Slashdot Mirror
Patreon Hits Donors With New Fees, Angering Creators (venturebeat.com)
Patreon's changing their fee structure to make donors cover payment-processing fees (standardized to 2.9%) -- plus an additional 35 cents for every pledge. Long-time Slashdot reader NewtonsLaw reports that Patreon's users are furious:
Despite Patreon's hype that this is a good thing for creators, few of these actually seem to agree and there's already a growing backlash on social media... many fear that their net return will be lower because the extra fees levied on patreons are causing them to either reduce the amount they pledge or withdraw completely... For those patrons supporting only a few creators the effect won't be large, but for those who make small donations to many creators this could amount to a hike of almost 40% in the amount charged to their credit cards. Without exception, all the content creators I have spoken to would have:
a) liked to have been consulted first
b) wanted the option to retain the old system where they bear the cost of the fees.
As a content creator, I've already seen quite a few of my patreons reducing their pledge and others canceling their pledges completely -- and I understand why they are doing that.
"Everyone hates Patreon's new fee," writes VentureBeat, adding "Many creators are saying it's unfair for patrons to have to pay transaction fees. In addition to that, most people support multiple creators and not just one, and they'll have to pay the extra fee for each pledge they make."
Tech journalist Bryan Lunduke is already soliciting suggestions on Twitter for an open source or Free Software solution that accepts donations from multiple payment systems, and while the change doesn't go into effect until December 18th, NewtonsLaw writes that "it's starting to look as if many content creators will be getting a slightly larger percentage of a much smaller amount as a result of this lunacy by Patreon -- something that will see them far worse off than the were before."
a) liked to have been consulted first
b) wanted the option to retain the old system where they bear the cost of the fees.
As a content creator, I've already seen quite a few of my patreons reducing their pledge and others canceling their pledges completely -- and I understand why they are doing that.
"Everyone hates Patreon's new fee," writes VentureBeat, adding "Many creators are saying it's unfair for patrons to have to pay transaction fees. In addition to that, most people support multiple creators and not just one, and they'll have to pay the extra fee for each pledge they make."
Tech journalist Bryan Lunduke is already soliciting suggestions on Twitter for an open source or Free Software solution that accepts donations from multiple payment systems, and while the change doesn't go into effect until December 18th, NewtonsLaw writes that "it's starting to look as if many content creators will be getting a slightly larger percentage of a much smaller amount as a result of this lunacy by Patreon -- something that will see them far worse off than the were before."
I had been pledging $1/month to several different creators. With the new fee structure, it's better to only fund one creator each month and rotate that creator every month. That's ridiculous.
I canceled all my pledges this morning in protest.
This just seems like a cash grab on the part of Patreon. There's no reason that they couldn't combine all of the pledges into a single transaction with respect to billing the customer and then split the fee equally across all transactions. So if someone is pledging $1 to 10 different individuals,
Yes, they are free to change the terms, obviously. I simply wanted to be asked. Mind you, my patrons are not leaving, and I'll come out ahead on this deal, but the original deal was simpler to explain and created less friction. A simple solution would be for Patreon to allow pre-funding your account which would allow for a single fee. It also helps non-USD patrons with exchange fees and other bank fees the incur outside of Patreon's fees.
This seems like Patreon is read to IPO. A few months ago they went after game developers (who use the system and provide monthly updates to patreons) and started objecting to sexual content in the games. Now they are changing the system to start charging more to the patreons, instead of charging more to the people who benefit from the donations. There was a time (I am showing my age) where Paypal did the same thing before it IPOed, by changing the payment method just before it became public so that they could have predictable revenue methods to describe to investors.
I don't know if it is for the best or now, I just know that people don't like being screwed out of money. In the US, we are conditioned to not know what prices are as everything we buy is the price of an item but tax is figured by the computer at the register. Yes sometimes in some states it is simple math but when you live in a province with tax rates like 9.417% you have no freaking clue what you are going to pay until the cashier tells you. That is exactly what people are pissed off about with this new policy change at Patreon. They knew it was a dollar (or ten) that was spent, now it is some formula that they have to figure out and it is not easy to figure out what is going on. Patreon is not mentioning if you get charged fees multiple times, single transactions, etc.
