creators hide the amount of money they are actually making, although the number of patrons is still public. Boruta’s numbers are based on the roughly 80 percent of creators who publicly share what they earn. Of those creators, only 1,393 — 2 percent — make the equivalent of federal minimum wage of $7.25 an hour, or $1,160 a month, in October 2017. Worse, if we change it to $15 per hour, a minimum wage slowly being adopted by states, that’s only .8 percent of all creators. In this small network designed to save struggling creatives, the money has still concentrated at the top.
Patreon previously: Adult content restriction, Graphtreon
posted by Existential Dread (131 comments total) 29 users marked this as a favorite
Tweet thread theorizing that Patreon took too much VC money at too high a valuation and is now under serious pressure to increase revenues.
posted by Existential Dread at 1:40 PM on December 7, 2017 [16 favorites]

The artist whom I support tweeted that he's already lost pledges over this, so it's not hypothetical. That's a net decrease of money flowing to the creator, isn't it...?
posted by inconstant at 1:41 PM on December 7, 2017 [6 favorites]

Somebody posted a chart of how to adjust your pledge so that you're paying the same amount as before, but not being a very mathy or financially clever person, I don't know what that means for the creator's monetary intake.
posted by inconstant at 1:43 PM on December 7, 2017 [2 favorites]

Here's another piece on this change by Patreon. Sounds like the new fee structure will really hurt those who have been giving/receiving small amounts.
posted by exogenous at 1:43 PM on December 7, 2017 [1 favorite]

I am one of those that have a few $1 recurring subscriptions set up for various places, so I may have to reconsider how I make those payments. Or consider making them in a lump sum, but I'm not a fan of that. It's easier to space them out throughout the year.
posted by Fizz at 1:43 PM on December 7, 2017 [1 favorite]

Many of the creators I support have a lot of $1 supporters, and prefer it that way, to some extent, as it spreads out the risk.

My understanding is that Patreon doesn't allow less than $1 pledges, or creators could lower to .60 and the costs to patrons would be about the same.

I've emailed Patreon and told them I'm not in support, and I've also let the people I am supporting at $1/pledge know that I am happy to support them elsewhere. It's a pretty big change with very little notice for the $1 supporters.

And yes, several of the creators I support are saying $1 patrons are already canceling their pledges.
posted by needlegrrl at 1:43 PM on December 7, 2017 [4 favorites]

Patreon alternatives:
Eventually, Drip
posted by Jpfed at 1:44 PM on December 7, 2017 [4 favorites]

$0.35 for a $1 transaction is too much friction. That's a real shame; the ability to make very small recurring donations is one of Patreon's most charming features. It wrecks havoc with per-post fees too. See this analysis for more (On preview, exogenous linked it too.)

I've been trying to understand the fee structure here. I'm fine as a donator paying the transaction fees. The 2.9% seems reasonable given credit card fees. But why $0.35 a donation? They charge my credit card once a month; why not $0.35 a month instead? Or alternately give me a way to donate $12 / year instead of $1 / month.
posted by Nelson at 1:45 PM on December 7, 2017 [9 favorites]

Creators could certainly offer fake "credits" or something. Like build up enough fees credit to unlock additional content or a discount or something. Of course, that's more work for them.
posted by blnkfrnk at 1:56 PM on December 7, 2017 [2 favorites]

Venture Capital ruins everything. In other surprising news, water is wet, the sky is blue, and cookies have been found to be delicious. All this and more, after the break.
posted by SansPoint at 2:00 PM on December 7, 2017 [14 favorites]

If Patreon doesn't smooth this part over, aside from in the moment screwing people over like this, what incentivizes me to use them at all? I as a hypothetical creator don't need help processing payments for larger or periodic donors; those amounts of money are actually worth it for me to handle myself. It was the way to get a thousand people to pay $1 each that actually made it work. This seems like admitting that Patreon as a concept is not, at this point, viable.
posted by Sequence at 2:03 PM on December 7, 2017 [13 favorites]

I'd be willing to bet that Patreon is in a profit sharing agreement with their payment gateway provider, if they're not the gateway themselves. Their revenue isn't the claimed 5%... I'd bet their revenue is primarily based on transaction fees.

It's good money if you can get it, and Patreon just significantly upped their monthly revenue stream while claiming to be doing this "for the artists". Smells like a VC decision to me.
posted by weed donkey at 2:04 PM on December 7, 2017 [17 favorites]

the ability to make very small recurring donations is one of Patreon's most charming features

I'd go further and say it was the whole point of the place. Crowdsourcing small amounts from a bunch of people to make a real difference in an artist's life.

I wonder how many folks will move over to Kickstarter's Drip once it is public? (I don't know how the finances differ over there tho)
posted by gwint at 2:06 PM on December 7, 2017 [1 favorite]

$0.35 flat seems big enough to kill the whole business model.
posted by PMdixon at 2:11 PM on December 7, 2017 [13 favorites]

> It was the way to get a thousand people to pay $1 each that actually made it work. This seems like admitting that Patreon as a concept is not, at this point, viable.

...which is super weird to my ears, because I work in nonprofit fundraising where this model is a time-honored and very successful strategy.
posted by desuetude at 2:15 PM on December 7, 2017 [4 favorites]

It's a successful way to raise funds, but it's maybe not something you can run a profitable business on top of .
posted by sagc at 2:19 PM on December 7, 2017 [1 favorite]

Wait, is there something I'm missing, or is the 35 cent-per-pledge just a huge fleecing scam?

5 patrons supporting 5 creators at $1 doesn't create 25 transactions. It creates 10 transactions: 5 from patrons to Patreon and 5 from Patreon to the creators. But there's twenty five 35 cent transaction fees.

If those 5 patrons each supported 1 creator at $5 results in the same number of creators getting the sa.e amount with the same number of transactions, but now there's only five 35 cent transaction fees.

$1 pledges make up the majority of pledges. This is just an underhanded way to skim off more money to Patreon, and hope that patrons don't notice the 35 cent fee for each person they support. There's no real-world justification for this fee.

It's even worse for people who pay per creative work instead of per month, since there's a 35 cent fee per work, punishing those who create many works per month.

Calling it a "transaction fee" is a cynical lie to milk more money out of patrons.
posted by AlSweigart at 2:20 PM on December 7, 2017 [37 favorites]

Another Twitter thread attempting to make sense of all this. (Includes interruption by kitty!)
posted by dannyboybell at 2:22 PM on December 7, 2017 [1 favorite]

Ryan "Dinosaur Comics" North with bunches of cancellations, just today.
posted by Chrysostom at 2:27 PM on December 7, 2017 [3 favorites]

This is a pretty naked ploy to boost revenues, no matter how much they claim "More money goes to artists," which proves Patreon's real customers aren't the creators or patrons, it's the investors. It's been great seeing small-time artists find support and success via small donations, and these are exactly the people who are being targeted.

With the old patreon, if you had a $5 budget and wanted to support as many artists as possible, you'd give each one a dollar and everyone would be happy. With this new scheme, you can give $3 to three artists, Patreon takes about $1 in "fees", and I guess you throw the last dollar away because nobody wants it? What a dumb, brazen plan.

Really, what this proves is there needs to be a non-profit version of Patreon, where you won't see fees levied in the name of profits and you can be sure artists are getting the maxim amount for your donation. Same with Humble Bundle, whose future is equally questionable thanks to venture capitalists. For-profit business models should stay the hell away from organizations that support art.

How feasible would that be, actually? There are already non-profit organizations dedicated to promoting the arts, is it possible to set up a non-profit that takes contributions and pays artists the way Patreon does?
posted by Mr.Encyclopedia at 2:33 PM on December 7, 2017 [9 favorites]

I pay 20 "crafter/maker/project/educator" youtubers $1 each, per month. For this I am billed $24 as I pay VAT being UK based. I know the creators get less than $1, but I always thought it would be pretty near to it... because this spread-it-thin model is exactly what I though patreon was for. If the creators collected the $1 payments directly then it'd be massively diminished by fees. Patreon's key feature was aggregating the transactions.

If they don't offer a big saving by doing that aggregation then why do they exist?!?

Under the new scheme the charge to me would be $31.58. ie a 32% increase in the amount that leaves my card. The creators may or may not get more from that nominal $1... but wow... if I do nothing this is one heck of a price rise.

What really irritates me, and what has really soured this, is the weaselly and disingenuous way its been spun. They're deliberately muddying things with talk of fees that mirror credit card fees, but they applying the flat rate part of the fee on a PER PLEDGE level. This is really dishonest, as many many pledges are aggregated into monthly batch charges. And those bar graphs in the announcement? Not to scale. The little fee bar is tiny despite being almost 40% the size of a $1 pledge.

And I don't think I'm an edge case here with my $1 pledges. A lot of creators have built their models around micropayments. I've just reviewed the public pages of some people I support and their average pledges are between $1.50 and $2.50.

