It really is a completely incorrect solution to the problem. At the very least for monthly-pledged patreons, the charge up front option should have been removed as an option for the creator and instead be given to the pledger. The pledger could choose whether they want to begin pledging to the creator NOW, or to have their pledge level take effect when the next monthly charge is made.
That at least gives more reasonable basis to discuss credit card fees from. I wouldn’t’ve minded a $1 membership fee to cover the flat portion of the credit card fees (“waived” when you’re not pledging to any creator, of course)
They’ve solved a customer support problem by ruining the utility of their platform, though. That’s not even shooting yourself in the foot, it’s cutting off your leg at the knee because you have a hangnail. Even if pro-rating is so mind-numbingly baffling that it’s an impossible-to-implement solution to the problem of theft-or-double-billing, I’ve still got a better one:
When a person pledges, they pay immediately. They then receive access to perks right away and access to the creator’s content for the remainder of the month and the next full month. Pledge on Nov 29th, pay for December and start getting billed January 1st. This still gives the creator exactly the same amount of money that they’re getting right now, it just moves the initial pledge point to the moment of pledging rather than the end of the initial partial month. If Patreon wants to make some money on that pledge, they can hold it in escrow and give it to the creator at the end of the month when it would normally come in.
If Patreon further wants to mitigate the variability of income per month based on how the processing fees worked out that time around, they can just round up their cut to cover the average percentage and give creators a buffer against that variability. They just got $60 million in venture capital, I’m sure they have a few hundred thousand to put into a “bad processing fees month” bucket.
I’ve put literally 10 minutes of thought into this. How did Patreon put an entire year into developing a solution and come up with something so unfathomably terrible?
I do believe I’ve identified the disconnect that both you and the Patreon execs are having. Yes, 500 people pledging only $1 to a single creator means five hundred 38 cent transaction fees, and there’s no way to distribute their impact. But that is an extremely creator-centric view of the platform that treats patrons as exclusive customers who only ever pledge to a single creator. If that were the case, Patreon wouldn’t prominently feature the number of other people you pledge to on your profile page.
Many, many people pledge a dollar to multiple creators. In that context, de-aggregating a single patron’s pledges means that someone splashing $10 around to 10 different people is suddenly paying 38% more for the ability to do that. Creators also understand that these $1 pledges are being made on a strict budget - often because they’re doing the same thing for their friends - and that a 38% increase in the cost of pledging means that 38% of those $1 pledges is going to disappear entirely, and a larger percentage of a pledge that no longer exists is still nothing.
Finally, this change is even harmful to creators who want to help their friends by pledging out of their Patreon income balance. Right now, that money goes directly to the other creator, with no transaction fee applied, so the creator gets a much larger percentage. Under the new structure, though, creators will no longer be able to make those pledges from their Patreon balance, and will be charged transaction fees despite the money already having entered the platform and been dinged once. So there’s another 5 cents in Stripe processing fee premiums that Patreon is creating for themselves where no revenue previously existed.
Apparently, Patreon’s approach to “researching” solutions to this problem was to ask creators if they liked dealing with the platform’s fees, and to ask patrons if they’d have a problem with paying them. Devoid of the context of a solution, I’m sure creators did gripe about fees - it’s an easy pain point - and I’m sure patrons were willing to pick up the tab for the transaction fee for the existing payment structure. This solution mutilates that payment structure, though, in a way that utterly explodes transaction fees for patrons while assuming that this explosion will have no impact on their ability to maintain the same quantity and amount of pledges. It’s idiotic.
Sort of. They had to put it on the patreon owner, or the patrons themselves. I think from a business perspective, the risk of the patrons quitting the platform is greatest because then you lose everything --they figured (perhaps wrongly?) that the risk of patrons quitting would be greater if they suddenly said
Hey now you, the patreon owner, get 30% less money!
versus
Hey, now all your patreons have to pay a bit more
It’s kind of a no-win situation, IMO, but the real enemy is the current banking system and its fees for small transactions.
I really, really don’t believe this. I’d need to see actual data because I expect the reality is the opposite – a whole lot of people supporting one, maybe two patreons.
I don’t know if they’ll come forward with that data, I could be wrong, but my gut says the majority of supporters for any given Patreon are one-shot or two-shot at best.
