What the creative community wants, is affordable micropayments, the smaller, the cheaper, the better. To give the listener/viewer audience the option of tossing a quarter into a buskers hat, without thinking too hard about it, or having to install a special web add-on. (I’d love it if the Linux community got interested in a widely available option like this!)
Patreon’s choice looks like exactly the opposite direction from this.
Patreon uses Stripe for payment processing. Stripe’s baseline fee for US credit and debit card processing is 2.9% + 30 cents, so Patreon is already quietly earning an extra 5 cents on every transaction on top of their advertised cut for every US credit and debit card being used for payments. Payments from international cards cost an additional 1%, which is probably not an insubstantial volume of their transactions, but that was already being accounted for in the old fee structure where transaction costs came out of the post-charge amount before it got to Patreon and the creators.
Exactly.
I’ve been supporting a writer for 1 dollar per every chapter. He’s at 70+ chapters. If the new system had been in place, you would have paid over 25 dollars in fees…
I agree. Currently I barely use Patreon at all – I have two $1/month subscriptions. As far as I understand, Patreon has just increased my costs of $1 subscriptions by 38%. I can swallow $0.74 extra a month, but if I had hundreds of subscriptions, or were in the habit of tipping per article or something, this would make me re-think.
On the flip side, it’s true that I did imagine the creators getting my shiny crisp $1 bill. And I should have been cognizant of the fact that they were only getting $0.70 or whatever. They were paying it all along. I don’t mind creators getting more, I just want it to be way more transparent who is getting what.
I have several hundred dollars worth of pledges on Patreon. I’m more than happy to shoulder the burden of the fees (just as, for example, you have the option to do with PayPal Donations). I’m happy that ultimately the patrons are receiving fixed, higher ratios of payments.
I’m not happy that Patreon has hidden a fee increase this way, however. They should have included a note about how their costs had increased or whatever to make the change more transparent. It’s sleazy to hide a fee increase this way.
That being said, since several folks have said they will cease supporting creators as a result of this change, I have upped my pledges to compensate for some of them - because frankly, these artists deserve support regardless of the decisions Patreon makes.
Amanda Palmer just sent out an email about it. Its a long post so sorry for the wall of text. I don’t know if there’s a way to truncate text. FOUND IT:
hallo loves.
forgive me if this post is boring af, but it’s important. i’m going to stay live here on the comments for the next hour or so to discuss with anyone who wants to. please read this whole thing before commenting. i love you.
this wasn’t the post i wanted to make today, in fact i wasn’t going to post today AT ALL, i was gonna write something totally awesome and surprising. but life threw this our way, so we gonna deal with it.
today patreon has announced that they’re changing the way they collect fees. they sent out emails to all patrons about the upcoming change - you probably got one. if you found it confusing, we are hopefully here to lessen your confusion and also provide some…analysis. and gripe a bit.
this is a big deal, and i want to chat openly with you all about it. what it means for you as my patrons, what it means for me as an artist using patreon…and, i’d like to answer your questions. while i’d rather be writing today, this is huge enough that i’m gonna chain myself to this mac and talk to you SO THAT i can write tomorrow. it’s all connected, since you’re paying for me to be able to sit and write in the first place, capiche?
first, here is information from patreon about what’s happening and why:
their blog post: https://blog.patreon.com/updating-patreons-fee-structure
their FAQ: https://patreon.zendesk.com/hc/en-us/articles/115005631963and here’s an opinion about this change from a third party news site, techcrunch:
https://techcrunch.com/2017/12/07/patreons-new-service-fee-spurs-concern-that-creators-will-lose-patronsi talked to jack conte (the CEO of patreon, and stage-mate of mine, he’s in a band called pomplamoose who used to play with me) about it on the phone about an hour ago. i shared my thoughts and my concerns and heard from him about their reasons behind this.
his basic take is that this is going to be better and simpler for creators (we will be seeing 95% of our profits, clean, instead of closer to 85%-93% percent, where it’s been in the past).
that difference, instead, is going to be passed over to the patrons, who will now be picking up the processing transaction fees instead of the creators. i get where he’s coming from, and sure it’s nice to think that i’ll make a little bit more money (and more predictably), but…it’s not what i would have done.
i don’t envy any fucking CEO of any company. every time i talk to jack, i mostly want to cry because i remember when he spent his days making art, and now he spends his days making a company. although sometimes i have to admit: i am, myself, the CEO of my own company. it’s a small company, but it’s a real company. i have an office, all the expenses that come with renting an office, two full-time and several half-time employees and a collection of agents and managers who all take a collectively hefty cut of what i earn. i pay my team’s insurance. it costs a shit ton to run this show.
sometimes we run out of money because production things go awry and life sucks for everybody. so maybe: i don’t envy myself.
someone on twitter was decrying how stunning it was that patreon dropped this news with no warning, and while i agree, i’d also like to defend jack as one of the most reachable and collaborative CEOs i have ever worked with.