At the end of the day it comes down to the amount of money I have available to spend on this hobby. And so I will have to drop some of the people I support. And then there is the question of if I even want to encourage Patreon by giving them business. I don't. I really don't, that announcement was horrible corporate misinformation and if there weren't real people I know and respect associated with these payments (the creators) I'd have closed the account already.
posted by samworm at 2:34 PM on December 7, 2017 [20 favorites]

Yeah, I would not object to a .35 fee per month, but per pledge is like the nakedest of cash grabs. I haven't decided what I am going to do yet.
posted by jeather at 2:37 PM on December 7, 2017 [4 favorites]

How feasible would that be, actually?

Liberapay, referenced above, is a non-profit. So pretty feasible! (Wow, though, is Liberapay a terrible name.)
posted by phooky at 2:40 PM on December 7, 2017 [1 favorite]

Calling it a "transaction fee" is a cynical lie to milk more money out of patrons.

Exactly. I think it's the language about this that bothers people as much as anything else. If I fund 20 people at $1/mo, Patreon only has to manage one donation from me, not 20, but they charge me 20 transaction fees under the new model AND act like this is helping artists, which it is not. It's using the language of credit cards to obscure the fact that because they are acting as the middle-man the whole point was that you could donate $20 to Patreon and have it go to 20 people.

I would love to see these numbers running in another few months so see if this actually means that content creators "keep more money"
posted by jessamyn at 2:43 PM on December 7, 2017 [33 favorites]

Of those creators, only 1,393 — 2 percent — make the equivalent of federal minimum wage of $7.25 an hour, or $1,160 a month

Someone's calling that a failure? I had no idea that 1 in 50 patreon accounts were making day-job wages at it. (Admittedly lousy day job wages, but still.)

I support a very small handful of patreons - two (maybe three; I forget) - at a $2-$3 per month each. I suppose I'll cope with the extra cost and keep them, because I know they'll be slammed by cancellations over this.
posted by ErisLordFreedom at 2:44 PM on December 7, 2017

One of the creators I support through Patreon: Mark Does Stuff: Hey @patreon, I’m fine eating this cost, please don’t change this THANKS.
posted by Pendragon at 2:50 PM on December 7, 2017

File 770 has a post with a roundup of responses to this change: Patreon Changes Fee Structure and Unleashes Chaos
posted by Lexica at 2:55 PM on December 7, 2017

Liberapay is a terrible name. I can come up with a better one in 10 seconds. BeneFactory. There, you're welcome. If I set up a BeneFactory to accept your donations I can continue to provide better startup names.

BuenaFactor might actually be better? We'll workshop it.
posted by Mr.Encyclopedia at 2:57 PM on December 7, 2017 [43 favorites]

Several of the people I support on Patreon have pointed to Ryan North's explanation as being better than what they could come up with.
posted by ckape at 2:58 PM on December 7, 2017 [5 favorites]

Damn. 2017 can't die fast enough. Patreon was a ray of sunshine in my bleak internet world.
posted by a complicated history at 3:17 PM on December 7, 2017 [4 favorites]

I really don't understand how a business that only accepts credit cards for payment, and has built its business around accepting credit cards for relatively small amounts, has not built in fees associated with credit cards into its financial workings in a constant and predictable way. This change is bullshit. For someone like my husband, who probably supports 12-15 creators, that means paying 12-15 35 cent fees per month, even though Patreon is charging his card once. My husband went through his (extensive) list of Patreon creators he supports and culled - only one or two went away, others got reduced, a few stayed the same. He's even adding one*, but that was planned before this change. On the whole, though, he decreased his donations by about a third or so.

* The Campaign podcast. It's really quite good.
posted by booksherpa at 3:21 PM on December 7, 2017 [1 favorite]

If I use PayPal to send someone money, the fee is 2.9% + $0.30. If I use Patreon, the fee will be 2.9% + $0.35 PLUS they take an additional 5% from the creator. Patreon's old model relied on batching payments to cut down on fees, but now? Why would I use them to support people I care about?
posted by davejh at 3:26 PM on December 7, 2017 [12 favorites]

I've been on Patreon for a while and regretfully cancelled a bunch of pledges today. I think I've worked it out so my most favorite creators still get money while leaving my outlay the same. I left an apology to everyone I stopped paying.

Patreon always charged me one time per month, despite backing eleven different creators and then the money gets distributed between them. I can't read this as anything but a cash grab - it's not like they were visibly making multiple charges and then eating fees.

Based on what a $1 supporter gets charged ($1.38) the creator is getting 68.9% of the fee rather than 95%. I was bored and checked how much creators get and it's never 95% of what the patron is charged.
posted by caphector at 3:28 PM on December 7, 2017 [3 favorites]

When YouTube radically decreased their ad payoffs, a few youtubers I follow decided to unmonetize their videos and turned to Patreon to make up for losses. This will likely put a dent on some content producers, particularly those who were popular enough to make a living from it - 8-bit Guy is actually working full-time on his channel and associated projects, like his C64 game.

I'm expecting there will be a few panicky videos over the weekend because this is a shameless cash grab from Patreon.
posted by lmfsilva at 3:44 PM on December 7, 2017 [1 favorite]

I am actually one of the few creators on Patreon who makes their living from it. A few points:

1. There was no widespread discussion with creators. I know a lot of of creators and follow Patreon specific message boards and no one is defending Patreon or seemed to have prior knowledge of it. Chapo Trap House (biggest creator on Patreon) came out against it.

2. They are probably going to screw creators who back others - from a creator only board, a Patreon employee said ""We will likely be changing the way creator to creator payments happen in the future so that you will no longer be able to use your Patreon balance. "

Previously, our pledges were taken from collected money in an effort to minimize transaction fees. No more, it looks like.

3. I attended a Patreon creator conference last month called Patrecon. It was hosted by Patreon and staffed by the CEO and a bunch of employees. NO ONE SAID ANYTHING ABOUT THIS CHANGE.

Ironically, they talked a lot about how the Youtube adpocalypse was bringing more creators and patrons to Patreon. WELP
posted by clockworkjoe at 3:48 PM on December 7, 2017 [31 favorites]

Damn. 2017 can't die fast enough.

this whole decade tbh. garbage fire, all of the coming years.
posted by numaner at 3:48 PM on December 7, 2017 [1 favorite]


"Hey Hank, this actually is not accurate -- the reason to make this change has nothing to do with us making more money. It's one step in a much large plan to 1) get creators more revenue in the long run and 2) fix a half dozen payments problems"
posted by clockworkjoe at 3:50 PM on December 7, 2017

If Patreon was so hard up for money why didn't they just start a Patreon page?
posted by FJT at 3:53 PM on December 7, 2017 [26 favorites]

When your transaction costs for a one dollar payment are 3/4 of what it costs to send a physical envelope containing one dollar across the US, you're not providing a valuable service. At least if I send a dollar bill every month through the mail I'm subsiding an essential service that is important for other reasons.

Somehow, the announcement wouldn't be so irritating if it weren't for the Good News, Everyone! tone. "We're dramatically increasing transaction costs so we can make more money" isn't great, but at least it would have been honest.
posted by eotvos at 3:59 PM on December 7, 2017 [24 favorites]

I mean... that's... I could set up recurring billing with Stripe for 2.9% + $0.30/charge.

Granted, I'd have to deal with some back-end infrastructure then (or use one of a variety of pre-built solutions - there are even Stripe plugins for WordPress), but still. At that point the benefit of Patreon is just... people might already have an account? Having just spent most of the year building out a subscription service - I went with Chargebee instead of completely rolling our own via Stripe for various reasons - I can't see the value here.

The bundling of transactions seemed to be Patreon's edge, the closest thing to accessible working microtransactions. Now, it's pretty much just another payment processor?
posted by sysinfo at 4:01 PM on December 7, 2017 [6 favorites]

Hmm. I mean, it's not hurting me to give 35 cents more per month to the webcomic I back. I rarely mind when a small business passes along their transaction costs like that to keep it affordable., for instance, my hosting provider, takes the transaction fees out of my deposits, and I'm fine with that. But I can see how it's frustrating for anyone giving 2 dozen $1 payments to various creators each month, or supporting other creators with payments via their balance. I was already surprised they went this long without an increase, though, because I doubted creators were getting much of my $1 payment, and I felt kind of bad about that.
posted by limeonaire at 4:03 PM on December 7, 2017 [2 favorites]

If Patreon wants to increase their revenue I don't mind paying more as a donator. What I don't like is the flat fee structure that specifically disincentivizes the smallest payments. It seems like a real mistake. Are they intentionally driving away the $1 donators?

