Oh these people named Jack who run online things. Patreon co-founder and CEO Jack Conte complained the other day that their business model was not sustainable, and that got a lot of people anxious.
In case you don’t follow it, Patreon is a subscription crowdfunding platform that allows supporters to pledge a certain amount of money for each month or work by artists, writer – and many cartoonists.
This model has seen more $1 billion in payouts to creators. Patreon sends 90% of the money to creators – $500 million in 2019 alone – keeps a 5% cut and tales 5% for processing fees. It’s a simple, effective system.
For the math challenged that means Patreon will make $55 million this year. But it’s not enough!
Patreon CEO Jack Conte said in an interview with CNBC that the platform will soon be facing the challenge of maintaining a profitable model as the company continues its growth. “The reality is Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business,” Conte said. The company does not currently provide contracts, which allows users to retain 100 percent ownership of their work and full control of their brand. The company plans to provide creators with new “value services,” like options for merchandising, to generate new revenue. Creators will be given the opportunity to participate in these services, and it could ultimately reduce Patreon’s generous 90 percent pay-out model.
Considering that Patreon really just runs a platform and makes passive income from it, this urgent need to make more money seems maybe a little weird. And that ownership comment was all kinds of red flags. Patreon has become the lifeblood of thousands of creators, many of them cartoonists, and changing the way it works could mean upheaval for many people. A year or so ago, Patreon tried to change the way it processed pledges, and as Todd Allen reported at the time, it was a fiasco, and they had to walk it back after handing the fall out awkwardly.
This time, media pundit Dan Olson had a much quoted twitter thread about this that kicks off here.
I don't want to be doom and gloom, but Patreon is about to eat itself. Or, more specifically, the investors who demand geometric growth are about to demand Patreon eat itself.https://t.co/Ze7Z0g829Z
— Dan Olson (@FoldableHuman) February 5, 2019
The short version: although Patreon’s business model is quite scalable, they got a big round of venture capital and that demands a big big return.
So Patreon has made around $55m in direct revenue, but they’re in hock to Thrive Capital for ~$107m, and Thrive doesn’t just want their money back with interest.
Thrive wants all the money.
And just to add this to the General Apocalypse Unified Theory:
Oh, BEE TEE DUBS, this is Thrive Capital: pic.twitter.com/QgA3HU2to1
— Dan Olson (@FoldableHuman) February 5, 2019
Crowdfunding guru Spike Trotman compared Patreon’s growing pains to Kickstarter’s general aura of helpfulness:
One of the things that perennially amazes me about Patreon is that, in every piece I've read where someone over there in a management position is interviewed, they basically say their client base is just Using The Site Wrong.
— Iron Spike (@Iron_Spike) February 5, 2019
The whole thing:
One of the things that perennially amazes me about Patreon is that, in every piece I’ve read where someone over there in a management position is interviewed, they basically say their client base is just Using The Site Wrong.
Fun tidbit: When Kickstarter launched? They didn’t even HAVE a Comics section. And the original vision was a site where Girl Scout troops could fund trips to the Grand Canyon and soforth. Not Shemue 3 and Pebble watches.That’s why there’s that “backer rewards” system. It was supposed to be like when you sponsored PBS, and they sent you a mug and a tote bag. Maybe you used the mug and tote bag, but that’s NOT why you were giving PBS money, cuz you had to have that sweet mug.
But people, used the site wrong. And by that, I mean did a WHOLE lotta stuff the founders of KS never imagined they would.
KS’s response wasn’t to try and change a million users. Their response was to change the site to better suit its user base.I’ve been using KS since the year it launched, and watched them add new categories, an interface to fine-tune shipping rates, referral links, stats, category-specific rules, all KINDS of improvements. And I can attest, a lot of it has been stuff people explicitly ASKED for.But whenever Patreon’s in the news, it’s always them alienating creators, of trying to figure out how ts squeeze more money out of them, or wistfully fantasizing about Perfect Patreon that only served the top 5% of YouTubers, instead of the filthy rabble.
