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Patreon: Case Study CASE STUDY TABLE OF CONTENTS 1. BACKGROUND 2. CRISIS 3. TURNING POINT 4. STRATEGY 5. RESULTS 6. CONCLUSION 7. SOURCES BACKGROUND Patreon is a popular crowdfunding website where artists and creators can receive donations from fans, called “patrons”. Through using Patreon, creators can directly fund their work which is typically distributed online for free on sites like Youtube, podcast platforms, and personal websites. Some highly successful campaigns have enabled creators to devote themselves full-time to their projects income they receive from fans. Most donations on Patreon are structured as on-going monthly payments instead of one-time donations; this enables creators to structure their work in a professional atmosphere and grow their business and brand. Patreon branded itself as a funding platform for artists, operated by artists. Several of its key messages echo creator rights, ease of use, and financial transparency. CRISIS On December 6th, 2017, Patreon announced a change to their fees structure that would go into effect December 18th. Previously, service fees came out of donations before they were deposited to the creator’s account (ex. for every $1 donated the creator would receive up to $0.93). Under the new payment structure, a surcharge would be applied to every donation (ex. for every $1 donation, the patron would be charged a flat $0.35 plus a 2.9% surcharge, and the creator would receive $0.95). In response to this announcement, the Patreon community (both patrons and creators) were outraged and concerned that this change unfairly punished patrons who donate small amounts to many creators, instead of larger amounts to single creators. News travelled quickly over social media and within hours after the announcement, many patrons cancelled their pledges since the change in fees model was seen as a betrayal of creator’s rights to control their own business models. CRISIS With the sudden loss of a significant number of patrons over a few hours, many creators were worried about the stability of the platform. Notable Patreon creators, Jeph Jacques, the creator of the popular webcomic Questionable Content, and Hank Green, co-creator of Vlogbrothers and several educational YouTube series, expressed their concerns and posted lists of lost patrons. Many creators immediately began diversifying their income streams or moving to other platforms. With the community’s confidence in decline, Patreon appeared less reliable than ever before. Additionally, the scandal impeded the growth of new creators joining Patreon, and made alternate platforms or funding their work via traditional methods more attractive. In response to the announcement, the community voiced their many complaints to Patreon over social media, where the story eventually reached the mainstream media. Many of the complaints accused Patreon of greed, attempting to reduce their bottom line by eliminating costly third-party processing fees from credit card companies and discouraging patrons from making small donations. TURNING POINT On December 13th Jack Conte, the founder of Patreon, personally responded to the controversy in a blog post on the Patreon Creator’s entitled “We messed up. We’re sorry, and we’re not rolling out the fees change”. In the post, Conte admitted the fees change was a misstep, apologized, and recommited Patreon to working with the community to revise the fee structure. He made it clear that by announcing the fees change, Patreon was overstepping and violating the philosophy that the platform was founded on. This change gave Patreon more control over the relationships that creators had with their fans, instead of letting creators run these relationships themselves, as they had always previously done in the past. The language used in the follow-up blog post is personal and honest. Not only does Conte admit fault, but he also recognizes the apology alone cannot make “We still have to fix the problems that those up for the loss of income some creators experienced. changes addressed, but we’re going to fix them He makes a point of saying that if any creators have in a different way, and we’re going to work with any concerns that Patreon has yet to address, they you to come up with the specifics, as we should are encouraged to provide their feedback to Patreon. have done the first time around. Patreon, then as a united entity will work their best ” to address those concerns. He also acknowledges that Patreon, as a business needs their creators to be “Thanks for continuing to create. We are nothing successful and without their patrons Patreon is nothing. without you, and we know that. ” STRATEGY Conte’s response to the scandal appears to have addressed most of the community’s concerns over the fees change issue. While the original blog post detailing the fees change was shared 1200 times at the time of writing, the follow-up post was shared over 27700 