I've got to think they've modelled this out carefully and have some theory on what the result will be. And I'd like to think the CEO is not actually lying when he explains the goals. OTOH what they're doing really doesn't make sense to me.
posted by Nelson at 4:08 PM on December 7, 2017 [2 favorites]

As Twitter showed us, the order of operations for such platforms is to:

Step 1) Build a unique, useful tool that people like.
Step 2) Break it.
posted by mrjohnmuller at 4:14 PM on December 7, 2017 [38 favorites]

Liberapay is a terrible name.

And all the choir geeks (and Catholics, probably) go:
Libera me, Domine, de morte æterna, in die illa tremenda
Quando cœli movendi sunt et terra
Dum veneris iudicare saeculum per ignem.
I mean, I guess if you think crowdfunding will save you from eternal death, it's not so terrible.
posted by fedward at 4:20 PM on December 7, 2017 [2 favorites]

Patreon adds no value. They are big because they were first. It wouldn't cost a lot for literally anyone to make a service just like it, only cheaper.
posted by Splunge at 4:25 PM on December 7, 2017 [2 favorites]

I do agree on supporting things like NearlyFreeSpeech (and I do host stuff with them) but they've always been transparent on their charges and changes - they gave 3 months notice on their blog of their latest shift, and then even more time in their email about it, and carved out exceptions for development/personal sites. This feels like if they were to announce that every site you host with them would suddenly have a per-visitor transaction fee regardless of infrastructure, site size, or traffic.

Additional unrelated thought - if I'm a creator who's also doing cons/fairs/etc and selling merch, chances are I already have a Stripe reader, so there's even less friction to switch. I'd like to know why Patreon thinks somebody (Stripe, Drip, etc) isn't about to eat their lunch with this.
posted by sysinfo at 4:26 PM on December 7, 2017 [3 favorites]

Patreon updated their FAQ explaining their reasoning.

Basically it comes down to when to charge backers. Right now, every backer is charged at the first of the month.

Some creators have charge up front enabled - that means backers are charged for a month the second they back. This also means they are double charged if they sign up late in the month - back on the 29th and then get charged again on the 1st.

Other creators do not have charge up front - that means backers have free access to the content until the first of the month and can steal content and delete their pledge before the first.

Patreon's solution is to now charge every backer on the day they sign up and every month on the same day.
posted by clockworkjoe at 4:27 PM on December 7, 2017 [4 favorites]

See, the thing about Nearly Free Speech is that they use an account system. The charge a fee per deposit, and then your payments for hosting and domains are pulled from that account. Patreon has basically exploded each pledge into its own transaction, each with its own fee. If they implemented some kind of wallet I could transfer money into and pledge from, that would be great! But they're not!
posted by davejh at 4:38 PM on December 7, 2017 [3 favorites]

Ugh. The point of Patreon was to let them distribute the credit card transaction costs among a bunch of different donations. If I wanted to pay at random times during the month, I'd use PayPal.

This not only raises my out of pocket by over 20% (which, I suppose, would be fine if that were going to the creators, but it's going to the freakin' credit card processor), it results in a whole bunch of little charges throughout the month. Exactly what I was trying to avoid.

I'll probably cull everything but the three Patreon podcast feeds and see if PayPal (or, hell, my bank) can just do recurring payments for everyone else.
posted by straw at 4:39 PM on December 7, 2017 [2 favorites]

A site like Patreon ought to be owned by the creators, not outside investors. Then they'd be making the decisions instead of scrambling to react to them.
posted by panic at 4:45 PM on December 7, 2017 [3 favorites]

Yeah the updated FAQ explains the reason for the charge-per-donation; they're going to bill donators separately for each donation, on the monthly anniversary of the first donation. So Patreon's going to incur more flat credit card charge fees and will pass those along to donators.

Still seems dumb but at least I see the logic. The reason they want to bill each project separately is to solve a problem with creators who use Patreon to charge for access to their products. But personally all my Patreon donations are just gifts, I get nothing contractually in return, and I don't care which day of the month they bill me. I wish they'd do it efficiently.
posted by Nelson at 4:50 PM on December 7, 2017 [1 favorite]

A post on Dreamwidth turned up this, from June of this year: Inside the 6 Hypotheses that Doubled Patreon’s Activation Success, by Brian Balfour:
Raviv explains, "We'd rather have our GMV be made up of fewer, but truly life-changed creators rather than a lot of creators making a few dollars."
I suppose they're going to get their wish. There's a whole swarm of $1 payment cancellations already, and a number of creators who've decided to close shop and maybe look for something else.
posted by ErisLordFreedom at 4:58 PM on December 7, 2017 [3 favorites]

Seems like it would be easier to just prorate the first month rather than completely ruin the whole point of their business.
posted by ckape at 5:15 PM on December 7, 2017 [17 favorites]

More like Ticket Mastreon.
posted by peeedro at 5:19 PM on December 7, 2017

Seems like it would be easier to just prorate the first month rather than completely ruin the whole point of their business.

Then people would back something on the last day of the month, pay $.01, download all the backer-only stuff they want, then cancel their pledge. I agree that it's a shitty problem, but I don't think knifing a primary use case for their service is the answer. A better system would be to limit how often you can donate and how often creators can withdraw funds. Or add an option for creators to require people to back continually for at least a month before specific content becomes available to them.
posted by Mr.Encyclopedia at 5:44 PM on December 7, 2017 [3 favorites]


I don't know about today but last night nearly all the @-replies to the Patreon Twitter account were all talking about how many MONTHS they'd been working on this with the entire COMMUNITY. Hard nonsense.
posted by jessamyn at 6:23 PM on December 7, 2017

You can just not unlock backer-only content until one payment has gone through, and offer the choice of "pay immediately and again on the first of the month" or "wait for the first of the month". (Or this can be an option for the creator to enable.)

There are a lot of solutions that this isn't finding.
posted by jeather at 6:35 PM on December 7, 2017 [9 favorites]

My husband went through his (extensive) list of Patreon creators he supports and culled - only one or two went away, others got reduced, a few stayed the same. He's even adding one*, but that was planned before this change. On the whole, though, he decreased his donations by about a third or so.

Yeah, but Patreon makes more money, so what the fuck do they care?

This Patreon change comes from the same philosophical approach to life as the GOP tax bill.

So far I've only had one patron cancel. I make about $150 each month. We just started having our podcast not cost us any money. I resisted Patreon for a long time. I'm disgusted by this.
posted by Automocar at 6:36 PM on December 7, 2017 [4 favorites]

@jeather - backers want to access content as soon as they sign up. Not all creators were able to go to charge up front. Making a backer wait weeks to access content is a bad idea.
posted by clockworkjoe at 6:40 PM on December 7, 2017 [1 favorite]

I'm spitballing here. But I still contend there are a bunch of solutions that are not this bullshit.
posted by jeather at 6:48 PM on December 7, 2017 [9 favorites]

Best solution is a wallet/credit system, not mandatory, but allows patrons to control how many transactions they do a month.

Patron has 10 pledges at 1 buck each.

Every month they have Patreon charge $10 + fees to the Patreon Wallet.

Pledges come out of the wallet.

That's 1 transaction a month.

Key is to make this optional so patrons who don't want to bother or are uncomfortable with storing money in the wallet can choose to pay the transaction fees.

If patrons need the money they can get it back (minus fees of course)

You can also create gift cards with a wallet system.

Downside is complexity for patrons to manage a wallet (especially when they change how much they pledge a month) but that's way better than the current system.
posted by clockworkjoe at 7:07 PM on December 7, 2017 [9 favorites]

I would gladly let Patreon hold $10 in a wallet for me to save $3.50 / month in fees.
posted by Nelson at 7:16 PM on December 7, 2017 [6 favorites]

It's like they're mad at money and want to make less of it. What a bizarre-ass choice they've made.
posted by XtinaS at 7:27 PM on December 7, 2017 [5 favorites]

Then people would back something on the last day of the month, pay $.01, download all the backer-only stuff they want, then cancel their pledge.

I'd love to see numbers on how many people do the "sign up, download the stuff, then cancel" thing. My experience is more along the lines of being a supporter of Ursula Vernon's, where at one point she did a survey of what her supporters wanted as a reward. The overwhelming response: "We don't want anything exclusive, we just want to support you making stuff and putting it out there."

Her two main support levels are $1 "You get nothing!" and $2 "Still nothing, but twice as much of it!"
posted by Lexica at 7:30 PM on December 7, 2017 [13 favorites]

So Patreon is switching to loot boxes?
posted by SonInLawOfSam at 7:36 PM on December 7, 2017 [3 favorites]

@Lexica - it's a huge problem with the NSFW creators (like pinup artists and sexy cosplayers). People not only steal everything from a creator they repost it to reddit and other sites.
posted by clockworkjoe at 7:44 PM on December 7, 2017 [2 favorites]

From HackerNews:

tmorton 3 hours ago | unvote [-]
Ok, that link makes things clearer, and I can understand their position a bit more.