Maybe yes, maybe no. It is not at all uncommon for a single company to be “Doing Business As” (d.b.a.) multiple other names, and those names can often be very similar to the names of the companies they work for.
For example “Service Corp” may be working with “Company X” and they may provide a service in the name “Company X Advantage”. If “Service Corp” is providing the direct service they are the merchant, but the billing statement would say “Company X Advantage”. In the majority of cases this is totally legit, “Service Corp” is providing a service based on the products of “Company X” in partnership with “Company X”, but what ever “Service Corp” does is outside the specialty of “Company X”. On occasion I’ve heard of it being used to work around various payment processing rules, or hide where money is actually going.
I doubt that Patreon is doing this either for the good or bad reasons, it seems like it wouldn’t be worth the effort on their part.
They “had to” do nothing of the sort, frankly. There were and are plenty of solutions to “people are confused about first-month billing” and “people are pledging and stealing content by canceling before the first month is up” that don’t involve fucking over small donors or pissing off literally every single person who uses the platform. They chose to address this issue in the most ham-fisted way by increasing the overall complexity and cost of the payment for patrons (because now not only are you getting charged transaction fees for every pledge, but your pledges are billed whenever the heck you happened to initiate one, rather than all at the same time in an easily-manageable block) while expecting creators to happily spew corporate-approved bullshit about how great it is that people are going to be charged a hell of a lot more for providing the same amount of support.
Patreon approached their “solution” with a critical misunderstanding of the fragility of people’s trust in their platform and the tight-knit community nature of the vast majority of small-time creators and their supporters. Patreon assumed that creators saw their supporters as little more than a revenue stream, when in fact creators are overwhelmingly protective of their patrons because they know how hard it is to get them and how easy it is to lose them. Patreon was further supremely misinformed by their own flawed surveying tools about how both patrons and creators view the application of fees, and whose responsibility it is to pay them. They went out of their way to expressly state that there is no way for creators to choose to shoulder these increased fees. Creators, meanwhile, seem to widely recognize that 95% of $0.67 (a $1 pledge less transaction fee) is still better than 95% of $0, and they have been openly demanding an explanation for why they can’t do so if it would mean keeping supporters (understandably) turned off by a huge increase in the overhead of their pledge - particularly one that they have to subsidize.
I’m not sure how long it takes for anecdotes to become data, but my timeline and every single tweet on Patreon’s announcement has been full of people saying they’re going to have to cut back their $5, $10, or $20 small donations because the fees will destroy their budget. Crawling through patronage chains just from the five people I pledge to, those who indicate that they support anyone else overwhelmingly support at least 3 people. I would be extremely surprised if the majority of people pledging more than $5 or $10 to a creator are supporting more than a couple at a time, but $1 donors? Based on everything I’ve seen both before and after this shitstorm, they absolutely do.
I’m not going to argue that point, because you’re right, merchant fees are fairly ridiculous. But every “we need microtransactions to fund online content” bandwagon in the history of the internet has focused on how to get around the fact that merchant fees for tiny transactions make such a business model impossible, and Patreon fixed that problem by allowing people to bundle a bunch of small donations into a single payment. Now they’re hell-bent on re-breaking it because they can’t figure out how to explain to someone that they get billed at the start of the god damn month!
Their new fee and billing structure disincentivizes spreading money around to the widest possibly number of people, and instead encourages larger donations to a smaller pool of recipients. This will almost certainly have the result of increasing the amount of money Patreon makes from their 5% cut of pledges because it’s easy to swamp out the exodus of $1 donors, but it comes at the expense of the creator community as a whole as current patrons have to pick and choose who to cut off in order to stay within their budget. Over the past 24 hours there has been a massive exodus of pledges from both small and large operations alike - literally hundreds of dollars overnight in some cases. Patreon may think that this will eventually balance out in the long term and we’ll all wonder why there was ever any fuss to begin with, but in the meantime small creators who rely on their patreon accounts to buy food are suddenly having to take a long hard look at whether they’ll be able to do so in January.
Not evidence, but all over their site, but especially when you make a pledge they push other creators to support, like derived from looking at what your fellow supporters are also supporting. Personally, I support about a dozen… Though none at the $1 level.