That’s what you WANTED. Not what you HAVE.
WORK with WHAT you HAVE.
As mentioned, Patreon provides crucial financing for a ton of cartoonists among others. I ran a very succesful Patreon for years, to help run this site while it was privately owned and it was a godsend – however it didn’t really do much for me beyond providing a stable platform to enable regular micropayments from supporters. I talked to a few Petreon people informally about marketing and so on, but that was never a service they offered.
Currently, I continue to support a bunch of creators on Patreon – giving a few people a few bucks a month is a super satisfying way to help support the artists I believe in.
All that said, Patreon doesn’t make it easy for me to find NEW people to support. I just logged in and there is NO front page I can find for Patreon where I could browse categories I might want to support. Instead it asked to login to my FB and Twitter to find people I already know. I signed in for Twitter and there’s been a spinning beachball on that page the whole time I was writing this post (which took me a pretty long time.)
UPDATE: It stopped spinning and didn’t show me ANYONE. Fail. I finally found an “Explore creators” link in a drop down menu and when I clicked on that it showed me about 12 creators, all organized by what kind of rewards they give. Not exactly the kind of thing I’m looking for.
So maybe things like this lack of discoverability is what is not making Patreon sustainable? Clearly they do need to hire some better engineers and UX designers.
Patreon’s weaknesses made the announcement of Kickstarter’s own recurring payment platform, Drip, over a year ago very intriguing. If Patreon is going to start adding on services for pay, will Drip become an alternative?
Well, it turns out after a private beta launch…Drip actually is no more. In a story from last fall that I missed, Kickstarter is partnering with the independent creator focused festival XOXO to start a NEW platform.
Nearly a year after launching its subscriber-based crowdfunding platform, Kickstarter announced today that Drip is on the way out. Fortunately, for the creators currently working with Drip as well as anyone looking for an alternative to Patreon, Kickstarter isn’t abandoning the platform. Instead, the company is providing seed funding to XOXO festival creators Andy Baio and Andy McMillan to create an entirely new one with an explicit focus on providing financial stability and transparency to independent artists.
The new initiative came about through conversations between Kickstarter founder Perry Chen and Baio, a former Kickstarter CTO. “You start thinking, what’s next, what are the possibilities?” says Chen. “As we talked more and more, I ended up thinking that this could be a good way for this to progress, for [Baio] and [McMillan] to build on what we’ve done with Drip over the last year.”
As promising as the idea may be it sounds a long way from launching, let alone replacing the $500 million cash flow of Patreon.
In the meantime, Kofi has also emerged as a way to directly support creators – according to their front page, they’ve paid out more than $10 million to creators. Kofi is free to use, but funds itself through charging $6 a month for “gold level” services, like private posts. I haven’t followed the discussion about this, but I see more and more people using the platform.
But back t the current issues. Patreon’s Conte responded to Olson’s criticisms in his own long Twitter thread:
I usually try to avoid twitter drama, but I saw a thread last night from @FoldableHuman that was just uninformed enough that I feel the need to chime in. Much of the thread stemmed from oversimplification and misleading assumptions: https://t.co/xH5q9yM0Ei
— Jack Conte (@jackconte) February 6, 2019
Among the things he pointed out: as the user base rises, so does troubleshooting and the infrastructure to support it. Also the need to fight fraud. And requests for new services from both creators and patrons. And also, Josh Kushner is a really great guy.
To which one might add, just making the service more usable. I get it: this started as a way for Conte to fund his own band’s videos and now it’s heading towards being a billion dollar business. Shit happens.
One thing’s for certain: crowdfunding is here to stay, as creators appealing directly to their fans/readers/supporters/patrons is a very authentic and satisfying experience for many people. Patreon has become an essential tool for makers AND people looking for entertainment/information, and one can only hope there’s room for a sustainable model in there somewhere.
Heidi MacDonald is the founder and editor in chief of The Beat. In the past, she worked for Disney, DC Comics, Fox and Publishers Weekly. She can be heard regularly on the More To Come Podcast. She likes coffee, cats and noble struggle.