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It's worth remembering that less than three months ago, Patreon raised $60M in a series C (https://patreonhq.com/new-round-funding-816d5a592477 https://patreonh
by panic 9y ago
It's worth remembering that less than three months ago, Patreon raised $60M in a series C (https://patreonhq.com/new-round-funding-816d5a592477 https://patreonhq.com/new-round-funding-816d5a592477):
I’ve got some exciting news! Patreon has just secured an additional round of financing ($60M!), which means we will be scaling our team, building faster, and building more — all in service of getting you paid what you deserve to be paid, for the value you give the world. YESSS!
So why is Patreon changing their fees now, when they just got a ton of money and can basically do whatever they want in order to grow? Their Zendesk article (https://patreon.zendesk.com/hc/en-us/articles/115005631963 https://patreon.zendesk.com/hc/en-us/articles/115005631963) isn't much help:
Q: Why is Patreon doing this now?
A: Patreon exists to allow creators to get paid what they deserve to be paid, for the value they give the world. This is awesome and to continue this vision, we need to constantly evaluate our processes. As we work to deliver bigger and better features for creators and patrons in 2018, we felt like sooner than later made sense to put this change into effect.
This doesn't actually answer the question: why do the fees need to be changed at all, whether sooner or later? Were creators asking for this change? What was wrong with the way it worked before?
The obvious answer is that Patreon needs more money for some reason. But… they just raised a bunch of money. So I really don't understand how this change makes sense or helps anyone.
- TillE 9y ago> Were creators asking for this change? Nope. And the absolutely universal response, from tiny artists all the way up to Chapo Trap House (the largest Patreon creator by far) has been firmly against this change. But investors put in money expecting to get more money out. That's the only credible explanation I can see. They're lucky that Drip isn't up and running yet so there can't be an immediate reaction.
- JeffreyKaine 9y agoThis was likely the strategy. The board wanted more profit, knew they needed to change some things, and decided to do it before a real competitor made it to the scene.
- siffland 9y agoAmen. Like always it is all about the Benjamin's. They are a for profit business. The best thing you can do is switch to another service with better rates. Most people wont do that. I currently give $38 a month to 19 creators ($2 each, I don't really have much to give). So that is like what $13 in fees for me. I think not.
- robryan 9y agoPatreon would only need to bill you once, not sure why they need to add processing fees to each pledge?
- trowawee 9y agoBecause it lets them extract a lot more cash from their users under the cover of processing fees.
- njarboe 9y agoI agree. Without an efficient micropayment system available, I can understand a charge per transaction. But adding a transaction fee to each pledge, when the patron is making one monthly payment, is a bad idea. Maybe they want to get rid of patrons supporting lots of people at low levels for some reason.
- runj__ 9y agoThey could argue they're potentially paying a transaction fee when they're paying the creator if you're the only patreon. That's a silly argument though. I'd be happy to pay a single 2.9% of my total pledges + a single 35c fee. This just kills $1 donations (and in my mind: anything up to $10)
- deleted 9y ago[deleted]
- zimpenfish 9y agoIt seems that they might also be de-aggregating pledges - which means not only will you be paying the 2.9% + 35c on each pledge, you'll also get N charges on your card rather than one. There was also some other hint that pledges would continue to be charged on the day you signed up rather than the 1st - just to make a triple whammy of idiocy.
- gkya 9y agoDrip? Is it this: https://d.rip/ https://d.rip/
- duck 9y agoCurrently invite-only: Drip is currently in an invite-only period for creators. We plan to open up more early next year, and you can drop your email in at the bottom of the homepage to be notified when we do.
- pronoiac 9y agoIt's like Kickstarter's version of Patreon. More info: https://www.kickstarter.com/blog/introducing-the-new-drip https://www.kickstarter.com/blog/introducing-the-new-drip https://news.ycombinator.com/item?id=15704169 https://news.ycombinator.com/item?id=15704169
- tehwebguy 9y agoForgive me, how will this earn Patreon more profits? Am I doing the math wrong?
- ZenoArrow 9y agoImagine you have a user who supports five different creators, each with a $10 donation, and the money they are charged comes out on the same day every month. From the end user perspective, as a result of this latest change they will be charged five transaction fees. However, from Patreon's perspective, that's not an efficient way to process the payments. What Patreon can do is bundle up the five $10 payments into a single $50 payment. What this means is Patreon will only pay for one transaction fee, but they'll charge this user for five transaction fees. The four extra transaction fees that Patreon have charged for are then used to boost Patreon's profits.