But they missed the BIG OBVIOUS solution: charge a pro-rated "first month" pledge, then combine all subsequent pledges like they do now.

For example, if I become a patron at the $10/month level, on the 15th of the month, they can charge me $5 immediately. Then the $10 gets added to my regular charge on the first of the month, and everyone saves in processing fees.

As a patron, I would much rather get one charge per month on the first. The current schedule works great.

ThrustVectoring 2 hours ago | unvote [-]
I'd swap that. Charge the $10 immediately, then bundle the pro-rated refund of the half of the month you missed into the first month's subscription charge.
ThrustVectoring's solution nails it.
posted by Jpfed at 7:46 PM on December 7, 2017 [11 favorites]

Several of the people I back on Patreon are all like, "WTF is this, I dunno what to tell you. Let me yell at somebody and I'll figure something out."

Happy fucking holidays from Patreon, this is going to be a delightful season for people who were depending on those smaller contributions, which are going to vanish in droves.
posted by fifteen schnitzengruben is my limit at 8:51 PM on December 7, 2017 [3 favorites]

"No one makes a living on Patreon" by Brent Knepper is brilliant. Thank you so much for sharing it. His thoughts about the challenges of being a creator on Patreon are similar to mine, and the piece is provocative, on-point, and beautifully written. It saddens me that even people who write as well as he does can't make a decent living on Patreon, even when they make it their full-time job. I doubt there will ever be much hope for writers like me, who can only devote a few hours a week to maintaining Patreon and social media accounts due to the demands of the day job.

Rather than re-tell my story here, I'll just quote a slightly edited section from "Earning a Living and the Dilemma of Unpaid Work," a personal essay I wrote on the injustice of a world without unconditional basic income. (Note: relevant self-link, obvs.)
Patreon...provides ongoing funding for creators in a way that has enabled some of them to quit their day jobs and create full-time. But it’s a far cry from unconditional basic income.

As much as I have wanted to believe that Patreon can provide something like a basic income – or at least a sufficient financial foundation for many of us who want to do unpaid creative work – the sobering reality is that Patreon is not at all like a basic income. It’s...monetizing our unpaid work.

Success on Patreon is a full-time job that requires popularity, marketing skills, and media visibility. In order to succeed at the quit-your-day-job level, most of us must first monetize our social networks, develop our “branding,” and make ourselves into public figures. That’s difficult to do, for all kinds of reasons, and monetizing unpaid work comes with costs of its own. The more time we must spend on self-promotion and social media work, the less time we have for creativity. Only a small group of highly skilled and visible people are receiving enough patronage to permit them to live without another means of financial support, and I’m willing to bet most of them got there with the aid of behind-the-scenes support or fall-back options that give them an advantage (e.g., spouses, savings accounts, etc.) For the rest of us, I’m afraid, Patreon is mostly “hope labor” for the time being. It’s got potential to be liberating for some people. The platform is growing quickly, and for good reason. But there’s a catch-22.

Here’s how that plays out in my own situation as a writer on Patreon.

In order to bring in more Patreon support, I’d need to spend more time releasing work, handling media and publicity matters, and interacting on social media. But in order to release more work and spend more time on publicity and social media, I need an income that is sufficient to free up that time. I’ve been working on The Anticareerist and its predecessor projects for over 20 years now, and my other project, The Black Stone Hermitage, for six years. I’ve got an audience that would like to read more of my work. I’d love to deliver more work! But until I have more free time and energy to write what is in me to write (which means I must first have more money, or some other means of support), my unpaid writing is pushed to the margins of my life. So, unless something major changes in my life, I’ll be keeping my day job.
I maintain two Patreon campaigns, since the audiences for my projects don't overlap much. One has been active for two years; the other for one year. I'm bringing in just over $100 per month from both of them combined.

Granted, as a freelance copywriter I do have a good day job now compared to the five previous years I spent cleaning houses full time. But when I started my Patreons I had hopes that the platform might one day provide a route for me to spend the bulk of my time writing what's in me to write, instead of what I'm hired to write, and that's what attracted me to Patreon. That illusion is gone now.

Knepper writes:
...with the new fees, the $1 level doesn’t really make sense. I’m back to working as close to full-time as I can as a freelance writer and photographer, so I only spend a few hours a week writing stories for my patrons.
Me too, Mr. Knepper. Me too. Solidarity.

The micropayments model was one of the main attractions for me, both as a creator and as a patron of other creators. When I launched I told my patrons I'd much rather have many patrons at $1/each than just a few at $50/each, since it provided increased income stability - something I find very valuable as a freelancer. Small pledges distributed over a larger number of patrons involves less risk, because the impact of losing a few patrons will be less likely to interfere with my writing time.

Given the outcry about Patreon's new fee structure, and the fact that it penalizes people who make micropayments to support many creators, I'm betting there are a lot of $1 pledges being deleted right now. And the psychological impact of losing those $1 patrons is going to be substantial. Even a $1 pledge means a great deal, especially to those of us whose incomes are beneath the poverty level.

Mr. Knepper again:
In this small network designed to save struggling creatives, the money has still concentrated at the top.
Indeed. That's the bottom line for me, and that's what puts me off Patreon the most. The income distribution is just like it is in the rest of the U.S., only with Patreon the money is made by preying on the false hopes of creators like me.

Still, though, I don't know of any other way I could bring in a steady $100 a month for the things I create whenever I have time to create just for the love of it, so I'll keep my Patreon campaigns active for the time being. But with Knepper's well-timed and thought-provoking piece coming right on the heels of a fee structure change that penalizes micropayments, the last of the wool has been pulled from my eyes. My dwindling hopes of using Patreon as a platform to permit me to (eventually) quit my day job have finally dwindled down to nothing.
posted by velvet winter at 9:13 PM on December 7, 2017 [4 favorites]

FYI -- if you send in feedback to Patreon, you apparently have to by verify by email and register for Zendesk to actually send it. The yellow notice at the top of the screen that warns you the feedback isn't sent right away is easy to miss.
posted by HarshLanguage at 9:39 PM on December 7, 2017 [1 favorite]

"Some creators have charge up front enabled - that means backers are charged for a month the second they back. This also means they are double charged if they sign up late in the month - back on the 29th and then get charged again on the 1st. "

I've joined gyms before! I know this game! I am okay with it when supporting creators! I do not begrudge them two months of my tiny pledge because I joined on the 29th!
posted by Eyebrows McGee at 9:42 PM on December 7, 2017 [5 favorites]

At this stage in a VC funded company's growth, you would never ever sacrifice growth for money. They raised money THIS YEAR. It makes no sense to raise $60M and turn around and start putting on the screws for profit margin. The "VCs are ruining Patreon" idea is complete bunk.

There is a very straightforward answer to this -- they have terrible product management and terrible communication skills. This should surprise no one. Most companies have terrible product management because it is very hard to do well. Their updated blog post from the PM makes this crystal clear. He lays out all their product problems:
  • Patrons get double charged if their first pledge is at the end of the month.
  • Creators get uneven take-home pay even with a fixed number of patrons. (I don't totally get this one, but whatever.)
  • They are trying to support three very different payment models that are hard to reconcile: monthly subscriptions, pay per piece, and monthly charged up front.
  • There's some sort of fraud problem around payment timing and reward granting.
These are totally real problems that cause creators and patrons problems and it's right for product management to try to solve them. They just picked a bizarre solution: collapse monthly up front and monthly trailing into monthly based on when you subscribe. Once you accept that idea, you're screwed on pay per piece because there's no longer a single monthly charge to lump the transactions into. So you have to standardize the fee structure so you don't hemorrhage money. Then the question becomes "will patrons revolt with this fee structure?" and they ran a bunch of A/B tests on that question and the answer was "no." Maybe those tests were bad, but I bet they're not. In my experience running A/B tests on revenue products you often discover you can make changes like this and folks won't change behavior, but you get a storm of negative PR that is totally out of whack with the scale of how many people will change their spending behavior.

The failure in this story is in the second step. Good problems to solve, and they just over-constrained themselves on what the solution should be and bungled the communication. Sometimes VC is the evil force, but I don't see it here.
posted by heresiarch at 10:11 PM on December 7, 2017 [10 favorites]

I doubt they ran any A/B tests. I'm sure they built models, but it's really hard to run A/B tests on pricing and not have that news leak. Especially so given Patreon's payment model -- they're not like an Amazon who can just change their prices willy-nilly; in this case they're going from charging donors nothing to charging them something for a subscription service, which is a big, fundamental, and probably TOS-affecting change.

