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Mar 20, 2019 11:50 AM ET

Patreon launches Pro and Premium tiers to compete with Facebook and YouTube


iCrowd Newswire - Mar 20, 2019

Patreon is how thousands of artists, vloggers, musicians, podcasters, and other creators make their living. The six-year-old startup currently supports more than 100,000 creators, who receive recurring donations from over 3 million supporters, and it has become the center of a growing ecosystem for supporting creators online. But, facing new competition from YouTube and Facebook, the company is still working toward turning a profit while trying not to alienate its users.

To give Patreon a steadier shot at survival, the company is planning a fundamental change to its platform. In May, the site’s campaign system will be splitting into three tiers: a simple version called “Patreon Lite”; a “Patreon Pro” plan that’s similar to the existing service; and a more expensive option called “Patreon Premium.”

That might mean a price increase for many new users. Patreon Lite takes the same financial cut as Patreon’s existing service: a flat 5 percent fee, plus the cost of payment processing. Pro and Premium are more expensive: Pro has an 8 percent commission, and Premium has a 12 percent one, with a minimum fee of $300 per month. Importantly, however, these changes don’t apply to existing users. People who started using Patreon before the split — a group Patreon refers to as “founding creators” — will be automatically enrolled in Pro at their old 5 percent rate. They also won’t be affected by a new way of calculating payment processing fees, although they can choose to opt into that system.

Patreon Pro includes all of the features Patreon has now, plus a couple of new options. Members can attend workshops with successful creators, and there’s a new tool for offering limited-time backer bonuses, which launched in beta last year. CEO Jack Conte refers to Pro as Patreon’s flagship product, and it’s the one that people who liked the old Patreon model will probably want.

Lite provides Patreon’s basic service: creators can start a campaign with a homepage on Patreon’s site, and backers can pledge recurring donations. But creators can’t set up pledge tiers with special perks, and they won’t get features like sophisticated analytics. Conte says that around 20 percent of users already ignore the tiers. “They just want to quickly set something up,” he says. It’s a little bit more like the casual “tip jar” platform Ko-Fi, which supports monthly donations but without the complex perk system.

The Premium tier, by contrast, gives users a close relationship with Patreon. It’s designed for larger campaigns. It would take $2,500 per month in pledges to make a 12 percent commission reach Premium’s minimum fee, or over $3,000 for founding patrons, who can get a cheaper 9 percent rate. Premium subscribers will get access to a system for shipping merchandise as well as a dedicated manager who can work with their campaign. A handful of creators already have managers, but Patreon is scaling the option up, although it’s still limiting the number of Premium subscriptions. “It’s a person who’s dealing with you full time, and that’s really expensive,” Conte says.

Conte says Patreon is adapting to better serve a huge spread of different creator needs. “We literally have creators like a painter with 50 patrons,” he says, “and they’re using the same product as a media company with 40 employees that’s using membership to finance their operations, and we’re not serving either of them.” The vast majority of Patreon’s creators make less than $500 per month. According to tracking service Graphtreon, only 9,200 users currently make more. Many people use Patreon to get a few dollars from fans for things they’d be doing anyway, like making YouTube videos or posting art online. But a few campaigns rake in huge paydays: the podcast Chapo Trap House, for instance, is making over $122,600 monthly.

The new tiers are supposed to reflect that disparity. Conte says Patreon can’t scale a one-size-fits-all service to include things that big or midsized creators really want, like merchandise management and full-time support. This system, he says, offers a “really healthy course” to profitability without making Patreon inaccessible to smaller operations. He claims Patreon has vetted the tiers with a large group of creators to make sure they’re acceptable. But these changes are still rolling out conservatively — and for good reason.

Patreon is one of the best-known alternatives to online advertising, branded sponsorship deals, and relying on the whims of a specific social media service. So far, it’s escaped a lot of the backlash that’s engulfed other web platforms. Beyond users’ landing pages and a small Snapchat-like app for creators, it hosts relatively little content to worry about moderating. It’s acquired a few companies, including e-commerce startup Kit, which will likely power its merch service. But instead of aiming to build a juggernaut that might raise antitrust concerns, it’s focused on integrating with other companies’ platforms, including the chat service Discord and the gaming storefront Itch.io.

