So, let's talk about that there Patreon pledge fee. Sorry if this is the 48424th e-mail you've gotten about this (and really, I'm also sorry if this is the first time you're hearing about this). I'm also gonna use numbers, because I'm a nerd, so uh, be aware: there's some math ahead.
For the uninitiated, Patreon has changed their fee structure. In the old system, pledges were aggregated together at the end of the month (to consolidate credit card fees). Patreon would take their 5%, and then the credit card/PayPal fees would come out of what was left. So, to re-use an example I posted on Twitter: If you currently pledge $5 to two people for a total of $10, then the math on the first of each month breaks down as:
You pledged: $10.00
You pay: $10.00
Patreon's 5% Fee: $0.50
Credit Card Fee: $0.49 (Stripe charges 1.9% + $0.30 per transaction, PayPal does 5% + $0.05 per transaction. I'm going w/Stripe here)
Creators: $9.01, or $4.505 per creator.
In the new system they are pegging the creator's take of pledged amounts to 95%. Yay, more money for creators! Except to do that, they're no longer going to be aggregating transactions. Instead, it seems they are moving to a "monthly anniversary of when you pledged" system. This means multiple charges a month rather than one big one. It also means paying Stripe/PayPal fees each time, rather than once. To offset that Patreon are tacking on an additional fee ($0.35 + 2.9%) to each transaction, pushing the burden of those credit card processing fees from my cut to a fee you pay. Using our above example in this new system:
You pledged: $10.00
You pay: $10.99 ($10 worth of pledges plus a $0.35 flat fee per each of two transactions plus 2.9% of the pledge total)
Creators get: $4.75 each (a now hard-set 95% of the pledge value)
Patreon + CC fees: $1.49 (these are now inseparable, making it impossible to know what's Patreon's cut vs. what is covering processing fees).
And those are just the totals. In this new system you won't pay this set $10.99 at the first of the month. Per their announcement, they will be charging it at the anniversary of your pledge date for each pledge. So now you'll get a $5.50 charge from Patreon on one random day of the month, and another $5.50 charge from Patreon on another day of the month, depending on when you signed up for those two pledges. And the kicker is that their explanation page, after explaining how you're gonna be charged more than you pledged and at seemingly random dates, says this: "We want a Patreon where your patrons never have to wonder when they’ll be charged, or how much they’ll be charged."
This is, frankly, terrible.
First thing's first: The most important thing to me is that you feel comfortable with your pledges. If these changes are unaffordable, or if you don't like how badly this whole change has been handled, or just want to quit using Patreon in protest, you absolutely will not upset me if you have to cut back or remove your pledge. I totally get it. Your support means the world to me, but you gotta protect you and yours first, and I support you 100%.
With that explanation out of the way, let's talk about why this change bugs me.
1. This was communicated in a way that was outwardly disingenuous.
The e-mail that I got announcing this change was titled "Creators now take home exactly 95%." It emphasized selling this to my Patrons as really being something that will help me, a creator, because now my revenue is A) a bigger percentage, and B) consistent and predictable instead of varying based on various credit card fees. It also had a ridiculous graph that showed the tacked on fee as maybe 3-5% of the overall pledge.
But for smaller pledges that tiny sliver is a comical farce: the charge on a one dollar pledge is $0.38, which is tantamount to a 38% fee. And also, taking home $0.95 on $1.38 is not 95%. It's 68%. It's actually a 20% decrease in how efficient it is to get money to creators at that pledge level. Yes, it's 95% of the pledged amount but that's some disingenuous math if we're talking about how to effectively support someone's creative efforts with your money.
This impact gets reduced the higher the pledge (it's that $0.35 that just kills the efficiency of low level pledges). But as any creator on here knows, smaller $1-$2 pledges are not only the most common but the most reliable. It hurts creators and patrons to make cheap, widely spread pledges prohibitively expensive. Instead, they wanted it framed by me to you as "Hey all, I'm gonna be getting more money and it's gonna be more stable, just pay them there fees because you love my content!" That was gross. Being asked to do Patreon's PR for them (even if this change were completely benign, which I deeply question) rubs me the wrong way.
Furthermore, the initial e-mail and announcement did not mention the switch away from the "aggregate everything and charge on the first" billing cycle at all. This is why so many people immediately assumed it was a cash grab - the belief (without any info to the contrary) was that they would continue to aggregate charges at the end of the month and even though they still paid a flat transaction fee would pocket the $0.35 per pledge fee.
It turns out, though, not to be the case. Which brings me to...
2. It makes no sense.
So Patreon's big argument here in the updated addendum is that people don't like getting double-billed and are sometimes confused about when money gets taken out.
This... doesn't really hold up to scrutiny. I mean, yeah, I get that if I subscribe to someone on the 29th who has Charge Up Front enabled it might be a shock to then be again charged on the 1st, but that's more of a UI issue. Make it clear that if you're pledging to someone with CUF turned on they will be billed immediately and then again on the first. This isn't hard.
Instead, they are going to explode the number of times they charge people and tack on an only vaguely predictable fee per transaction, and are doing so in the name of... making sure people know when and how much they're being charged? This is the opposite of solving this problem. This is making that problem infinitely worse.
I just don't see how using Charge Up Front to charge someone $1 on the 15th and then another $1 on the first (and $1 on every 1st there after) is more confusing than a network of individual charge dates based on when you pledged, with the amount charged being slightly more than each pledge. It's a nonsense solution to a modest problem that's going to cause more chaos than it solves.
3. It makes Patreon harder to hold to account.
So as things stand in the current system, Patreon's income (from customers, not from VC injections) is pretty easy to calculate: they take 5% from all transactions. They made mention of being on track to give out ~$150m in pledged revenue this year, so that puts their income at around ~$7.5m.
But once this new system kicks in that becomes way more obfuscated. They are taking 5% in fees, but then also charging a fee per transaction that sometimes loses them money and sometimes gains them money.
Basically: Patreon's thirty five cents plus 2.9% fee is always bigger than Stripe's thirty cents plus 1.9% fee. They are always going to be making more money on Stripe transactions.
But the larger the donation through PayPal, the harder it hurts them. At some point the thirty-five cents plus 2.9% is outpaced by PayPal's five cents plus 5%. A $20 PayPal donation generates $0.93 for Patreon in the new system, but costs them $1.05 to transact for a loss of $0.12.
So now they're earning more on credit card and small PayPal transactions, but potentially losing on big PayPal transactions.
So is this change a cash grab? Who can say? They have the numbers that would determine that, they alone know who has what size pledges and the breakdown of which payment method people use. This also assumes the rates they posted for Stripe/PayPal were A) Accurate and B) Have not been negotiated down in the wake of more frequent payouts throughout the month. The ambiguity of what creators were going to earn is now shifted to am ambiguity about what Patreon will earn. And in the midst of what is undeniably a fee hike that almost no creators or patrons seem happy about that raises serious questions about their motivations.
This change is both bad and nonsensical. As I said, I'm totally cool if you feel the need to edit or pull pledges as a result of this clown show, but as always I appreciate and am always thankful for your support. Oh, and I've got a new episode coming in the next few days about a quirky non-story driven indie game, so look forward to that.
Hopefully we'll talk again soon, and under happier circumstances!