The cynical side of me also thinks they are wiling to cause problems for the large number of content creators who are just using Patreon to take small donations because they don't think it's a defensible and valuable market. Being a donation processor is an easy thing to displace. If they are a payment processor and sell value added services like gating access to content they are more valuable to content creators they have a stickier and more valuable product. It's in Patreon's interest to be essential to creators' livelihoods. (Whether they can pull it off is another story.)
posted by phoenixy at 12:43 AM on December 8, 2017 [3 favorites]

AND act like this is helping artists

That's what really pisses me off, holding creators hostage with a "Don't you want them to make more?" spiel. Dickheads. I get that it's 2017, but I can still write a cheque and drop it in the mail and then creators get the whole thing, while you smarmy pricks get the square root of fuck all.

And Pomplamoose? Never that interesting.
posted by Alvy Ampersand at 12:54 AM on December 8, 2017 [1 favorite]

Ah, I just read the blog post it says they said they did run experiments -- I apologize for saying they probably didn't. I am dying to know however how they managed to run a pricing experiment like this for "nearly a year" and the news didn't get out on a blog somewhere that they were contemplating a pricing change.
posted by phoenixy at 1:06 AM on December 8, 2017 [4 favorites]

as others have said it'll be interesting to see how Drip works out when it goes full on
posted by fearfulsymmetry at 3:31 AM on December 8, 2017

I've read the math and I've read the counter-arguments to the math. But the math really doesn't matter to me, on the whole. It's an emotional reaction on my side. I'm not paying them 35 cents per dollar extra per pledge. You don't raise your bill to someone 35% and then give them an explanation that reads like a rough draft for a short change scam. I'm not even going to bother to take it apart.

I had 15 one dollar pledges or so, and I took a screenshot of the list and pulled my billing information from Patreon. I'll revisit in a month, see if those creators have congregated somewhere else.
posted by quillbreaker at 5:41 AM on December 8, 2017 [9 favorites]

Radical model -

You have an account balance with Patreon.
You make pledges, which incur a charge either on their own monthly anniversary or on a release of a thing or whatever, and are paid from your account balance.
You can make manual payments into the account, and when you do so there is a fee of 35c+2.9%.
You can set an optional reload value for automatic reload payments (default $10, but can be $1 if you like fees) which is triggered whenever a pledge will deplete your account.
Pledges are deposited into creators' accounts, where they can leave it to use for their own pledges or withdraw it to their bank ac.
When a creator makes a withdrawal they are charged a 5% creator fee. Or 10% if they need more money to pay for beard oils at patreon hq.

It seems to me that this would have allowed Patreon to move to individual monthly renewal dates, and to charge the first month at the time of pledge, and to ensure all card fees were always covered, and to aggregate micro-payments to save on fees, and allow creators to cross support, and allow for transparent charges.

But they didn't do anything like this .. . I /can't/ imagine why...
posted by samworm at 6:06 AM on December 8, 2017 [1 favorite]

Here's an interesting Twitter thread about the Patreon debacle.
posted by Samizdata at 7:17 AM on December 8, 2017

My processing fees on Patreon have been consistently above 5% -- I suspect this is because many of my patrons are in other countries. I've had no cancellations from this so far, and only one pledge reduction that was scaled to get back to the previous cost. So there's a real chance I may come out ahead by 5% each month.

But, letting this decision be driven by patron-only content and losing their actual micropayment advantage seems like a big mistake on Patreon's part.
posted by joeyh at 7:17 AM on December 8, 2017 [1 favorite]

When YouTube radically decreased their ad payoffs, a few youtubers I follow decided to unmonetize their videos and turned to Patreon to make up for losses.

Doesn't demonetizing also mean none of the Red revenue share? I guess folks who felt the need to shoot themselves in the foot just leave more for the people who didn't, if I understand how it gets allocated, so that's not all bad.
posted by wierdo at 8:40 AM on December 8, 2017

I re=read Patreon's blog post and updates after reading the Twitter thread Samizdata linked to above. One of the bits that stands out is their "It’s a lot to understand" mention. It seems like one of the things they were reacting to--if you believe them, which I am not sure that i do--is support tickets. That is "People complained about fees and we did this in response to that." I think this is from one of those weird internet-conceits that you can create an internet moneymaking machine where all customers are (mostly) satisfied and no human intervention is required to make that money machine keep working. I believe this is a fallacy.
posted by jessamyn at 8:48 AM on December 8, 2017 [9 favorites]

Wow, this really isn't a hard one. First (short) month is full price. You pro-rate the second month. Third month and every month thereafter is full price. All billing except the initial happens 1st of the month. They can't have missed this solution. Obvious greed.
posted by agentofselection at 9:09 AM on December 8, 2017 [6 favorites]

I wonder if there are any regulatory hurdles in any jurisdictions Patreon serves on them holding money for later disbursement (the wallet idea). I could imagine that easily becoming interpreted as acting like a bank and bringing down a host of additional requirements on their activities.

The whole notion of deaggregating pledges to me is as much as saying they wanted to undo the primary value I saw them providing. I wonder what value they see as their primary offer.
posted by meinvt at 9:42 AM on December 8, 2017 [2 favorites]

As Twitter showed us, the order of operations for such platforms is to:

Step 1) Build a unique, useful tool that people like.
Step 2) Break it.

That seems to be the plan for most business now.

This whole thing is weird. It's also sad because the only course of action to protest it is to stop paying the creators. I guess that was part of the calculation.
posted by bongo_x at 9:46 AM on December 8, 2017 [1 favorite]

Another Patreon-supported creator here.

Patreon never said anything to me about this. I learned only thanks to complaints from supporters on Twitter.

Really not sure what to do now.
posted by doctornemo at 9:58 AM on December 8, 2017

I just got started using Patreon a couple weeks ago. I didn't have many patrons, but as of yesterday all but one of my $1 patrons have cancelled. I went through and cancelled all my $1 pledges, and the number of creators I support has dropped from twenty-something to four.
posted by AlSweigart at 10:39 AM on December 8, 2017

Here's evidence of testing from five months back.
posted by foxfirefey at 10:41 AM on December 8, 2017

doctornemo: "Another Patreon-supported creator here.

Patreon never said anything to me about this. I learned only thanks to complaints from supporters on Twitter.

Really not sure what to do now.

Now THAT is almost as bad as getting data breach notifications that are four years old. I mean, seriously, Patreon would be nothing without the content creators. One would think that you folks would be the first people they would notify.
posted by Samizdata at 10:50 AM on December 8, 2017 [1 favorite]

I did the maths on my current Patreon pledges (repost from Twitter):

Previously I was paying $45 per month to 15 creators and they were getting between 80% and 88% of that. After the change I will be paying $51.56 per month to 15 creators and they will be getting a fixed 82.9% of that.

I don't think the "giving a greater proportion of the money to creators" excuse stands up to even rudimentary analysis.

I can afford to pay the extra $6-odd per month, not sure at this stage that I want to. Hopefully the folk I support will get on some of the alternative platforms.
posted by robertc at 11:00 AM on December 8, 2017

You would think, Samizdata.
I started a thread on my Patreon space, and people started responding in minutes.
Echoed thread on Twitter and Facebook to make sure I reach as many supporters as possible, where they feel most comfortable posting.

First comment: a supporter recommended I explore other options.
posted by doctornemo at 11:03 AM on December 8, 2017

So, to recap...
  • Patreon tested doing this in the past year, but hardly anyone noticed.
  • They announced it to Creators on the 6th December, and Patrons on the 7th, with the launch date on the 18th, positioning it only being to get more money to creators.
  • Meanwhile, someone asked about the ability of Creators to avoid fees by paying other creators from their Patreon account, and was told "oh, yeah, we're cancelling that".
  • After immediate backlash, it took another 4 hours before Jack Conte posted about more info coming because "folks are super concerned right now about the fees".
  • 2 hours later, the original blog was updated to include the reasoning that they needed to do this because they had to change to charging every pledge individually or people might be confused by the charge up front system.
  • Since then... silence.
posted by Auz at 11:29 AM on December 8, 2017 [4 favorites]

doctornemo: "You would think, Samizdata.
I started a thread on my Patreon space, and people started responding in minutes.
Echoed thread on Twitter and Facebook to make sure I reach as many supporters as possible, where they feel most comfortable posting.

First comment: a supporter recommended I explore other options.

Yeah, because there is such a varied marketplace to choose from.
posted by Samizdata at 11:30 AM on December 8, 2017

I wonder if there are any regulatory hurdles in any jurisdictions Patreon serves on them holding money for later disbursement (the wallet idea). I could imagine that easily becoming interpreted as acting like a bank and bringing down a host of additional requirements on their activities.

This, unfortunately. I'm really not defending their approach, but the dirty secret of credit card processing is eventually you have to convince a bank what kind of processor you are, and they have (arcane, often arbitrary, nominally oversight-based) definitions often hinging on whether you do things like hold value, offer a marketplace, etc. Chances are good Your Favorite Wallet Solution is surprisingly easy to covert to a Money Laundering Scheme and eventually merchant banks will roll that risk into your fees or straight up deny you service. (This applies to Stripe, PayPal, etc - anybody who eventually charges a Visa, MasterCard, Amex, Discover, and don't even get me started on international consortia).

