Important Update 12/13/17
Please see our most recent update regarding service fees: We messed up. We’re sorry, and we’re not rolling out the fees change. We will not be rolling out the changes as described below.
In order to continue our mission of funding the creative class, we’re always looking for ways we can help creators continue to grow their creative careers. We’re committed to building tools that transform communities into thriving, long-term membership businesses. A large piece of that puzzle is predictability and consistency around your finances, which is why we’re introducing a change that allows Patreon creators to take home exactly 95% of every pledge, with no additional fees.
Aside from Patreon’s existing 5% fee, a creator’s income on Patreon often varied from month to month because of third-party processing fees. And, patrons may not have been aware that creators actually take home a lower percentage of their intended pledges because of those fees. Our goal is to make these paychecks as predictable as possible, so we’re restructuring how these fees are paid.
Starting on December 18th, a new service fee of 2.9% + $0.35 will be paid by patrons for each individual pledge. (To get into the details, existing per-creation pledges for posts made on/after Dec. 18th will be charged the new service fee; existing per-month pledges will first be charged a service fee on January 1.) Streamlining these fees for creators and patrons ensures that creators take home as much of their earnings as possible.
We want you to know that we approach every change with a creator-first mindset, aiming to help creators grow their businesses. In preparation for this change, we ran experiments and months and months of research to understand patrons’ potential reactions and we found that many patrons were happy knowing that this change will send more money to creators. While some patrons may leave in the short-term, we know this will help creators earn more money in the long term.
Every decision we make — including this one — is a part of our goal to help creators establish memberships, earn salaries, and build careers. Standardizing third-party fees in this way helps ensure that creators can continue to get paid making content their fans love. If any patrons have questions, we have a robust Q+A here where they can learn more.
We’re building Patreon so that creators can have a stable, long-lasting career. And we’re making progress on that: this year alone, we’re on track to pay $150 million to creators. We can’t wait to see what we accomplish together next year.
The Payments Team at Patreon
Update: 3:57pm PST
We know creators and patrons want more information about our fee decision today, so we’re going to go one level deeper for those interested. Here is more about the decision, from our payments product manager.
Today, payments on Patreon are weird. There, I’ve said it. Payments are weird. Today, creators can use any one of three different ways of charging patrons.
Per creation – You, as a creator, can charge your patrons for multiple creations per month. These are bundled together and billed on the first day of the following month. (So, all creations made in November are added up together and charged in one bundle on December 1.)
Monthly – You, as a creator, charge your patrons for the previous month’s access on the first of each month.
Monthly with charge up front – you, as a creator, charge your patrons as soon as they pledge for immediate access, and charge them on the first of each month thereafter for that month’s access. This is, by far, the most creator-requested feature over the last 2 years.
It’s a lot to understand — for scale, we receive literally thousands of support tickets (complaints) about payments confusion every single month. Creators and patrons are confused in our current system. Not only that, but if you’re a creator on the monthly plan without the benefit of charge up front, you are constantly worried that your patrons are going to delete their pledges before they’ve paid. That’s why we’re hustling to release charge up front to every creator, to really make sure you get paid for your creations up front.
Some creators already have charge up front enabled and, even at its current state, it’s far from perfect. Example: let’s say you become a patron of a creator who has charge up front enabled on November 29. You’ll be charged the full amount immediately, and then you’re kind of double-charged that same amount again on December 1. That’s bad. Patrons are surprised by it (and sometimes angry about it), and some creators feel the need to refund their patrons because of it. That’s obviously not a great, long-term solution!
How on earth does this relate to the new service fee? We’ll get there. But first, let me talk about our plan to address all of these concerns and all of the confusion around payments. Our vision for our payments system is that creators have confidence that their content will always be paid for, and patrons have absolute clarity about how much they will be charged, and when.
To do that, we need all creators to get the benefits of charge up front.
To do that, we need to eliminate the “double charge” scenario that harms patrons today.
To do that, we need to move our payments system to treat your pledges like any other subscription service. In other words, we need a system that charges patrons at the time of their initial pledge, and on the anniversary of their pledge each month thereafter.
Historically, Patreon set a flat 5% fee for our service, with an additional third party processing fee that ranged from 2% – 10%. Some creators were hit by these fees much more than others, and it wasn’t predictable month to month. Right now, we keep those fees as low as we can by charging patrons once every month across multiple pledges — that’s why all charges come on the first day of the month. But if we move to an anniversary-based subscription model without a revised system, the fees would shoot up for creators.
To drive home how complex this system currently is, let’s look at a sample patron who pledges to 1 monthly creator, 1 charge up front monthly creator, and 1 paid post creator. Today, this 2.5 month span results in 3 fees being assessed by third parties:
Looking at that same patron in the new world where all creators have charge up front and patrons pay on their pledge anniversary, the exact same pledges result in 8 fees being assessed.
That’s a lot of fees for creators to pay. We had three options:
- Have creators deal with a huge increase in fees
- Have Patreon eat the cost of the new fees (which is financially impossible given our current rate of 5%)
- Add a service fee so Patreon can cover the third party fees
To put this into perspective, each month when we send our NPS (customer satisfaction) survey to creators, one of the top negative comments is that fees are too high. In fact, if you look at the NPS score from people who have mentioned fees in the past year, the score is -20. And the most recent 30-day score is even worse: -50.
Here’s a sample of the type of pain we hear from creators. These are from NPS reports from this week alone:
I am in general very happy with the revenue and number of patrons, but the high fees put a serious dent in the gains. Of $11k, almost $1k goes to fees!
Transaction fees too high.
It’s slightly confusing how much money you are getting/what is patreon taking.
Your fees. I get that you take a cut from creators to keep running, but out of $176 that has been pledged to me, my take home is around £97. That’s a ridiculous amount of money lost. Another note – your fees change month to month and have no reasoning as to why it differs, so for those who need to tax – it becomes incredibly confusing to say the least, and dodgy at most
That is NOT good, and we didn’t want to make creators shell out even more money.
So, we chose to pursue option three, and spent nearly a year reviewing the numbers and running experiments to make sure the end result was creators either make more money, or keep their current earnings. We actually experimented with three different service fee structures, all of which were higher than the 2.9% + $0.35 we selected. As it turns out, patrons weren’t nearly as sensitive to the amount of the fee as we predicted, but we ultimately chose the lowest service fee that would offset the third party costs in all likely scenarios.
This was never (and still isn’t) about making more money for Patreon as a company. This is a strategic move to make our platform even better for creators and patrons in the future. We want a Patreon where all creators receive their money as soon as a patron pledges. We want a Patreon where your patrons never have to wonder when they’ll be charged, or how much they’ll be charged, and this is the first step toward the improvements we’re making so that Patreon becomes a better system for everyone.