{"id":41192,"date":"2017-12-10T06:00:17","date_gmt":"2017-12-10T11:00:17","guid":{"rendered":"http:\/\/www.shamusyoung.com\/twentysidedtale\/?p=41192"},"modified":"2017-12-10T11:17:41","modified_gmt":"2017-12-10T16:17:41","slug":"new-patreon-fee-system","status":"publish","type":"post","link":"https:\/\/www.shamusyoung.com\/twentysidedtale\/?p=41192","title":{"rendered":"New Patreon Fee System"},"content":{"rendered":"

If you support my Patreon, then you probably got a notification recently that Patreon is changing how they process fees and pay creators<\/a>. This change is being universally panned. I follow a lot of other creators, and I have yet to see a single person endorse this change. <\/p>\n

Reader James asked on Friday:<\/p>\n

Hi Shamus,<\/p>\n

With the recent changes to Patreon, what’s the best way to support you and your content? I know you have Paypal as well but maybe there’s some fees there that you pay that you now don’t on Patreon…<\/p>\n

Maybe a blog post about this might be useful to clarify things.<\/p>\n

Kind regards,
\nJames.<\/p><\/blockquote>\n

The best way to support me is still on Patreon<\/a>. I guess? It’s the most convenient, and I’m a big believer in the idea that convenience is king. <\/p>\n

This entire controversy is completely fascinating. At first I thought it was an understandable move, poorly explained. Then as I looked into the details it looked like a foolish move, dishonestly explained. And now that I’ve been looking at the numbers for three days it looks like an insane move explained by an idiot. The longer I stare at this mess the more strange it seems, which would make for fun analysis if it wasn’t directly tied to how I provide for my family.<\/p>\n

Before I can discuss the change, let me explain how Patreon has worked in the past.<\/p>\n

<\/p>\n

Under The Hood<\/h3>\n

As an extra security precaution, banks have begun issuing extra-blurry cards.<\/div>
As an extra security precaution, banks have begun issuing extra-blurry cards.<\/div><\/p>\n

When you donate to someone on Patreon, there are three fees that come into play. You don’t need to understand this stuff to give, but you do need to understand it to follow this controversy.<\/p>\n

    \n
  1. Patreon takes a 5% cut.\n
  2. The credit card company charges a percentage. This percent varies between card companies and the actual details can get to be fiendishly complex<\/a>. I don’t actually know what the average is, but it’s somewhere in the neighborhood of 2% or 3%.\n
  3. The credit card charges a flat transaction fee. Most quotes I’ve read put this number between $0.25 and $0.35 per transaction.\n<\/ol>\n

    The last two fees are charged by all banks and card companies and Patreon has no control over them. So if you pay for $100 worth of goods at Wal-Mart, then your bank will charge Wal-Mart $2.90 for their percentage cut, and on top of that they will charge Wal-Mart 35 cents for the transaction. <\/p>\n

    HOWEVER, let’s say you don’t buy $100 worth of goods in one big transaction. Let’s say you buy 100 items for $1 each, and for some reason you pay for each item individually. I don’t know why you’re doing this. Maybe you’ve got a crush on the cashier and you’re looking to spend a lot of time with them. In any case, the bank will still collect that $2.90 percentage cut. They will also charge Wal-Mart thirty-five cents for each<\/strong> transaction. When your cashier is finally done ringing things up, Wal-Mart has paid $2.90 for the percentage and $35.00 for those per-transaction fees. Over a third of your money went to the bank rather than Wal-Mart. Given that retail margins are usually less than 30% for small items, this means Wal-Mart actually lost money. (And that’s before we take into account the cost of the cashier’s time and all the receipt paper you wasted. You absolute monster. What were you thinking?!)<\/p>\n

    Wal-Mart pays these fees themselves. Because the overwhelming majority of transactions are large, they don’t often encounter the latter scenario where they lose money. And when they do, it’s just a few pennies. <\/p>\n

    That’s fine for your typical Best Buy, Wal-Mart, or grocery store. But this becomes a problem when you’re running a Patreon and you’ve got 100 people giving you $1 each. Like the second Wal-Mart scenario, those per-transaction fees can take a huge<\/strong> bite out of your income.<\/p>\n

    To mitigate this, Patreon would bill everyone on the 1st of the month. If you support 10 people for $1 each, then Patreon would just charge your card for $10 and split the money up themselves. That nasty 35 cent transaction fee would only be inflicted once, rather than 10 times. Basically, the more people you supported the more efficient your donation would be. <\/p>\n

    So Why Change Things?<\/h3>\n

    Why do I have a picture of a trombone here? Keep reading. It will make sense in a couple of paragraphs. Sort of.<\/div>
    Why do I have a picture of a trombone here? Keep reading. It will make sense in a couple of paragraphs. Sort of.<\/div><\/p>\n

    Originally, all of these fees were hidden within your Patreon donation. If you gave me a dollar, then all three fees would be subtracted from that dollar. (Patreon’s 5% + Credit Card cut + transaction fee.) These fees varied from company to company. Maybe you’d give me a dollar and I’d get sixty cents. Maybe I’d get seventy five. <\/p>\n