Again, not saying they did the right thing, but reminding everybody that money is ancient and stupid and ultimately still controlled by banks no matter how much internet you slather on top.
posted by abulafa at 11:37 AM on December 8, 2017 [3 favorites]

My comment above was innacurate because Patreon actually turns out not to have emailed me about the patrons I lost. I've lost a chunk of income over the blowback to this, and had another less sizable chunk moved to liberapay.
posted by joeyh at 12:09 PM on December 8, 2017 [2 favorites]

Alexandra Erin has a good twitter thread that covers why this change may have happened, and it's not just "Patreon being greedy assholes."

There are apparently two problems with the current/old system(s?):
1) Charge on the 1st, after you subscribe: People who subscribe at the $10 level (or whatever) to get this month's Nifty New Digital Content, download the content, and then delete their subscription before it gets charged, thus cheating the creators; or
2) Charge immediately: People who sign up on the 26th of the month, get charged, and then get charged again on the 1st, so that first payment only covered 5 days.

Both of those got complaints. This is a "solution" to both of those: Charge immediately on subscribing, and monthly on that date! The fact that it will hose any creator counting on $1 subscriptions is considered acceptable collateral damage.

Prorated charges are apparently beyond their accounting software's abilities.
posted by ErisLordFreedom at 12:41 PM on December 8, 2017 [1 favorite]

To those contending that liberapay is a horrible name, it might help to know that they were founded in France, though I agree that the name is not particularly sonorous in English.

Regarding other alternatives, I think my bank where I hold a checking account lets me automatically send a payment to anyone at a US address without fees.
posted by exogenous at 1:20 PM on December 8, 2017 [1 favorite]

Prorated charges are apparently beyond their accounting software's abilities.

Unless this is sarcasm I call bullshit. I wrote the billing software for a medium sized company by myself, and it supported prorating and all kinds of other nonsense just fine.
posted by RustyBrooks at 3:10 PM on December 8, 2017 [1 favorite]

Alternative headline: "Patreon Finds Gun, Aims at Foot, Pulls Trigger, States Critical Need for Additional Ammunition".
posted by -1 at 4:29 PM on December 8, 2017 [2 favorites]

I'm pretty sure the thing about prorating was sarcasm. They could almost certainly do prorated contributions, and even prorated refunds, with less changes than this fee hike took to implement.

Given that their business model was explicitly built around batching transactions to make micropayments feasible given the current regime of credit card transaction fees, suddenly charging 35c/transaction (which is to say, like a credit card) is absolutely and unequivocally a repudiation of their original business model.

They're either saying that their original model (1) can't work for some exogenous reason, (2) it can't work for them, because they done fucked up and shot too much sweet, sweet VC money into their fucking veins, and now they're getting squeezed by their dealer investors, or (3) they're just plain old greedy.

I don't think there's much evidence towards explanation 1, so it's probably some combination of 2 or 3. Charitably, I'd guess 2, since people don't tend to suddenly discover greed halfway through building a business.

The good part about that explanation, though, is that it means there's no reason someone else can't set up a Patreon clone and do exactly what they were doing, but don't get hooked on VC juice, and probably survive and toddle along comfortably enough.

Particularly if they don't try to support a whole bunch of different funding mechanisms, and concentrate just on subscriptions.

The pay-per-piece bit strikes me as a different challenge; there are lots of other funding streams for selling one-off digital items (e.g. Paypal, Stripe, generic ebusiness platform for taking credit cards, whatever), and it seems distinct from subscriptions. The only way I'd see one-offs working would be if you required buyers/donors to deposit a fixed, reasonably-large amount, and then disburse it out to sellers/creators, and only cut the sellers/creators a check once a month, or when some minimum deposit amount had been reached. I don't know if there's really a market for that sort of service. And then you get into chargeback/refund shenanigans, and you have to decide whether to favor the buyer or seller in a he-said-she-said scenario (e.g. do you want to be PayPal or do you want to be Venmo?), and you have to deal with the inevitable people who will try to use it to launder money and sell Bitcoins and everything else, if you allow significant transfers of money. I don't know that I'd want to get into that, if the primary use case is recurring small-amount subscriptions.
posted by Kadin2048 at 5:29 PM on December 8, 2017 [1 favorite]

I hate this. If they'd asked me if I was willing to cover the credit card fees for my pledges with the MONTHLY charge, I would have said sure. But what they're doing isn't about getting more money to the creators by covering processing fees, even if that's how they originally framed it. I think "are you willing to cover transaction fees on your pledge so more money goes to your creators?" is a much different question than "are you okay if we drastically increase the amount of transaction fees and ALSO have you pay them?". Any research based on surveys may have been flawed in this fashion--asking a question that didn't correlate in the answerer's mind with the actual consequences. Any A/B experiments to see how many people dropped may have underestimated the effects of everybody talking and complaining about it at once, convincing each other to act in tandem.

They describe the option of it coming out of the pledge as "That’s a lot of fees for creators to pay." and "Have creators deal with a huge increase in fees" but forget that the corollary to that isn't "Add a service fee so Patreon can cover the third party fees", it's "Have patrons deal with a huge increase in fees." What's worse, they try and cover up the real effects with a misleading graphic that's based on a much, much higher amount than the most common pledge, despite $1 being the most common pledge amount on the site. At that level in order to give a creator another 2-10 cents they're having the patron pay 38 cents more. The efficiency (how much of the donor's money is going to a creator) of a $1 pledge right now is 85-93%. Once the fee is tacked on, that plunges to 69%. After all, the donor's money was paying that fee the entire time; it's just that when you bundled up all the charges, it made the fee much less for each individual pledge, and since you can't go below $1, there's no way to lower your pledge to keep paying the same amount.

Some donors are going to eat the cost. But some aren't, because they're budgeting a given amount, and they'll have to figure out where to make the cuts. Some creators are adjusting their pledge levels down so that patrons won't be paying any more for a given level. (You can't make it lower than $1, though, so that's going to be the breaking point.) Some patrons are adjusting their pledge levels down. Others, especially those with a lot of smaller pledges, are going through and culling the amount of creators they support. So while creators are going to get slightly more of the stated pledge amount, it remains to be seen if they're going to actually make more or break even or even lose some. And that doesn't even get into possible damage to future growth--some people talk about maintaining their current level of support but unwilling to make any new pledges.

Besides fees being horrifically punitive at the $1 pledge level, I can't even imagine how people who like pledging to 20-100 or more different creators are going to react to getting at least one charge every single day of the month that's a pledge anniversary (that's assuming the credit card processor groups all the multiple charges, which I hear happens.) Getting charged once a month is really nice for keeping track of your budgeting. Everybody's current pledges will still hit on the same day but any future ones will be spread out on the day they're made unless you make sure to only pledge on the 1st.

Patreon took legitimate problems affecting some patrons and creators (peek-and-punking, support issues related to strategies that prevented it) and in solving it sacrificed another of their defining features (being able to do $1 micro transactions across many creators while minimizing the credit card fees). What they're telling me with this move is that they're not actually interested in supporting the use case of making small donation amounts a viable way to support creators, focusing instead on being a paywalled content platform.

The result is it's now cheaper for me to use PayPal/Stripe/Square, which have a 2.9% plus 30 cent charge per transaction AND isn't taking an additional 5%. I could get even more bang for buck by just doing yearly donations instead. And that's what I intend on doing, because I don't want to financially reward Patreon for this decision, which punishes my use case where I'm not subscribing to get specific rewards, just to support the creators of content I'm already consuming.

It's interesting to watch how badly Patreon is fumbling this. Everybody knows that what a company says doesn't always match what's actually happening. In fact, it often doesn't. So once you give people a reason to think they're being bullshitted, they'll run down all sorts of avenues trying to figure out the catch even if they're dead ends. People could tell that the first reason wasn't up to par once you did the math (we're charging this fee to give more money to creators!). So, everybody assumed it was a cash grab, especially given VC funding.

Now that people's first explanative theory doesn't line up as neatly, they're still not satisfied with the explanation, so they've found this essay back from June and are zeroing in on charming quotes like "A Creator earning a very low amount through the platform won't meaningfully contribute to Patreon's monetization model, nor to its viral loop (more on that below)." and "We'd rather have our GMV be made up of fewer, but truly life-changed creators rather than a lot of creators making a few dollars." Which then makes creators who are making $1,600ish a month feel like Patreon doesn't even want them. That is a devastating PR failure from a company that was giving its creators instructions on how to sell the changes, which would have helped soften the blow. Instead, it has many popular creators yelling foul and telling people it's okay to drop their pledges and making sure they have their alternatives in order.