i responded to that person on twitter with the fact that even when i was one of the top-followed people on twitter (back in Ye Olde 2009), twitter NEVER, EVER reached out to me to discuss changes in the platform, nor did kickstarter when i was top earning musician there. in general, jack & co get massive points for communicating way more than the average bear, even when it’s hard shit like this. and i do think they made a mistake in how they rolled this out.
patreon only gave me a one-day heads up about this change, and i wasn’t happy to hear about it.
had i been given the choice between keeping things the way they were (namely, the processing fees were just an annoying cost that i had to suck up and eat, which i’ve gotten used to) and passing the transaction fees along to the patrons, i never would have chose this.
then again, i’m getting used to the fact that we are all in digital bed together, and while it pisses me off, it’s not going to drive me away from using patreon. i haven’t been in agreement with a lot of the things that twitter or facebook are doing lately, either, but it hasn’t forced me off the platforms. it’s frustrated me, but i need these things in order to work and share my work.
i know enough about business to get that patreon couldn’t just swallow all these costs themselves; they’d be crippling.
but i also (and anybody) could see from the graph above that patreon’s income is going to go up due to this decision, because they are going to be getting 5% of a larger pie (the creator’s pie, that is). so their uber-cheerful “this is great for creators” seems a little disingenuous. it’s great for patreon, too.
i get it. they’re a new company, and they need to run their company, they need to figure out how to make a sustainable future workable.
i just wish they’d done this differently; consulted the creators, worked on a more elegant solution…i dunno.
i am also waiting to understand what this means for people (like me, and many of you, i’m sure) who back MANY people at the $1 level. will a toll be levied on every single transaction with every creator? will it be possible for them to aggregate that processing fee?
for instance: if i’m backing 100 of my favorite artists at $1 each, it does seem absurd that i should pay an extra $38 a month if it’s really a “processing fee”. the card is being processed once, right? so charge me for that?
i’m waiting to hear back from patreon about this, and i will pass on what i learn. (i may even learn in real-time while this post is live).
mostly, upshot: i don’t think this is seismically awful, but i do want you to know about it and know the reality of it.
i would expect this to effect the $1-level folks more than anyone, because your pledge is effectively going from $1 to $1.38, which is a massive increase.
(a few people on twitter have mentioned that if you’re overseas, it’s even more annoying, because this is ON TOP of the VAT tax, which can be sizeable already).
on the other hand, if you’re a $10 patron, your pledge will go up to $10.38, which doesn’t feel epic.
one thing i would like to remind you, if it’s any comfort:
the extra money that you’re paying is going - mostly - to me, the creator. you’re getting charged the fee so that i, the artist, don’t have to take it on.
you might look at that and say: “that’s nice! i’m happy to take that pressure off the artists i am trying to support, hooray, more money for them to live and make art” or you might say “fuck that”.
it is a free country, and that’s why i’m writing this long rambling blog and being totally transparent about this instead of slinking into the backroom and hoping nobody notices this - that would be shitty, and against everything i stand for (especially here on patreon, where i go above and beyond to be as honest with you all as i can).
to close:
i hope you stay with me through this change.
we will use the systems that work for us, and we will leave if and when they ever stop working. i have looked far and wide and as you from the early days know, i thought LONGGG and hard about whether to use patreon or just set up a patreon-like-system on my own website via paypal (like, say, maria popova of brainpickings, or rabbit rabbit radio, or NPR). i came to the conlcusion that i didn’t want to be jack conte, that i was happy to give 5% of my potential profits to a company like patreon to deal with teh headaches and back-end dramas of credit card fees and endless data crunching and massive server melt-downs and so on and so forth…
and on patreon i will stay as long as it is the best solution - for me as a creator AND for you as the nice, enthusiastic person supporting my art and trading your dollars for my creations.
we are all in this one together, loves.
right now, literally, i’m here, live…for the next hour or so. please talk to me…please hit me with your questions. i’ll be here answering questions in the comments with my gal hayley, who some of you know as a long time member of team afp, she helps me with all the things, and with all the projects i release through the patreon. she’s been with me since the days before the kickstarter and for awhile she worked in crowdfunding herself (for kickstarter). she’ll chime in along with me.
i wanna know your thoughts.
love
a
p.s. someone mentioned on twitter that we should start Matreon.
make art & smash the patriarchy all at the same time? I AM SO IN.
Going back to the legality of these fees, someone did the hero’s work of digging up the page I was trying to recall earlier from VISA’s merchant terms of service:
As I’m reading it, Patreon’s new fee structure reads like a violation of multiple elements of the TOS.
As someone who had to go back and forth with my bosses over how convenience fees were allowed to work in online payment processing and who cited this document on multiple occasions as explanation for why we couldn’t do exactly what Patreon is now doing, this feels like a case of Patreon just deciding that they’re too big to be stopped by pesky things like legal contracts.
I honestly hope VISA (and PayPal, which I believe has similar requirements about not passing fees on to the end user) beats the shit out of them for this.
Thanks Patreon for trying to squeeze out low income folks that can only afford $1 monthly pledges. Swell move.
