Patreon and the Cash Cow

Do you use Patreon? Do you support more than one artist? Congrats, it would seem that Patreon has dollar signs in their eyes when they look you.

This week, I received an email from Patreon that detailed out a new fee schedule that they were going to apply, ostensibly to help ensure creators get more of the pledge money. The method they have chosen for this is to apply a new 2.9% + $0.35 fee for each and every pledge, to be paid for by the patron.

Think about that for a second. 

Yes, Patreon feels that you, the patron, should be paying additional fees to be a patron, so much so that they will not allow the creators to continue under the old model even if they want to. However, if you only support a single creator, that's probably not that big of a deal, but it is likely to inhibit you from expanding on that.

Where does this all really come from? Well, Patreon has a blog post that explains why they are updating their fee structure. Bearing in mind that this is their explanation as they choose to craft it. It's also worth bearing in mind that they've been getting a lot of VC funding and growing in size too. Having been in the software startup world, I can tell you that VCs like to see a couple of things in the companies they fund: growth in size and growth in revenue. 

I don't begrudge Patreon the right to make a profit and grow revenue, that's the point of having a business in the first place. What I do object to is the lack of transparency behind all of this. If this has been a year long journey, then why haven't they taken us along with them?

In any case, the heart of the argument is that this simplifies the payments processing system and turns pledges into anniversary driven activities as opposed to start of the month ones. This does a couple of things: it splits up payments by pledge and it spreads the processing of the payments out. Ostensibly this is to avoid the possibility of a new pledge near the end of the month getting billed again a few days later. Splitting up the processing has the ability to result in increased transaction fees through payment processing channels, but it depends. When the fee is strictly percentage based, it's not really changing anything, but when the fee has a fixed amount component, then the cost of processing does go up and Patreon is suggesting that the new structure flattens out the logic.

Historically, the cost of processing the payment is buried in the price. Merchants know what fees are applied by banks and credit card companies and so include that in the price up front rather than charging it based on how consumers choose to pay.

Okay, so that doesn't sound terribly crazy, right? On the surface, no.

It gets crazy at the low end of the pledge model where this change is really going to be felt. So, let's say you have $25 a month that you want to spend on pledges and there are a number of content creators that you admire and want to support by spreading that money around. If you normally do $1 pledges, the new structure will now result in you paying $34.50 per month, a 38% increase in spending. To bring that back to $25 or so, this means you're going to be supporting 18 people rather then 25. So, if you stay and want to keep your monthly costs the same, 7 creators will lose your support and this will happen, assuming that many don't leave it altogether.

This is what I find really unfortunate about this decision. There are big names on the platform that won't really feel an impact, but it's the smaller names, the ones just starting to build a following, that will feel it. A lot of people use Patreon as a means of giving back for great Youtube content, it's one of the reasons I do it, but this change will discourage it by punishing it.

So, while I feel that there may be a problem to solve, the idea of being seen as the cash cow to solve it really, truly, offends me.

Edit: For some additional context on this, check out this blog post by Natalie Luhrs that helps break down the real change that Patreon wasn't interested in highlighting.