This is anecdotal, and I may be an outlier, but I pledged to 53 people on Patreon, with about 20-30 of those were sub $3, and only 2 were over $10. The raw numbers can be deceptive, too because this change has a disproportionate impact on per item pledges vs. the per month pledges.
A few of my longest running pledges were for $1 per weekly podcast episode. Under the old system this was just $4-5 per month, now it will be 4-5 x $1.38 ($5.52-6.90 total) pledges per month and not a single $4.47-5.50 per month.
Anecdataly, I currently support 5 creators, with an average pledge of $5/mo, for a total of $25/mo.
Under the current system, I calculate that of my $25, $1.25 goes to Patreon, PayPal gets $1.07, and my creators get $22.67 (divided between them proportional to my pledges). 90.7% of my payment goes to my creators.
Under the new system, where the 2.9%+$0.35 is charged per pledge, that changes to me paying $27.48 (+2.48), $2.58 (+1.33) goes to Patreon, PayPal gets $1.15 (+0.08), and my creators get $23.75 (+1.08). The increase going to Patreon is greater than the increase going to the creators. 86.4% of my payment goes to my creators.
The more pledges I make, the smaller the percentage that goes to my creators. For a fixed budget, it makes sense for me to make a few, large pledges than many, small pledges.
The PR problem here is that Patreon pitched this as shifting the transaction costs from the creators to the patrons, while keeping their take the same. I could get behind that,
Under that regime, my payment would become $26.11, PayPal would get $1.11 of that, Patreon would get $1.25, and my creators would get $23.75, regardless of if I do it as 1 pledge of $25 or 25 pledges of $1. But that’s not what they went with.
I guess that explains not only their reasoning, but also their utter radio silence on every public channel since their updated explainer post yesterday. They legitimately do not care that this will hurt people, because they don’t want them.
I look forward to the day next quarter when Patreon figures out what a long tail is, and why it’s bad that they no longer have one.
Presumably Patreon would have this data – whether or not the majority of pledges are singletons – and made their decision based on it. Could be a wrong decision, of course…
No question that this decision heavily penalizes small donations, but it is unclear whether that is intentional (our platform hates small donations, make bigger ones or GTFO) or the result of banking system limitations.
Let’s put it this way. For four years it has run on the principle of the supporter making pledges (per-month or per-creation) that get charged in one transaction at the beginning of the month, and then the total pledge amount minus fees is distributed to creators. It worked. It’s not a banking system problem, or rather it was the solution to the banking system problem of per-transaction credit card/paypal fees.
Frankly, assuming they are greedy and not stupid, it is likely because they are intentionally aiming for fewer supporters donating larger amounts to fewer creators. Same revenue, reduced infrastructure costs thanks to lower user volume and less hosted content.
And I think that also jives with the immediate billing if they’re also trying to reduce pledge fraud on the “high-value” content that remains.
It does beg the question, if what they were doing was working, why did they have to change anything at all?
Was the situation life threatening for them as a company, or what? This is a big, dramatic change no matter how you slice it, so it is unlikely they did it without a major internal problem forcing their hand, yes?
Yes, I agree there has to be something major. But there is (checks a few webcomic twits) no communication from Patreon officially or unofficially on what that might be, except that they’ve had complaints from creators about the fees (of course, charging the users vs the creators is mere bookkeeping) being confusing and the occasional pledge fraud, and from users on why they get charged up front for the full month no matter when they start pledging (for applicable patreons), so they’re going to eliminate what makes micropayments through their system feasible.
How the problem justifies this particular solution being imposed is still a secret.
…A really serious internal problem, given this PR nightmare. $60 million more in VC funding and they can’t hire competent PR?
After over 24 hours of complete and utter silence, this is the only thing that Patreon’s CEO has had to say as of this evening:
I’m sure the creators who have already seen double-digit patron loss and triple-digit income decline are super thrilled that they get to spend all weekend having no idea whether Patreon is going to find two brain cells to rub together.
Wait a minute, THAT is Patreon’s CEO? Dude looks as punchable as Richard Spencer fer Chrissakes. Fuck it. I’m done. I’m going to cancel my subscription and wire transfer some money to Canadaland instead (only folks I support through patreon at this point). I’ll die before I give another penny to anyone who looks like that.
There’s some speculation that Patreon is making the change so as to avoid becoming classed as a money services business, which would subject them to additional regulations and increase costs.