- tehwebguy 9y agoAre they doing that? It sounds like they explicitly are NOT doing that.
- quadrangle 9y agoThey are proposing multiple charges each month, super wasteful. It's because they are first and foremost a paywall service.
- chipotle_coyote 9y agoActually, from Patreon's update, it sounds like Patreon will, in fact, run five different transactions: https://blog.patreon.com/updating-patreons-fee-structure/ https://blog.patreon.com/updating-patreons-fee-structure/ Which is frankly insane, but does explain the change.
- falcolas 9y agoYikes. That is an insane way to do things. Silly inefficient to boot. The only real winner in this will be Stripe and its ilk. Thanks for finding and posting that.
- dba7dba 9y agoIt helps the funds that gave $60M to patreon. Pretty simply imho. You know, follow the money.
- panic 9y agoAlso, I'm going to reply to my own comment to point out a quote from that patreonhq.com post (by Jack Conte, a co-founder): I want Patreon to be different. I want creators to feel understood by Patreon. The only way creators will feel understood is to include them in the decision-making process. If I were a creator making money on Patreon, I'd be organizing a new site, co-owned by other creators, where everyone is involved in the decisions made by the company.
- cdancette 9y agoThat would be really great, an organization, owned by its members, that would manage the site. It just takes someone to launch this, and very hard work
- egypturnash 9y agohttps://liberapay.com https://liberapay.com
- cdancette 9y agoThat's huge! Thanks
- staz 9y agoYou mean like a cooperative or an union? Filthy communist ! /s
- PeachPlum 9y agoIt was the Co-Operative Society in the UK that joint funded the Manchester Ship Canal, first national UK distribution service, first to promote Fairtrade goods. They were the UKs largest grocery retailer by far. Today they are still 6th but with 4million members.
- reitanqild 9y agoCoop in Norway is owned by the members and is one of Norways 3 large chains together with Reitangruppen and NorgesGruppen. BTW: They recently been running a hilarious advertising campaign on tv, based on a story about a pivoting SV company that decides to do just this with a pilot in Norway.
- usrusr 9y ago“We will invest to help you growing if and only if you stop acting like a VC bonfire charity and start operating like a business" I could well imagine investors to occasionally say that. The fees may have been a condition for getting the capital. The backwardness of the timing is well within the range of weirdness that can be expected from a compromise that was a difficult struggle to get.
- DigitalJack 9y agoIt's cash flow vs cash on hand. If they are doing this as a part of getting positive cash flow, then good for them.
- TazeTSchnitzel 9y agoPatreon is a startup which is a conduit for and yet a leech upon the incomes of struggling people[0]. An service of its kind should not be a for-profit operation, the incentives are perverse. Kickstarter is a Public Benefit Corporation, so I'm slightly more enthusiastic about the potential of their offering (Drip). [0] https://theoutline.com/post/2571/no-one-makes-a-living-on-patreon https://theoutline.com/post/2571/no-one-makes-a-living-on-pa...
- loceng 9y agoNothing that is a utility should be for-profit (relating to basic survival and quality of life), however the VC model requires such fast scaling (as part of this VC money can help kill what would otherwise become a successful service through copying and scaling faster/competition); this is ultimately why subway systems, which started off as individual privately owned lines, were bought by the public. The issue is always capitalism and competitive factors, people who want to get ahead in the world - to make the world a better place - without having a collaborative mindset or understanding their actions. Facebook would be in the best position in the world to facilitate this, however current leadership hasn't ever shown the compassion necessary to understand and guide this. Part of the issue is that such a platform or ecosystem requires understanding that you need to share - meaning that value created can't all be captured/controlled or measured. Short-term scarcity vs. long-term abundance thinking.
- qdot76367 9y agoOne of the divisions here is that while Kickstarter is a public benefit corp, they've also had an extremely negative view of adult related material, something that a lot of us on patreon base our campaigns on. This is why a lot of adult product campaigns end up on indiegogo. I'm sort of suspecting the same will happen with drip. While the sentiment of a PBC is nice, it doesn't really do many of us much good since we figure we have no chance to host there anyways. Even at the current fee structure, Patreon is still far better than past tries at adult related crowdfunding services, like Offbeatr (which you had to pay to even be considered for).
