Patreon’s Unpopular New Fee Policy: Why It Was Dropped
What a week it’s been for the Patreon community.
Just one week ago, on December 6, 2017, Patreon (see our review) announced a change in their fee structure. Broadly speaking, the change would have seen creators no longer pay payment processing fees on what they earn through Patreon. Instead, creators could count on taking home 95% of what is pledged to them — everything minus Patreon’s 5% platform fee — with patrons paying the payment processing fees instead.
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The Great Patreon Fee Controversy
Sounds okay, right? Well, due to the specifics of how these processing fees were going to be charged to patrons — a 2.9% + $0.35 fee on each individual pledge — it would have become significantly more expensive for patrons to support several different creators with $1-$2 per-month or per-post pledges. This posed a threat to the viability of Patreon creators, particularly the smaller creators who disproportionately rely on small contributions.
The change did not take effect immediately, but the damage did. Creators flooded social media with screenshots of feedback from patrons who had already canceled their contributions in anticipation of the new fee policy. With patrons and creators united in condemnation of the new fees (which were set to take effect on December 18), Patreon did something surprising and notable to those who have grown accustomed to coming out on the losing end of upward wealth transfers: they issued an apology and announced that the new fee policy would no longer happen.
Patreon CEO Jack Conte’s statement was refreshingly contrite and free of self-justifying corporate-speak:
We’ve heard you loud and clear. We’re not going to rollout the changes to our payments system that we announced last week. We still have to fix the problems that those changes addressed, but we’re going to fix them in a different way, and we’re going to work with you to come up with the specifics, as we should have done the first time around. Many of you lost patrons, and you lost income. No apology will make up for that, but nevertheless, I’m sorry. It is our core belief that you should own the relationships with your fans. These are your businesses, and they are your fans.
His statement ended with “Thanks for continuing to create. We are nothing without you, and we know that.” Creatives struggling to support themselves in this predatory world haven’t had a lot of victories as of late, so Patreon’s unconditional surrender has to come as a bit of a morale boost. But why was this change proposed in the first place? Let’s go through the whole saga thus far and see what lessons we can take away from it.
The Now-Canceled Fee Change
If you will allow me to plagiarize myself, here’s how I described Patreon’s just-canceled new fee policy in a previous version of this article:
Prior to December 18, 2017 — the day the new fee regime takes effect — Patreon’s policy was to charge the content creator for the cost of payment processing, deducting the amount from the earnings, which were bundled together and paid out once per month. This amount would vary, both month-to-month and creator-to-creator, because it depended on the number and amount of the individual pledges you received from your patrons, not the sum total of your patrons’ contributions.
As of the 18th, this all changes. Creators won’t be charged a fee for payment processing, and will instead pay only the 5% platform fee Patreon has always charged. Patrons will now be charged a 2.9% + $0.35 fee on each individual pledge they make to a Patreon campaign.
To those not involved in crowdfunding, the significance of this change may not be immediately apparent, and, in fact, it was initially presented by Patreon as an unalloyed good. According to the company’s much-criticised first statement, the change was made because it “allows Patreon creators to take home exactly 95% of every pledge, with no additional fees.”
However, here’s the thing. To charge a 2.9% + $0.35 fee to a patron’s every individual pledge adds a significant burden to patrons, most especially those who contribute a small amount — often $1 — to several different creators.
Seriously, though, it’s a big hit to small contributions! You might see the 2.9%, or even the $0.35, and think “well, that doesn’t sound like a big deal.” But the truly significant part is that this fee is charged to your every individual pledge and not assessed to your total monthly donation. This means every $1 pledge you make to a creator — whether monthly or per creation — will cost you $1.38. That’s a 38% fee you’re now paying on your donation, which sounds a lot worse than “2.9% + $0.35.” So if you contribute to, say, 20 different Patreons at $1/month each, you’ll now be paying $27.60 instead of $20.
It was the aggregation of the per-pledge fees that led patrons to cancel their contributions to creators. Many patrons divide their giving into small amounts sent to many different creators. The new system would have penalized this activity and incentivized giving larger payments to fewer creators. The big guys win, the little guys lose.
Patreon’s Reasoning Behind The Change
Responding to the initial tidal wave of anger and anxiety from creators, Patreon said that they were making the change in order to solve the problem of creators having patrons who pledge to become a monthly donor, thus enabling them to take the creator’s patron-only content, but who skip out and cancel their “subscription” before the first of the month when billing occurs. To remedy this, Patreon wants to move to a system where patrons pay an initial charge (“charge up-front”) for access to a creator’s content and subsequently pay each month for their continued patronage.
However, when Patreon let select creators move to this billing system, patrons complained, as it disadvantages those who, for example, sign up with someone’s Patreon on November 29, pay 5 bucks, and then are charged another $5 on the first of December. To fix this, Patreon wants to move to a system that works more like most subscription services — the buyer pays for the first month up front and then again on each monthly anniversary of the initial subscription date. But doing this would cause the payment processing fees paid by creators to shoot up; having patrons pay on their monthly subscription anniversary rather than on the first of the month creates many more individual transactions and therefore many more instances where the payment processor takes a cut.
Complicated, isn’t it? What it comes down to is that Patreon’s since-discarded new fee policy was sold as the answer to the anticipated problem of escalating payment processing fees for creators once Patreon moves to a monthly-with-charge-up-front payment system. However, as critics pointed out, and as Patreon themselves seemed to acknowledge in their mea culpa statement, there are other ways to deal with these payment issues than to implement a system that penalizes small pledges so harshly.
The reaction to Patreon’s proposed new fee system was so overwhelmingly negative that just a week after announcing the changes, the company a) cancelled the changes, b) apologized to the creators who lost patrons, and thus income, upon the rollout of the canceled changes, and c) pledged to work with creators going forward in devising a more sustainable payment system.
It was a remarkable about-face for Patreon — one that showed just how uniquely dependent they are on maintaining the goodwill of the creators and patrons who use their services. The fact that patrons were starting to tell creators that they’d rather just support them directly via PayPal than through Patreon had to strike fear into the hearts of Patreon’s executives. It’s not as though people can only send money to artists and entertainers they like through Patreon. People use Patreon for the convenience, and if onerous conditions are put on individual pledges that make small donations prohibitively expensive, creators and their fans can always connect with each other via other means.
One of the most significant parts of Patreon’s apology is the acknowledgment that Patreon is nothing without creators. Companies typically try to avoid acknowledging that their very existence depends on their employees and users, as that implies that the value they add isn’t uniquely precious and that a two-way relationship rather than a top-down private autocracy is the just way for an enterprise to function. And yet, it’s the truth.
We saw a remarkable display of solidarity from creator and patron alike in opposition to Patreon’s new fee structure. The debate could have played out differently, with creators and patrons at each other’s throats arguing over who should pay the payment processing fees. Instead, creators and patrons recognized the commonality of their interests and presented a united front against these changes. Lo and behold, it worked. Social media is an effective tool for spreading hate, fear, propaganda, and authoritarianism, so to see it used successfully to bring people together to share information in the cause of fighting an effective upward transfer of wealth was quite inspiring.
When disparate (and often desperate) people start recognizing their shared interests and the power of solidarity, real change can follow. Thankfully, Patreon was made to see the futility of standing against the very people they depend on for profit. May this be the start of a glorious trend.