Still, plenty of smaller creators are nervous that Patreon will become less welcoming as it becomes more profitable, and that’s led to controversy in the past. In 2017, the company made a disastrous attempt to streamline its payment processing system by offloading processing costs to backers. The system offered legitimate benefits, but it also penalized backers with surprise fees that seemed disproportionately high if they were only donating $1 or $2. Patreon reversed the decision amid heavy protest and apologized.

This time around, it’s trying to avoid forcing change on longtime users. Patreon is introducing a new payment processing fee system in May, changing a more nebulous rate that Patreon has previously said ranges from 2 to 10 percent. But unlike the earlier proposal, it’s not asking backers to pay these costs. And the rates are meant to accommodate small donations, which are an important source of income for less famous creators. Pledges of more than $3 will incur a 2.9 percent charge, plus 30 cents per pledge. Anything lower will be processed at a 5 percent charge, plus 10 cents. For example, a $3 pledge would lose around 25 cents, instead of a minimum of 30 with the larger flat fee.

Conte claims around one-third of Patreon creators would pay less under the new model. But “we’re not going to force anybody to adopt anything,” he says. “It’s 100 percent opt-in, no changes, for founding creators.”

The new service tiers will still probably draw some criticism, judging by the response to a January CNBC interview where Conte hinted at the changes. A widely cited tweet thread by YouTube video maker Dan Olson claimed that Patreon’s single-tier business model should be easy to scale since it doesn’t require massive data hosting resources or even a lot of content moderation. Olson suggested that investors were forcing Patreon into adding unwanted features to grow more quickly, and the basic user experience would suffer as a result.

Conte called the thread “misleading” and says it ignores work that Patreon does behind the scenes of its simple-looking website. According to Conte, most of Patreon’s expenses come from paying its roughly 170 employees, many of whom work with creators or Patreon’s business partners — not in roles like engineering where one person can build a massively scalable system. “A lot of members write in and say, ‘What about this? How can I do this? I want to change my thing here,’ and we’ll guide them through that process,” he says. “We’re not a fully automated system.”

A handful of people have proposed undercutting Patreon with alternative services, largely because they’re critical of Patreon for banning far-right users. (The company has a policy against hate speech or affiliating with hate groups, and it applies to creators’ behavior on all platforms.) In January, self-help guru Jordan Peterson protested one such ban by deleting his account — where he once made over $80,000 monthly — and promising to help build a competing crowdfunding site. That platform is supposedly under construction, but it has yet to launch.

“I hope it works out, because I think competition is good for creators,” Conte says of attempts at a Patreon alternative. “But it’s a really hard thing to do. So from Patreon’s perspective, and from a landscape perspective, I’m not worried about it.”

He also thinks that Patreon can survive competition from huge companies like Facebook, which began rolling out its Patreon-like Fan Subscriptions last month. Fan Subscriptions was derided for reserving a license to any art that users created as well as the right to a 30 percent revenue cut. But Conte argues that even with better terms, Facebook’s approach to subscriptions would be broken.

“If you look at the companies they acquire, and what they do, they’re like — go for massive scale. And they’re not going to scale a customer support team and a creator success organization, and have creator care reps and answer support tickets from fans. They don’t think of business that way,” he says. “The [Fan Subscription] terms that were published, that people ripped to pieces, are a symptom of a lack of respect and a lack of understanding of and for creators. I think that’s a deep-seated cultural issue that Facebook probably can’t fix.”

Conte points to Facebook’s history of making abrupt changes to which content appears in its News Feed, which is something that’s kneecapped entire media companies and highlighted the shortcomings of relying on one big content platform. “That’s such a negative signal to send to professional markets,” he says. “Creators feel that so hard. They’re scared. They’re scared that Patreon is going to do something like that.”

That’s a perception that Patreon wants to avoid at all costs. “We’ve done a year’s worth of work and talked with creators and showed them this ahead of time,” says Conte. “We’re going above and beyond to make sure folks know that we’re getting feedback or talking with them — we’re taking care of them, we’re doing right by our current creators.”

Contact Information:

Adi Robertson








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