On the one hand, I don’t make any dollar pledges… and I’ve even padded some of my pledges in an inconsistent way to make up for the fees I know are taken, which I’ll now be able to reduce. On the other hand, it’s only one charge a month per payment method, so it damn well should only be 35 cents a month, except when you make a pledge to someone that charges up front in the middle of the month.
Isn’t this what bitcoin / blockchain was supposed to do for us?
Heh, I can almost forgive the complete lack of uppercase in the rest of the message for this. Almost.
The last impulse I had to own bitcoin, was to buy a geek merit badge with one, back before it became a vehicle for speculation. I no more want to put bitcoin into someone’s tip jar, than I want to put gold krugerands or junk silver.
I can 
Then again i’m subscribed to her news letters and Patreon, and honestly i appreciate the lack of polish and filter from her posts. They can be kind of stream of consciousness at times and overly verbose, but it reads to me that she’s trying to be very up front and real. So lack of capitalization and whatnot is something i’m more than happy to put up with.
I think what happened is that many businesses realized that even with the fees added on, it was still cheaper to handle credit card transactions than cash. I can’t find the link right now, but MEC used to offer cash discounts, but at some point they ran their numbers and found that after taking into account the extra costs or counting, sorting, securing, and transporting cash, it was generally worth it to use less of it.
Turns out they’re going to charge you multiple times per month instead of just once!
Because that somehow makes sense!
Yeah, it’s just proof that they fundamentally do not understand the benefit and utility of their platform for small-dollar pledges. The whole reason $1 pledges were feasible to begin with was because you could distribute Stripe’s 2.9%+30¢ processing fee across a large number of recipients. They’ve decided to solve the easily-addressed “why didn’t I get billed immediately” question by completely destroying their platform’s entire purpose for existence.
Even if this change to billing means they’re not raking in tons of money on redundant per-pledge processing fees, they’re still going to be making money off of it, and I decided to actually do the math to figure out how much. As I said before, their processing fee is 5¢ above and beyond Stripe’s base rate for Joe Nobody (given their transaction volume, I cannot imagine they don’t have a volume deal of some kind, but I’ll charitably assume they don’t). Patreon is apparently on track to bring in $7.5 million this year, and pay out roughly $150 million to creators, for a total of $157.5 million in post-fee transactions. Assuming they lost 10% to processing fees (the high end of the percentages stated in their blog post) every month, that means the total amount paid into Patreon was actually about $173 million, conservatively. According to Patreon’s own blog, the average pledge is $6.70, meaning that there were a ballpark 25.8 million pledges made this year. If every single one of those pledges is now its own transaction, Patreon stands to make $1.3 million a year just from that extra 5¢ addition to the processing fees, which is on top of their stated 5% cut of pledges.
Also, to circle back to the legality of these fees for a moment: after stumbling around for a while today putting his foot in his mouth and seeming to go out of his way not to notice the hundreds of people already seeing disastrous drops in pledge volume as a result of this change, Hank Green (who is on the advisory board that Patreon failed to inform about this change in advance) dropped this little gem suggesting that their legal department knows what they’re doing is probably illegal, because of course this is to pass the costs of credit card processing on to consumers:
Oh interesting, the lede was buried in the tweet you quoted, I didn’t understand this part:
The problem they have:
Patreon charges everyone at the same time, so you don’t get charged right when you sign up. So some people have signed up, gotten their perks, and then cancelled without paying. It also means that tons of people call them saying their charges didn’t go through, or being confused when they get charged two weeks after pledging.
Any normal subscription service charges you the day you sign up and then every month after that on that day.
So they want to fix that, but to do that, they have to have every pledge be a separate charge, which means credit card fees will be outrageous…especially for $1 pledges.
So… people being jerks, plus the actual batching of monthly charges to reduce fees they were already doing was causing customer support problems!
Er what? Only per person; if you are one person backing one patreon, that’s still a full-fat processing fee on the transaction, every month. And if it is 500 people with a $1 donation, that is 500 different processing fees every month.
The only grouping that can be done is per-person, if a single person supports, say, 10 different patreons. And to some extent by time, though I don’t think many patreons would be super psyched to learn that all those small $1 monthly donations from Joe and Jane User were being batched into once-per-year transactions ($12 plus a single transaction fee, versus a dollar 12 times with 12 transaction fees) to reduce transaction fees.
The real villain here, as always, is the current banking and credit card systems. I always felt the only thing we could really do is wait for inflation to take the value of the dollar down low enough that microtransactions can finally make sense…
But If you’re one person backing many creators it was a single “full-fat” processing fee. Now there’s a dollar surcharge for every 3 you back. If you have, say, 30 pledges, you’re charged an extra $10. It basically penalises backing multiple people. Only if you think of Patreon as being primarily people only supporting a single creator with a larg(ish) pledge does it work at all.
No because there’s a cost of doing business. The “villain” here is Patreon for putting the burden of said business on the consumer, which as others have discussed is unheard of because it’s illegal.
I think a lot of supporters really will use different ways to support creators. Because as someone noted, even if you’re willing to shoulder the burden this offensive fee structure, your money simply will not go as far.
https://twitter.com/wombatoverlord/status/938977738354028544