You have no idea what you are talking about. The monthly donations are batched into a lump sum transaction, so the fee per pledge did not exist. Out of a $1 pledge, $0.05 was a Patreon fee and a variable amount up to $0.10 maximum was the "transaction fee." Now for a "$1 donation" the charge to the donor is actually $1.38, so the initial amount has changed significantly and it is not really $1 we're dealing with. Out of this $1.38, $0.95 goes to the creator, $0.05 is the Patreon fee, and the remaining $0.38 is the "transaction fee" which Patreon largely pockets since they STILL batch all donations by a person into one lump sum withdrawal. That's a 280% increase in the transaction fee. Once donation amounts are normalized to only charge the donor $1 total for a "$1 pledge" the creator takes home $0.62 instead of $0.85. For what's now being called a "$1 pledge" Patreon is now taking a 31% cut of what the donor gives instead of a 15% maximum. Of course, if you donate $40 a month to one person this percentage goes down relative to 40x $1 donations, so it pressures people to dump most of their recipients in favor of giving all the money to very few. Many are just bailing completely in protest.
It's a money grab for Patreon. I suspect it's a golden parachute deployment tactic by the executives because there's no other logical explanation for this; they knew the backlash would happen.
You should take the time to understand what you're commenting on before you put fingers to keyboard. I have nothing against you but you spouted a bunch of false numbers as facts. The information is very easy to get so there isn't an excuse.
Imagine what would happen to a tip jar at a restaurant if donors weren't allowed to put anything into it without paying an additional fee to an administrator who managed the jar.
File under 'M' for 'Manic ranting'
1. Patreon was newer responsible for covering fees, it was always on creator side
2. Fees have two components: percentage of amount and fixed sum. In current system all payments are made together so the fixed part is paid once only. In new system all payments will be made separately so fixed amount is added to every payment. Basically for every extra pledge I make I waste the fee amount. For large pledge its largely irrelevant, but for small ones it means huge increase in costs
3. Patreon takes 5% as their fee. Now that they don't offer payment aggregation service and so become the LEAST efficient way of supporting the creator, why should I give it to them? So far the cost of convenience was low as aggregation lowered the external costs, but now they will be just taking 5% on top of other ways to support for a "fanpage" and paywall system of questionable quality.
According to Patreon's blog entry, previously creators received anywhere from 85%-93% of donations. Now they receive exactly 95% of pledges, but only a part of the amount paid by the patron counts as "the pledge".
Let x be the total amount paid by a patron for a pledge, and p be the value of the pledge.
x = 1.029p + 0.35
Solving for the worst case, where the 95% of the pledge that the creator receives is at least 85% of all money donated, to match that under the new system the patron would need to pledge at least $3.95, which would cost the patron $4.42. That's what a patron will need to pay to avoid the creator receiving less than the worst case under the old system. Paying $5 is hardly better - let's look at the $1-$5 range, which is what most patrons are probably giving:
From now on, patrons who pledge $1 have to pay $1.38, and the creator receives less than 69% of that. Patrons who want to pay $1 to each of their recipients are out of luck, and must choose between increasing their monthly Patreon expense or give up donating. When patrons spend $5 the creator sees less that 86% of that, which is basically the same as the old system's worst case.
Okay, but at what point does the new system work out better for the creator than the old system's best case? The answer is: never. Even if a donor pledges a million dollars a month the creator gets barely over 92% of it.
---
To sum it all up, Patreon is raising its fees dramatically, so instead of creators receiving 85%-93% of money given by patrons, they will now receive 69%-86% in practice.
In addition, they will also have fewer patrons because new hidden fees on the payer's side will turn many potential and existing patrons off.
And on top of that, the minimum pledge of $1 now costs 38% extra, all the patrons who used to sponsor multiple creators at $1 each but aren't willing to pay 38% extra per month on Patreon will now have to choose between dropping more than a third of their sponsored creators or dropping out of Patreon entirely. Either way, creators lose many of their patrons.
If Patreon simply hiked their fees honestly instead of instead of adding the extra "35c plus 2.9% of your pledge that that count as part of your pledge" hidden service fee for patrons to disguise the fee hike then it would creators would grumble about losing roughly an eighth of their net revenue but at least wouldn't be losing patrons too. Keeping all the fees on the receiver's is better for everybody.
A simple solution would be for Patreon to allow pre-funding your account which would allow for a single fee.
Exactly. There’s no reason Patreon can’t batch the payments together to reduce processing fees for everyone involved. Moreover, the incentives are misaligned in this new system.
When I buy stuff from Apple, I generally don’t see the charge show up on my card for 2-3 days. If I end up buying multiple apps in that time, they batch them together in the same transaction, saving them those processing fees. And that works out well for them, since those transaction fees come from their slice of the pie.
Patreon should be doing something similar, either by allowing people to prepay, allowing people to be charged once per month for whatever has happened that month, or allowing people to be charged as things occur, but then batching them like Apple. Even if Patreon did the same but then passed those fees onto content creators instead of taking it from their own slice, it’d still be an improvement over what they had (since creators would effectively be splitting the fees, rather than paying them by themselves) and what they’re doing now (which seems designed to give credit card companies as much money as possible).