I found this transcript from August with the CEO that doesn't stray from that messaging. He only mentions $1 pledges once, seems very attached to the $10 pledge amount and notes that the average patron spends $12 a month. Which is also a funny amount, because later he talks about how "but if two or three or four percent of them give you 12 bucks a month, suddenly, you’re making a lot of money now". I don't think he did that on purpose, but it's interesting because he has access to all the stats of the platform and "number of patrons with multiple pledges has been increasing over the last year, especially".

This transcript also gives a good idea of what they're working towards, which might help explain why the payments move is so important for future business strategies:
The real network effect that I think Patreon is going to experience — and what we’re really starting to build out now — so we’ve had the ability ... we’ve had an API for a little while now. Hasn’t been, like, fully staffed, but we’ve gotten some amazing results back with that API, so we’re starting to integrate with other platforms, like Crowdcast, like Discords. Now you can ... When you go onto Discord, you can have a patron-only chat room on Discord.

Wait, so, I was going to say, before we get to Crowdcast and Discord, just explain what the API does for you and other people.

Ah, I’m sorry. You know when you see “log in with Facebook” on another website?


So we have “log in with your Patreon credentials” on a different website that is not Patreon. So now, on Discord, which is like a chat platform, you can log in with your Patreon credentials and get patron-only chat rooms with a specific creator. That ends up creating wonderful network effects.

So basically, this billing system that you created — because in the end, it is a billing system, right? — can then be added on to other platforms.

Exactly, and you can understand the entitlements on other platforms, and that is definitely a big component of our strategy. So imagine ... The vision for this is, being a member on Patreon should make the web look different to you. The whole web should look different to you if you’re a member on Patreon.
They go into more detail about integrations here. So, they really want to focus on being a pay-for-play experience, but "as patrons self-report, it is literally split, almost 50 and 50, with the desire to support a particular creator and the desire to get the things that that creator is offering." That means this change doesn't translate into a value add for around half of the people currently paying despite costing more.

Drip is going to be a big factor, I think, because it's the most comparable competitor. It's made by a successful company and has experienced indie creators giving it advice. Creators who run Patreons often also run Kickstarters, and many patrons already have Kickstarter accounts, reducing the friction to transfer. Will they be coming out of beta before Patreon manages to contain the damage or after? Are they going to use this opportunity to try and snipe some high profile upset creators? Will Patreon even care, given their current strategic focus? Maybe they're perfectly happy to offload the small fry onto another platform, except I imagine many people will be perfectly happy to straddle and maintain accounts on both sites, to maximize their take since a wholesale migrations would lose some. So the small fry will be hanging around, they'll just get even smaller.

People wanting to follow how Patreon will be further handling this saga should keep an eye on Danielle Corsetto who has a phone call with Patreon today and Jeph Jacques who has a call with the CEO tomorrow.
posted by foxfirefey at 5:55 PM on December 8, 2017 [10 favorites]

All the creators I've seen commenting about it are seriously angry.

Ursula Vernon: "And also I think they underestimated or didn’t realize the intense loyalty a lot of creators have for their patrons. These are MY PEOPLE, dammit. You don’t mess with my people! I will cut you!"
posted by Lexica at 8:21 PM on December 8, 2017

"Software can't handle prorated fees" was sarcastic, or contemptuous of their lousy software; take your pick.

Another issue that was brought up in passing: Are people's accounts going to be frozen when the bank sees a string of $1 ($1.38) charges? Banks don't like anything that looks weird, and "fifteen charges a month for tiny amounts" looks weird. Sure, you just have to call the bank and say, sigh, yes, that's legit; one of the online thingies changed their payment system - but how many people will have to do that? And how many will decide, instead, to say fuckit, I don't need Patreon; I will use Paypal to throw some money towards the creators I care about.
posted by ErisLordFreedom at 9:43 PM on December 8, 2017

Is it significant that their desire to pay fees ten times more often came around the same time that they got invested in by a company that also invests in payment processors?

I think it might be.
posted by quillbreaker at 11:04 PM on December 8, 2017 [2 favorites]

The multiple-charges thing PLUS the removal of the ability for creators to pay out of their Patreon balance is going to especially screw international creators like me.

At first I looked forward to the 95% thing since I don't really earn that much on Patreon anyway (not even $150/m) and I don't tend to have a lot of $1 supporters. But when I heard it was going to be a per-TRANSACTION thing, even though I have mine set up as monthly, and when I saw the math, that got concerning. Then there was the cancellation of being paid out of my Patreon income - so now my income is even less reliable than ever. I think me using Paypal as my main payment gateway helps manage the whole foreign fees thing; otherwise, I'd stand to lose money on foreign exchange fees from my bank.

I'm trying to find a calculator that'll take my income AND my payments and calculate how much I can expect to pay/earn per month. I've seen one that does one half of it, but if someone can rustle one up that'd be great.

Also, Patreon has always hyper-focused on the Big Names, even when they don't do it well - such as their attempt to court Kanye West using a white lady folk singer as an example (note: self link).
posted by divabat at 1:37 AM on December 9, 2017

Amazon could replace them in a week if they felt like it.
posted by andreap at 7:47 AM on December 9, 2017 [1 favorite]

Amazon did that a decade ago; Metafilter even took Amazon Honor System payments. See the link for comments from our own Matt Haughey. I can't find a quick explanation why they shut it down in 2008. But oh the irony in that article, complaining about how $0.30 + 2.9% is a "high fee".
posted by Nelson at 8:10 AM on December 9, 2017 [1 favorite]

Now circulating on twitter: an blog post from June talking about how they don't really want a lot of creators who aren't making a lot of money:
"We'd rather have our GMV be made up of fewer, but truly life-changed creators rather than a lot of creators making a few dollars."
posted by vibratory manner of working at 11:38 AM on December 9, 2017

Another hypothesis to add to the pile:

My theory: Patreon doesn’t want to be a money services business
Implied in Patreon’s reasoning and in the diagrams above is a move away from the concept of stored value, of an internal Patreon ledger than can be used to redistribute money amongst patrons and creators.

At this point you’re probably asking, “Christie, what are you talking about, isn’t the whole point of Patreon to “redistribute money” from patrons to creators?” Well, yes, it is. But the phrases stored value and redistribute money have specific meaning and consequences in the financial regulatory world. Business engaging in certain kinds of activities are considered Money Services Businesses (MSBs) and are subject to additional laws and regulations. PayPal and Stripe are money services business. Kickstarter and IndieGoGo are not. In the United States, MSBs are required to register with the Dept of the Treasury and are overseen by the Financial Crimes Enforcement Network (FinCEN). One type of MSB is a money transmitter and I believe this is specifically what Patreon is trying to avoid having to be classified as (and therefore subject to additional cost and regulation).
posted by foxfirefey at 2:23 PM on December 9, 2017 [3 favorites]

The thing is that if Patreon really gave one tiny bit of a shit about keeping fees down, they'd have more economical funding options. Visa and MasterCard both now have products designed to make business models that rely on tiny $1 or $2 charges work by charging a greater percentage and a much lower fixed fee for those transactions.

Some merchant banks and gateways are even on board and Patreon is definitely large enough to stitch something together rather than using a product like Stripe or Square or whatever that are fine for larger transactions but make zero financial sense when your transaction size is small.

And that's just the obvious alternative that stays within the usual credit card model.

Also, there is zero chance that Patreon can avoid being classified as a money service business. That's precisely what they do, among other things.
posted by wierdo at 4:45 PM on December 9, 2017 [1 favorite]

I made a chart showing the new pay scale - how much a patron pays, how much of it the creator gets, how much Patreon takes, and the percentages.

Oh, and I included the "list amount" that Patreon will say is the pledge amount, but I've realized that's bullshit. There no longer is a "dollar" pledge. You don't pay a dollar; the creator doesn't receive a dollar. It should be called a 95-cent pledge or a dollar-thirty-eight pledge.
posted by ErisLordFreedom at 12:37 AM on December 10, 2017 [1 favorite]

Dreamwidth user siderea does some math and suggests: a patron who pledges under $14.29 each month, at Patreon's current transaction costs and per-transaction cut of payments, costs Patreon money.
Patreon promised creators they would cover payment processing costs by charging creators a per-pledge fee that.... was not actually tied to the amount it cost Patreon to actually pay for the payment processing cost for that pledge.
She also digs into her own numbers as a creator on Patreon and discusses implications for Patreon's marketing focus, and for what sorts of creators and what sorts of patrons Patreon would need to attract or grow.
posted by brainwane at 4:41 AM on December 10, 2017 [2 favorites]

That's an interesting article brainwane, and it's pretty much what I assumed would be going on, except I also assumed they had some way around that problem. Because it's 20 years later and I can't believe we're still doing the internet bubble. There are adults who lived their whole life seeing "keep losing money until you're successful" as a business plan.
posted by bongo_x at 10:21 AM on December 10, 2017 [2 favorites]

Patreon had originally cited variability of fees as the reason they were making this change, so I had thought they were varying their cut to make sure they were always covering the fees. The original e-mail to creators cited a variable 7-15% cut for payment processing fees, so I'm a bit confused that post is saying ~5%. Perhaps a large portion of the backers were other Patreon creators, which were processed without fees.
posted by ckape at 11:09 AM on December 10, 2017

I find it hard to believe that someone starting a business that inherently works on a cost plus model is charging below their transaction cost. If they are, they're blindingly stupid. I could believe that they are losing money on the non-core business that involves selling shit. The development time alone had to be a fairly significant cost above and beyond what the original patron model requires, which isn't all that much, TBH.
posted by wierdo at 11:11 AM on December 10, 2017

I am inclined to agree with Koehler ("My theory: Patreon doesn’t want to be a money services business") who says, "it’s quite common for venture-backed startups to operate in a regulatory grey-area (intentionally or not) in order to build an audience and then get to a point where they either need to change the regulations (what Uber is trying to do) or come in line with them. It’s the latter point I think Patreon has come to." And "You could argue that Patreon’s true mistake was in subsidizing the true cost of micro-payments with a business model they couldn’t (or were unwilling) to sustain in the long-term. People flocked to Patreon because no one else was offering this model and it turns out there’s a reason for that."

