Patreon Redux – Another way of looking at it

As I was chatting with some very upset friends yesterday, I wondered what the Patreon fee schedule would look like if the cost to the Patron was the same.

This means that the listed pledge would be reduced. What “was” a $1 or $10 pledge, where all fees were taken from what the creator gets, would be listed as a $0.63 and $9.38 pledge, respectively. The fee structure, 2.9% + $0.35 per transaction, then increases those costs to $1 and $10, and 5% is taken from the “pledge” amount (rather than the cost to the Patron).

That paints a slightly different picture than my report yesterday. Note that the lowest “Pledge” is still $1, which costs the Patron $1.38, and I’ve adjusted the table accordingly.

New Fee Net to Creator
Cost to Patron “Pledge” Patron Fee Creator Fee Net to Creator
1.379  $       1.00  $          0.38  $            0.05  $                 0.95
5  $       4.52  $          0.48  $            0.23  $                 4.29
10  $       9.38  $          0.62  $            0.47  $                 8.91
25  $    23.96  $          1.04  $            1.20  $               22.76
50  $    48.25  $          1.75  $            2.41  $               45.84
100  $    96.84  $          3.16  $            4.84  $               92.00
Stripe Old Fee
% of Take
Cost to Patron “Pledge” Patron Fee Creator Fee Net to Creator Change with New Fees
1.379  $       1.38  $               –  $            0.40  $                 0.98  $                                    0.03 97%
5  $       5.00  $               –  $            0.65  $                 4.36  $                                    0.06 99%
10  $    10.00  $               –  $            0.99  $                 9.01  $                                    0.10 99%
25  $    25.00  $               –  $            2.03  $               22.98  $                                    0.22 99%
50  $    50.00  $               –  $            3.75  $               46.25  $                                    0.41 99%
100  $  100.00  $               –  $            7.20  $               92.80  $                                    0.80 99%
PayPal Old Fee
Cost to Patron “Pledge” Patron Fee Creator Fee Net to Creator Change with New Fees
1.379  $       1.38  $               –  $            0.19  $                 1.19  $                                    0.24 80%
5  $       5.00  $               –  $            0.55  $                 4.45  $                                    0.16 96%
10  $    10.00  $               –  $            1.05  $                 8.95  $                                    0.04 100%
25  $    25.00  $               –  $            2.55  $               22.45  $                                 (0.31) 101%
50  $    50.00  $               –  $            5.05  $               44.95  $                                 (0.89) 102%
100  $  100.00  $               –  $         10.05  $               89.95  $                                 (2.05) 102%

As you can see, when costs are normalized down to “what the the Patron pay before?” things don’t look quite so horrid. Not great, but not nearly as bad.

Take-Aways

The fees taken from low-dollar donations are still high . . . but they were high before, as well, at least for Stripe transactions. PayPal was the way to go for those, but now it’s reversed.

If you use Stripe for one-dollar donations, the net to the creator with the new Pledge schedule is within 5% of what it used to be. If you do this, use Stripe.

If you use Paypal, avoid $1 donations, but you’re within 5% of where you used to be if your “cost” for the pledge is about $5.

If you pledge somewhere north of $20-25, and use PayPal, the creator gets more of that cost than they used to – it’s actually a net win.

Creators: Lower your pledge amounts as New Pledge = (Old Pledge -0.35)/1.029

Creators: change your pledge totals to keep the cost to the customer the same and you will wind up with nearly the same take.

Creators: Request that your low-dollar donations use Stripe, not PayPal. Request donations from $20-25 and higher use PayPal.

If you can take these steps and adjust your fees, the change to the customer is minimal, and your take will be within a few percent of what it used to be.

This probably doesn’t help “pledge by post” at low dollar amounts as much . . . but it might mitigate it since the Patron’s costs are constant.

The lower bound on pledge amounts is still $1, however. That’s the real rub. The cost to Patrons will go up to $1.38, a 40% increase. But the “take” issue to the creators is not bad once you shift low-dollar donations to Stripe from PayPal, if you can.

Conversation with friends yesterday left me speculating as to what motivated this. Spreading out transactions from when the initial creator pledge was made has to be about load-leveling. And the shift away from low-dollar pledges might be seen as a good thing from an administrative overhead perspective. Low-dollar pledges are almost certainly the same cost to process as high-dollar ones, and bring in basically nothing under the old fee schedule. While horrid for the Creators, I can see a sigh of relief in shedding an unprofitable pledge level, and I bet the new fee structure is closer to covering the cost to process the $1 transaction than it was.

Not sure if it changes my thoughts much from yesterday in that it’s still the low-dollar donations that get impacted the most . . . but for the Patron, not the Creator.

Final word: I’m not defending or attacking Patreon here. I have only a couple pledges and they’re more than a buck, so the impact to me is minimal. I can say that the ham-handed way this was rolled out is doing Patreon no good, and almost certainly is motivating Dr.IP and other competitors to do handsprings of glee, and also motivating code-minded folks with an entrepreneurial spirit to say “I can do better than this.”

So I expect this will cloud the landscape a bit in a year or so, until someone really figures out how to make the $1 donations profitable. If you can do that, you can make the BIG donations very profitable.

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