In 2017, Patreon rolled out a new fee structure. Today’s it’s known internally at the company as “the fiasco.” A revolt from creators and patrons prompted it to retreat almost immediately.
Today, Patreon, which is valued at a reported $450 million, is trying again. It is announcing Patreon Lite, Pro, and Premium as a means to tailor fit its services to the needs of the platforms’ 100,000-plus creators. “We wanted to make sure and do right by the creator base that’s been with us for all these years,” says Wyatt Jenkins, SVP of product at Patreon. “I’ll talk to a painter with 50 patrons and then later in the afternoon, I’ll talk to a media company with 25 employees that makes over $1 million a year. So it’s pretty clear that [Patreon is] not one product anymore.”
Every creator with an existing Patreon account will automatically be grandfathered into the Pro tier with no changes being made to their account. Essentially, this new system is giving creators the option to pare down with Lite (which is meant to be the easiest onboarding option for creators who just want a page with no tiered benefits for patrons) or upgrade with Premium (which is meant for creators who make at least $2,500/month and has the highest cut to Patreon in exchange for services like team accounts and a dedicated partner manager). Patreon’s cut–5% in Pro and 9% in Premium, respectively–will also be locked in for existing accounts but will increase to 8% and 12% for new ones created after these membership plans officially launch in May.
One of the Premium tier’s key features is a dedicated partner manager whom Jenkins describes as “business coaches” who can offer growth strategies and analyses for an account. “A lot of creators are artists who do their thing really well, but they don’t always understand how to run a membership business,” Jenkins says. Currently, Patreon only has three partner managers in their fold, but Jenkins projects there could be as many as “50 or 100” in two years’ time.
In addition to the tiered membership, Patreon also announced changes to its processing fee structures: Pledges over $3 will be charged 2.9% plus 30¢ per payment. Anything below $3 will be charged 5% plus 10¢ per payment–the latter being a direct response to 2017’s “fiasco.”
Patreon’s 2017 changes to its fee structure were met with instant backlash because the processing fee was heaped onto the patrons instead of being taken out of the creator’s account (with no ability to opt in or opt out). In addition, the proposed fee of 2.9% plus 35¢ disproportionately affected anyone pledging between $1 and $3. As TPR Jones accurately summed it up in his tweet at the time: “Pledging $100 to one creator will now cost $103.25, which is reasonable. Pledging $1 each to 100 creators will now cost $138, which is not reasonable.”
The extra cost isn't tiny if you pledge small amounts to many creators. Pledging $100 to 1 creator will now cost $103.25 which is reasonable. Pledging $1 each to 100 creators will now cost $138 which is not reasonable.
— James a.k.a TPRJones (@TPRJones) December 7, 2017
Within a week of the announcement, Patreon CEO Jack Conte changed course and offered a mea culpa.
“Creators don’t want somebody in between them and their fans,” says Jenkins. “What I learned and what Jack learned and the way we’re doing this new rollout out is the business relationship is between us and creators. We are a membership platform that empowers a strong relationship between creators and their fans.”
That being said, Jenkins also acknowledges that with any change they make, there’s a risk of alienating some creators. “This is not backlash proof,” he says of the new tiered membership. “One of the big challenges in the business we run is the natural tension between art and capitalism. But we have gone to extremes to be very thoughtful about this.”
In conversations with some Patreon creators, indeed, they have a few early thoughts on the tiered membership idea–and what they think Patreon should be focused on instead.
The primary complaint comes down to a lack of flexibility in even this three-tiered offering. Qaadir Howard started his Patreon account about two years ago in response to YouTube’s exorbitant cuts in their payouts and its demonetization of non-family-friendly content. In reviewing Patreon’s new offerings, Howard isn’t particularly moved to upgrade his account to Premium, even though he, like many other creators, could benefit greatly from the services offered with it.
“I think they should have it where it’s more à la carte,” he says. “Let me pay for the thing that I want.”
But when it comes to a service like a project manager, Howard’s experience with a similar offering from YouTube has left him wary.
“The only way that would make sense is if it’s really a person who their devoted job is to really do their research in understanding your brand so that they can actually contribute something of use. Because what are you really contributing?” Howard says. “You don’t know me. You don’t know my work. You don’t know my audience to really say what to change. That’s how it was with YouTube. It was very clear from the beginning. [The YouTube project manager] did give me some help. But there are free videos on YouTube of what she did.”
“I have an account with Stripe, and you can choose whether to expose the processing fees to the customer or the business side,” adds Jack Allison, cohost of the Struggle Session podcast with Leslie Lee III. While Allison feels like Patreon did the right thing in backing down in December 2017, this change doesn’t address his needs. “We’re getting exactly what we need out of Patreon, which is a payment processor and a private RSS feed. I would say that if I’m looking for improvements, it’s [Patreon being] a grownup payment processor instead of a sort of Facebook/payment processor,” alluding to Patreon’s well-known problems each month getting its creators paid by the people who want to pay them.
For Nick Wiger, one half of the popular Doughboys podcast, what Patreon is still missing is the option for patrons to bundle the accounts they’re pledging to. “This is probably the No. 1 ask I hear from podcasters,” he says. “It would be nice, because if you want to support three or four shows, now we’re talking $15, $20 a month. That starts to be up there with some other monthly recurring costs. You’re paying more than Netflix and Hulu combined at that point just for four podcasts.”
Patreon very well could tweak its services down the road to include any of the above suggestions. For now, it’s hard to see how the tiered membership program will bring in significant additional revenue. “The reality is, Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business,” Conte told CNBC in January.
Because all existing accounts will be folded into Pro and locked in at the 5% cut from Patreon, any chance for growth on Patreon’s side will have to come from new members after the May launch and the increased cut in Pro (8%), which Jenkins predicts will have the highest adoption rate.
The upside of the new Patreon offering is that it does put more control back into the hands of its creators to dictate how they want to run their project. It is also a much better bargain when compared with competitors like Facebook’s Fan Subscriptions and YouTube, which take up to a 30% cut in revenue.
“At the end of the day, they’re an ad business–they don’t care,” Jenkins says. “YouTube and Facebook care about advertisers first, and users and eyeballs second, and people who make content third. It’s been that way, and it will be that way as long as the dollars come from ads. Our priority is creators.”
NOTE: This article has been updated to clarify Patreon Premium’s payment structure. The earlier version stated there would be an additional $300/month charge. However, the Premium tier is “for creators that expect to make at least $2,500/month on Patreon, so that the 12% fee equals at least $300/month to Patreon.”