- j_s 9y ago
- arielm 9y agoUnfortunately raising money isn’t a proxy for profitability. In many cases it’s the opposite. It could be seen as a proxy for potential, but potential alone doesn’t pay the bills. This fee feels a lot like the fee a merchant would be charged for a credit card transaction, so in essence Patreon is passing on their fees. I wonder why they don’t have a structure akin to micro transactions, where there is no fixed fee but a slightly higher variable fee. I’d guess most of their transactions are probably small enough.
- egypturnash 9y agoOriginally half of the entire value proposition of Patreon was "backers pledge small amounts to multiple artists, Patreon bundles these up under one monthly charge, thereby spreading transaction fees fees around". Or in fewer, longer words: Patreon is a micropayments aggregator. And it worked pretty well! A lot of creators got paid, myself included. And now here's Patreon with a new fee structure that appends a percentage plus a minimum fee to every single transaction. So much for micropayments.
- nemothekid 9y agoDo you know where Patreon said that? I had a hunch that what was what Pareon was doing but I could never find a source for it. I think it's way more likely that Visa/MC came knocking on Patreon's door and told them to stop doing that, forcing them to either eat the fees, or pass it on to someone else, and now Patreon has to eat the bad PR.
- fnbr 9y agoWhy would Visa/MC do that? It doesn't seem any different than metering any other service (eg Mailchimp invoicing monthly vs per email). I'm not saying you're wrong- I just don't understand what leverage the CCs would have.
- zzleeper 9y agoBack of the envelope calculations: Investors clearly want them to be profitable; maybe not now but eventually. They have a $450m valuation and $150m in sales, for which they get 5% ($7.5m) [1]. According to Crunchbase, they have 50-100 employees. Assuming only 50 employees, they are spending at least $15m in wages (plus health insurance, etc.), plus fixed expenses (SF building, AWS, etc.) and advertisement. So there is no way they would be making ends meet with their 5%. Even assuming they become 5x bigger while keeping the same expenses, they might still be losing money. The only way for them is to raise fees. Sure, another option is to keep costs down, everything streamlined, don't spend on advertisement, etc. but as others pointed, you can't pick that route if you have investors. [1] https://techcrunch.com/2017/09/14/patreon-series-c/ https://techcrunch.com/2017/09/14/patreon-series-c/ [2] https://www.crunchbase.com/organization/patreon https://www.crunchbase.com/organization/patreon
- chmln 9y agoWhy do they have so many employees? Seems excessive and totally unnecessary.
- trowawee 9y agoCan't be a Real Silicon Valley Start-Up™ if you aren't wildly over-capitalized and constantly adding unnecessary headcount.
- TylerE 9y agoMore importantly, why is a company that's not doing anything super cutting edge in SF? That's like a textbook case of a company that should be somewhere boring and CHEAP.
- fnbr 9y agoExactly. It's also not clear why it's taken VC- seems like it should be bootstrapped somewhere in the Midwest.
- 9y ago
- PeterisP 9y agoIf they simply need more money, they can simply raise the price directly and proportionally - this doesn't justify a major change to the pricing system that makes a previous use case (many $1 pledges) unviable.
- mbesto 9y ago> they just raised a bunch of money Capital != revenue > The obvious answer is that Patreon needs more money for some reason. Probably because like pretty much all other businesses, they'd like to see a profit some day.
- stormbeta 9y agoI don't even understand what they're using all that money for. The recent site and app redesigns have been a huge downgrade in overall UX (to the point I uninstalled the app as nearly unusable), and the site is just as slow and buggy as it's ever been (except now it's hard to navigate to boot).
- herbst 9y agoThey took money now are in debt and now need to make their investors happy. The same way every good idea died.
- quadrangle 9y agoBut the fee change won't make them much money, it just throws away patron money and gives it to Paypal/Stripe. They're doing it because of demand for instant-charge because their main business is being a paywall service.
- quadrangle 9y agoProbably too late in the thread to be noticed, but I have the real answer for you. This change doesn't make Patreon more money, it just costs patrons a bunch in Paypal and Stripe fees effectively. Patreon proposes to charge every donation to different projects or even each release of per-release things as separate charges, thus wasting everyone's money. It doesn't make them much profit. They are doing it because a large portion of creators use Patreon as a paywall service not a donation platform. Using it as a paywall is the source of the demands for instant charge (not waiting until 1st of the month). The changes are just Patreon bumbling through stupid decisions trying to deal with that issue. More details https://wiki.snowdrift.coop/market-research/other-crowdfunding#fn5 https://wiki.snowdrift.coop/market-research/other-crowdfundi...