    This original system was not perfect. It created several problems: <\/p>\n

      \n
    1. Uncertainty for the donor.<\/strong> This explanation I’ve just given is long and dull and not something people want to learn about when they’re trying to give you a dollar. If someone asks, “Wait, how much of this dollar are you getting?” then what they’re looking for is a clear answer and not accounting homework.\n
    2. Uncertainty for the creator.<\/strong> Those fees vary from month to month, and they do so in unexpected ways. Let’s say Bob gives me a dollar a month. He also gives Rutskarn<\/a> a dollar a month. Then Rutskarn makes a particularly egregious pun. Offended, Bob withdraws his $1 from Rutskarn. As a result, my monthly take will go down<\/em>. Rutskarn and I were sharing the burden of that $0.35 transaction fee, and now I’m bearing it on my own. This is a simple example but when you’ve got hundreds of supporters who in turn are supporting dozens of people and all those donors are using different cards with different fees… Ugh. Stuff like this makes it so that my income fluctuates slightly, even if I don’t have a change in donors, and it’s never clear where the money is going or why.\n
    3. Patreon absorbed the blame for the behavior of credit card companies.<\/strong> When someone learns that I only get seventy cents of their dollar, their immediate reaction is, “Wow. These Patreon guys take a HUGE cut! Greedy jerks!” But obviously Patreon’s cut is tiny compared to the cut the banks are taking.\n
    4. Patron rewards are granted as soon as you become a donor, but you’re not actually billed until the first of the next month.<\/strong> So if I’m a musician and I set it up so that patrons of $2 or more get immediate access to my huge library of trombone music, then you can get around paying me that $2. You just sign up as a patron on (say) the 29th of the month, download all those sweet, sweet trombone tunes, and then cancel your pledge before the end of the month.\n<\/ol>\n

      I don’t know that I would call these “problems” so much as “annoyances”. I certainly wasn’t looking for Patreon to attempt to “fix” any of them. I was just happy I was getting paid and hoping nothing rocked the boat. Anecdotally, I gather most other creators felt the same way.<\/p>\n

      So What’s The New Plan?<\/h3>\n

      I tried using this keyboard to chat with my wife and ended up sending her $5,382 dollars.<\/div>
      I tried using this keyboard to chat with my wife and ended up sending her $5,382 dollars.<\/div><\/p>\n

      Last week Patreon announced that – starting December 18 – they will be totally changing how they handle transactions. Rather than billing everyone on the 1st of the month, they will bill you as soon as you become a Patron, and then on the anniversary of that day every month. So each donation will be billed individually. <\/p>\n

      Also, the bank fees will “protrude” from the transaction. If you give me a dollar, then your card will be charged $1.38. Those extra 38 cents are the bank’s cut. Once the bank is paid, then there’s exactly $1 left and that gets divided, with Patreon taking its 5% and me getting the rest. This change supposedly clears up the uncertainly for the creator and shows the donor who is taking the really big cut (the banks). I can look at my income and know exactly how much I’ll get this month, and Patreon can stop taking the blame for the big bite the banks are taking.<\/p>\n

      Patreon is talking about this change in terms of “more money for creators”, and this claim is a strange blend of impossible and dishonest.<\/p>\n

      Yes, under the new system if you pledge $1 then I’ll get 95 cents. Yes, I’m supposedly getting “more money”. But you’re being charged more money<\/em> and I’m actually getting a smaller percent of it. Yes, I’m getting 95% of the money you pledge, but I’m only getting 68% of the money you’re paying<\/em>. In the old system, that sort of inefficiency was the worst-case scenario, and under the new system it will be the universal norm.<\/p>\n

      Even ignoring that, this means less money for creators because patrons have begun deleting their pledges. When Patreon announced the change, lots of people did the math, realized that they would be paying more and that their creator would be getting a smaller percent of it, and so they canceled their donations. Everyone I follow has seen a significant reduction in support. So even if this change did give me a slight raise from my Patrons, that theoretical raise can’t possibly offset the loss of supporters.<\/p>\n

      Patreon’s claims have been so at odds with reality that people have begun looking for alternate explanations. One popular theory making the rounds<\/a> is that Patreon has decided that their “core users” – the people they care about – are their small handful of superstar creators with big donations. According to the theory, small-time losers like me aren’t really that valuable, and this change was designed to get us to take our small army of $1 donors and sod off, while leaving more money for the big dogs. I guess the thinking is that if you support 10 people for $1 each, then maybe after this change you’ll just give the whole $10 to the one person you really like and drop support for the other 9. <\/p>\n

      I don’t actually believe this theory. I mean, it would go directly against the stated values of Jack Conte, Patreon’s founder. Then again, this theory isn’t any more ridiculous than Patreon’s claims that this change will “help creators”. This new system incentivizes single large donations and punishes making many small ones, so regardless of whether or not Patreon intended to weed out the little guys in favor of the superstars, that’s that the system has started to do.<\/p>\n

      (If this theory is true, it means Patreon is profoundly insane \/ stupid \/ incompetent. Systems like Patreon benefit greatly from the network effect<\/a>. The more people there are using the system, the more valuable the system is to everyone using it. It’s like a telephone. If you own the only one, it’s useless. If everyone has one, it’s indispensable. There are people I support on Patreon because I already had an account and it was easy to pitch a dollar their way by just clicking a button, but I wouldn’t have done so if it meant I had to set up an account first. If you shed all the small-timers and their supporters leave with them, then you’re greatly reducing the userbase. If fewer people are using the system then not only is the system useless to small creators, but up-and-coming creators will have a harder time getting donors. Getting people to create an account and enter those credit card details is hard<\/em>.)<\/p>\n

      Moving on to the topic of people “stealing” content, superstar creator Hank Green said:<\/p>\n

      \n

      The problem they have:
      Patreon charges everyone at the same time, so you don't get charged right when you sign up. So some people have signed up, gotten their perks, and then cancelled without paying.<\/p>\n

      — Hank Green is Dreaming of a White Christmas (@hankgreen) December 8, 2017<\/a><\/p><\/blockquote>\n