times. Patreon’s public statement was the first gesture made in good faith to its community and publicly realigned their brand with its core values. Transparency and trust are critical when your business model is acting as the broker in financial transactions. With several major competitors in the crowdsourcing market and several more emerging in the near-future, competition is fierce. After Conte’s response, several weeks passed without updates on the fees model, making creators and patrons uneasy about the future of the platform. In response to a growing number of questions from the community and press regarding the changes, Patreon attempted to reconnect with its community through a live-streamed Q&A panel and ‘townhall’ meetings to develop a new funding model that had the support of the Patreon community. By soliciting feedback and proposals from the community moving forward, Patreon will be living “for the creator’s” element of Jack Conte, Co-founder and CEO of Patreon its brand values. Only this will result in the continued success of Patreon and its platform, as a whole. RESULTS According to data gathered from Graphtreon, at the beginning of December 2017 the estimated monthly payouts to creators were $9,933,404 and with 2,892,242 individual pledges. While these are both massive numbers, over the past year the average growth in pledge growth overall was at 106.23%, whereas the Total Pledges and Donations by Month donation growth overall was at 102.37%. In December, Patreon’s growth was below the yearly average significantly. Total pledges grew marginally over November by 101% and monthy donation total actually shrank by $500, the first month Patreon ever failed to surpass its previous month. If the December growth trend had continued it would have resulted in a total of 3,222,038 pledges and $10,687,439. Based on their average growth over the last year, Patreon lost aproximately 136,000 new pledges and nearly $250,000 due to the losses incurred by the fees change scandal. However, at the beginning of January 2018 the estimated monthly payouts were at $9,853,661 and the number of individual pledges were at 2,918,619. The beginning of February 2018 shows the most promise for Patreon with the estimated monthly payouts being at $10,456,625 and the number of individual pledges being at 3,223,455 the most within the last three months. These results from Graphtreon show the increase that can begin to occur, as patrons and creators return to the platform. CONCLUSION SOURCES Patreon recognized too late that their proposed • Arnold, Taryn. “Understanding Your Brand New model would affect some segments of the Patreon Creator Dashboard.” The Patreon Blog, 1 Feb. 2016, community more than others and underestimated the blog.patreon.com/understanding-your-brand-new- size of the community backlash. Patrons and creators creator-dashboard/. overwhelmingly felt the proposed changes were not • Conte, Jack. “We Messed up. We’re Sorry, and in line with Patreon’s brand of empowering artists and We’re Not Rolling out the Fees Change.” The Patreon creators to run their own business. Blog, 13 Dec. 2017, blog.patreon.com/not-rolling-out- fees-change/. Acting quickly, Patreon released a humbling public • Morris, David Z. “Patreon’s Fee Change Stokes apology and re-affirmed their organization back to its the Ire of Creators.” Fortune, 9 Dec. 2017, fortune. key messaging. The language they used in the blog post com/2017/12/09/patreon-fee-changes/. was honest and personal, and immediately calmed the majority of the community. • Ohlheiser, Abby. “Facing a Rebellion of Furious Creators, Patreon Backs Away from a New Fee.” Yet the damage was done. Many creators lost a The Washington Post, WP Company, 13 Dec. 2017, significant amount of patrons and income. Although www.washingtonpost.com/news/the-intersect/ the changes were withdrawn before they came into wp/2017/12/13/facing-a-rebellion-of-furious- effect, many smaller creators claim they are still creators-patreon-backs-away-from-a-new-fee/?utm_ working to reclaim lost patrons due to the proposed term=.7fcb66a3788f. fees change, and the community has lost confidence in • “Patreon Earnings + Statistics + Graphs + Patreon as a platform. Rankings.” Graphtreon, Mar. 2015, graphtreon.com/. • Shu, Catherine. “Patreon’s New Service Fee Spurs Through this process, Patreon recognized not only Concern That Creators Will Lose Patrons [Updated].” a fair and straightforward fees model is necessary TechCrunch, TechCrunch, 7 Dec. 2017, techcrunch. to balance business needs versus the desires of the com/2017/12/07/patreons-new-service-fee-spurs- community, but that in the crowdfunding community a concern-that-creators-will-lose-patrons/. considerable amount of transparency and collaboration with the community is essential to retain user’s trust • “We’re Updating Patreon’s Fee Structure. Here’s and confidence. Why.” The Patreon Blog, Patreon, 6 Dec.
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