A large percentage of my gaming and writing Twitter timelines are abuzz with civil unrest over a change that Patreon will be making to their fee structure on December 18th.
I don’t use Patreon and I can’t really envision a scenario where I would use it prior to becoming famous, but a lot of people I follow do use it, and they aren’t happy.
If you don’t know what Patreon is, it’s a site where you can donate money to a “creator” (artist, musician, writer, etc.) every month to support their work, somewhat akin to pledging money to PBS.
As far as I know, Patreon donations are not tax deductible, which is just one of many reasons I haven’t rushed to patronize people. Another reason I don’t like Patreon is that it very quickly devolved from patronage to a “subscription,” for which subscribers very much expect to receive something tangible in return, as if they are making a consumer purchase. To me, that fundamentally differs from a patronage.
Regardless, I’ve considered starting a Patreon (who wouldn’t consider a vehicle to receive free money?), especially now that I’m on a work sabbatical, but it just doesn’t make sense for me. In order to make a “living wage” from Patreon, I’d need like a thousand patrons, and that’s pretty rare unless the creator is famous to begin with. Mary Robinette Kowal, for example, can make $2000/month from Patreon because she is already an established author and podcaster with a marketable brand. I’m not. If I were lucky, I might get five $1/month patrons, and while it might feel good to know there are five people out there who enjoy my work enough to support me, the amount of sustained effort I would have to put in to keep those five patrons happy would be cost prohibitive. I am very much of the opinion that my time costs a reasonably fixed amount of money. @AlternateChat is admirably transparent about her efforts with Patreon and I simply can’t afford to expend that much labor without enough compensation to pay my mortgage.
Also I’m not entirely convinced that pledging $1/month to someone is equivalent to “supporting” them. I could probably make a case that it’s more of an insult. But I’m weird about things like that.
But back to the Patreon-pocolypse.
There is apparently a very large economy of $1 patron subscriptions that is going to disappear because the cost to the patron will rise about 30 cents, which obviously is a significant percentage of a $1 donation, and has a huge psychological impact. Patrons are cancelling their $1 subscriptions in droves, and creators are left searching for other ways to make money. (At least, that’s the impression I’m getting on Twitter.)
The issue is that the new fee structure doesn’t affect the $10/month or more pledges so much as the $1/month pledges, which probably makes up a huge percentage of the total pledges on Patreon. The result is that users feel (quite rightly) that Patreon is trying to kill off smaller creators in favor of the bigger ones.
As with most issues, I can understand both sides on this one.
It’s really bad for small creators on Patreon, because most of their donors are going to (quite rightly) cancel their $1 subscriptions.
But from the business perspective, I have no doubt that $1/month pledges are a major hassle for Patreon to deal with. I am 100% sure that it costs them disproportionately more to process them, in time and money and computing resources and probably just about any measure you can think of. It’s just not cost effective to process a lot of small transactions of, say, $1.
I remember back in the 1990s, when I was involved in selling Amiga software to consumers, having to pay 4.5% of every credit card transaction to the merchant. That’s a big chunk of money to hand over for every transaction, and we had to eat that. (I doubt we would have even been allowed to process $1 transactions back then.) But it was the only way to receive enough money from consumers to justify the existence of the business. I don’t have any facts or figures, but I would guess there were roughly 100 credit card payments for every check received in the mail. Today I’m sure the ratio would be more like 1,000,000 to 1. It’s probably cost prohibitive to deal with cash and checks, to be honest. I know I hate getting paid with a check, and cash is like, “What the heck am I supposed to do with this weird paper?”
So it is not at all surprising to me that Patreon might start subtly discouraging $1/month subscriptions so they don’t have to process them. The simple fact is that they will make more money per transaction with $5/month or $10/month or $25/month subscriptions.
They also have to process two transactions for every one of those subscriptions. One transaction to take money from the patron, and another transaction to give money to the creator. If one patron pledges $1 to 25 creators, they can take $25 from the patron in one transaction, but they still have to give the money to the creators in twenty-five $1 transactions. Though I’m sure they optimize it more than that, so they only have to deliver one transaction to each creator for the sum total of their pledges. That’s probably the exact heart of their business: Streamlining those transactions as much as possible. The flashy web site and API is just a side-show.
I am seeing a lot of hand-wringing over the “unjustness” of Patreon’s obvious decision to try to make more money, as if they are somehow betraying their customers (ie. creators). Well, first of all, the creators and patrons aren’t their customers, they are just the machine which prints money for them. The investors are their customers. But that’s business 101.
Beyond that, I think people have a mistaken impression of what a “successful” business is, in the eyes of investors. One might think that any business which makes money is successful, but unfortunately that’s not true. Investors need a business to make more money every year. Not just more money, but more profit every year. A business which makes a profit is not a success–only a business which makes more profit every year is a success. And not just more profit every year, but geometrically more profit every year. If you have the same increase in profits as last year, you simply “met expectations” and bore everyone to death. But if you have more increase in profits this year over last year, you “exceeded expectations” and you’re a huge success and worthy of praise!
I’m not saying I like it, I’m just saying that’s the reality. It’s why many of the people who start companies try to get their money quick and get out, because most businesses are doomed to fail eventually, because it’s literally impossible to sustain a geometric growth indefinitely.
Patreon is not (yet?) a public company, but they have still received millions of dollars from investors, and those investors (quite rightly) want to see a return on their investment. They certainly didn’t invest 300 million dollars because they cared a whit about creators getting $1/month from patrons.