There are a bunch of services these days that use venture capital in order to set up and popularize a free or cheap service, and hope people are dependent enough upon it to stay once the business switches to a pricing model that's actually profitable. It sounds like Patreon's revealed that it's one of them.
posted by brainwane at 11:47 AM on December 10, 2017 [4 favorites]

Sure, but someone like Uber has actual competition so they have an incentive to subsidize the users to build the user base faster. Patreon was charging fees that appeared to cover costs under the original business model. Seems to me more like that wasn't providing the kind of growth they were looking for so they dumped a bunch of money into other shit and are now raising fees to recoup those costs and cover the ongoing cost of an unnecessarily inflated staff count.
posted by wierdo at 12:58 PM on December 10, 2017

Well, I should qualify that I mean there should have been plenty of margin there at least up to the point they attract regulatory attention. I have no idea what compliance would cost, so any estimate I'd make on that would be useless at best.

Thing is that there's no way to avoid that except maybe if all the money coming in and going out was using a platform or platforms that are already licensed MSBs and they don't keep balances as such that are transferable to other users.

Point being I can think of ways they could get around big compliance costs, but it would limit their income potential substantially. Though even then some of their more recent initiatives would fit in fine even with retaining the monthly billing model, and those might provide other avenues to grow the business while still remaining outside of the MSB framework. Too bad they seem to have chosen another path.
posted by wierdo at 1:09 PM on December 10, 2017

Venture capital ruins everything. If you can't make your business model work without it, you don't actually have a business model.
posted by harriet vane at 3:33 AM on December 11, 2017 [4 favorites]

Natalie Luhrs of Pretty Terrible does the math: START-UP SUICIDE, PATREON STYLE
With this decision to shift the fees from the creators to the patrons, they have chosen to destroy the viability of their platform for 98.7% of their creators and I think that’s a damn shame, because that 98.7% is providing them with nearly three quarters of their revenue. Or was.

Patreon has, with this move, essentially committed suicide. They’ve burned all their community goodwill and social capital, they’re still incredibly non-communicative to anyone who isn’t in that top 1.3%, and I can’t see how they will ever be able to get anyone to trust them ever again. Even if they do roll back this decision. That bridge is gone and only ash remains.
posted by Pope Guilty at 1:46 PM on December 11, 2017 [4 favorites]

> It's a successful way to raise funds, but it's maybe not something you can run a profitable business on top of .

Fundraising and profitable are not mutually exclusive. Profit just needs to go towards purposes which are consistent with fulfilling the mission of the organization, as compared to for-profit companies, where the owners are entitled to keep that profit. I don't have recent figures in front of me, but I believe about 40% of US nonprofits end the year with a surplus.
posted by desuetude at 10:35 AM on December 12, 2017

People have been talking about Micropayments as a business model since the internet began. Lots of brick and mortar businesses rely on micropayments, like arcades and laundromats and car washes and vending machines. When people started creating content on the internet they looked to those business models. You can buy a newspaper or magazine for a handful of coins, why not charge people for a website the same way?

There's a very good reason why micropayments have always been a pipe dream, it's because when you're just handing over some coins that's the end of it, there's no additional fees. Nobody slices a cut off of the $0.50 you drop into a dryer. Frankly I find it astonishing that there are vending machines that accept credit cards, I can't imagine how much finer that slices the operator's profit margins.

Now Patreon came along and said, "Hey you know that micropayment thing everyone's been talking about for decades? Let's actually go ahead and do it." and people were happy, because the problem with micropayments isn't that people don't want to make them or people don't want to accept them, it's that there's no money to be made facilitating micropayments over the internet. Now Patreon is saying, "Actually there's no money to be made facilitating micropayments over the internet." and everyone is angry at them for admitting they also can't do the thing everyone else already realized you can't do. The fact that Patreon is intentionally avoiding being subject to regulations by avoiding models that make micropayments more feasable (Such as having a stored-value Patreon Wallet) just makes it all the worse.
posted by Mr.Encyclopedia at 1:27 PM on December 12, 2017 [5 favorites]

If Patreon doesn't want to be classified as a Money Service Business, they should start handling political contributions at a steep discount and get a few senators on board. That's the American way.

> I find it astonishing that there are vending machines that accept credit cards, I can't imagine how much finer that slices the operator's profit margins.

It's indicative of the healthy profit margins of vending machines, really. The operator running a machine selling Coke for $1.75 is probably starting off making 75% before they start figuring in costs, and in my area a lot of the vending machines are run by companies who deliver soda to retail anyway, so they've already covered the truck, driver, route, etc. There's room in there for a few percent markup.

You can basically pick out industries with very thin margins because they're the ones giving you either a "cash discount" or prohibiting the use of credit cards altogether (or charging a markup for them). Places that only take ATM network cards are always a dead giveaway too.
posted by Kadin2048 at 3:21 PM on December 12, 2017

Nobody knew prorating could be so complicated!
posted by Phssthpok at 6:23 PM on December 12, 2017

Good news, everyone! We lost recurring revenue for most of our creators and burned our community goodwill to a smoking heap of ash for nothing!
posted by murphy slaw at 11:25 AM on December 13, 2017 [16 favorites]

So if they can't afford to run the way they used to, and they've backed off from their new method, how long will it be before they fold?
posted by harriet vane at 5:00 AM on December 14, 2017

Nah, they'll Etsy something together. They have $100MM in VC, their MBAs will find a hoary old business model somewhere they can hitch their star to.
posted by rhizome at 2:25 PM on December 14, 2017

> Again, not saying they did the right thing, but reminding everybody that money is ancient and stupid and ultimately still controlled by banks no matter how much internet you slather on top

What about this Bitcoin thing I keep hearing about?
posted by fragmede at 10:37 AM on December 24, 2017

So if they can't afford to run the way they used to

That's a humongous "if".

It's exactly the sort of thing you'd say to justify an unpopular hike in fees, but naturally it's also the thing you'd say long before you did anything that would affect your profitability or your investors' return. I think management was getting pushed by their investors to generate more cashflow; this is only very loosely related to the viability of the business as a going concern. It's related to the viability of the business as an engine for getting a bunch of VCs "fuck you money", shooting the moon, becoming bigger than US Steel, etc. There is a huge amount of latitude between what's viable as a business and what VC-type investors want.

So, yeah: I don't buy it. I think they'll go back to their investors and tell them "hey look, we tried to get you that cashout you wanted sooner rather than later, but these pesky creators wouldn't go for it! We'll keep trying, though! First moment they stop paying attention, fees are back! Don'tcha worry, we've got 'em by the balls, just gotta figure out how hard we can squeeze without 'em chewin' off our arm!" (In my head, this is how all CEOs of public companies sound in board meetings.)

Hopefully their high-profile clients will keep the pressure on and not blink, because I suspect that's the real reason for the rollback: enough of their "whales" -- Jeph Jacques, Danielle Corsetto, etc. -- must have threatened to leave if they didn't rethink the decision.

The easy go-forward for Patreon would be to develop some sort of pricing structure that divides and conquers the userbase: implement some sort of tiering, or better yet a continuous curve, such that the "whales" get to keep their current pricing structure, but the bulk of users get screwed like in their proposed plan. Hell, sweeten the deal for the big names a bit, and then see if they'll still go to the mat. This has a nice casino-type aspect to it, in that most people like to think of themselves being more successful than they are likely to be, so a system that screws you at the low end but gets better as you do more business can often attract aspirational customers who stagnate, but don't want to admit it, and you can bleed slowly for a long time.
posted by Kadin2048 at 6:35 AM on December 25, 2017 [1 favorite]

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