Patreon's CEO says the company's model is not sustainable

CEO Jack Conte discussed how the company's growth isn't in a position that can currently be sustained.

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Crowdfunding platform Patreon CEO Jack Conte doesn't think its current model is sustainable if the company is to be profitable.

When the company announced its latest benchmark on Wednesday, Conte discussed the challenges of maintaining such a model as it continues to expand. Patreon will be paying out over $1 billion to creators this year, up 1 million over the last year. 

"The reality is Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business," said Conte. The way it works right now, artists and creators join the platform and attract "patrons," who can contribute a certain amount of money at various tiers their chosen individuals. There are no contracts or anything like that, just what essentially boils down to good will between those who make things folks like to pay for and those who pay for it.

With that in mind, Patreon is looking to offer "value services" for creators like options for merchandising and other changes to its 90 percent pay-out model that's currently in place.

"We will have to re-examine how we charge for new services as we put them out," said Content. He spoke on how additional revenue streams will help the company in the future. It's not clear at this point what the plan is to improve the company function and the way it works with creators on its platform. It's also not immediately obvious how creators will respond to these changes, especially if it means any potential loss to the revenue they earn directly from their patrons.

If you're a current Patreon user, whether you utilize the platform to make sure your favorite makers get paid or siphon income yourself, what changes would you propose to make the system work better than it currently is? Do you think there any glaring issues with it at this time?

Let us know in the comments below!

Senior Editor

Fueled by horror, rainbow-sugar-pixel-rushes, and video games, Brittany is a Senior Editor at Shacknews who thrives on surrealism and ultraviolence. Follow her on Twitter @MolotovCupcake and check out her portfolio for more. Like a fabulous shooter once said, get psyched!

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From The Chatty
  • reply
    February 6, 2019 2:30 PM

    Brittany Vincent posted a new article, Patreon's CEO says the company's model is not sustainable

    • reply
      February 6, 2019 2:31 PM

      Well that's not good, I thought they took a small percentage of all donations in order to cover CC fees and costs?

      • reply
        February 6, 2019 2:35 PM

        when he says “not sustainable” what he actually means are “we just want higher margins”. There’s no way Patreon’s model is not sustainable. The site barely hosts anything but text and a few images and is taking a cut of an enormous transaction volume.

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          February 6, 2019 2:36 PM

          Sounds about right. I figure most of their costs were banking related and maybe also marketing.

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          February 6, 2019 2:45 PM

          "We'll never be able to sell this business model for billions of dollars and get filthy stinking rich."

          • reply
            February 6, 2019 2:47 PM

            Yeah, as if taking a 5% cut of 1 billion/year isn’t a great business, especially with how much they’ll grow and the tiny marginal costs of adding new content creators to their service.

            • reply
              February 6, 2019 3:06 PM

              You have literally no idea what you're talking about. It's almost amazing.

          • reply
            February 7, 2019 1:40 AM

            The issue is they will have already sold a good chunk of the business for almost a billion, with a promise to 10x that.

    • reply
      February 6, 2019 3:14 PM

      He is trying to do damage control on Twitter:

      https://twitter.com/jackconte/status/1093223206805106688?s=21

      • reply
        February 6, 2019 3:16 PM

        I dunno how it will go, but I have to say his thread there seems more balanced and even handed than most of the modern twitter-using CEOs we get glimpses of (Elon and Jack included). Maybe I just skimmed the posts too quickly, though?

        • reply
          February 6, 2019 3:18 PM

          I mean @jack by the above, to differentiate.

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            February 6, 2019 3:22 PM

            Jack is kinda an idiot and fairly terrible at managing Twitter as a product/business so yeah his Twitter posts usually come across as such

        • reply
          February 6, 2019 3:58 PM

          He's definitely giving a good breakdown of how Patreon's organization is setup. But I still don't understand what he believes is unsustainable about their model. Is it because they're still dependent on VC capital and not actually breaking even right now? That would make the most sense... however, if they're genuinely cash-neutral or cash-buoyant, then idgi.

          • reply
            February 6, 2019 4:39 PM

            Being modestly cash positive is not a great place for a VC funded startup. VCs want a big money exit or bust. They don't like to have companies stagnating in their funds forever.

            • reply
              February 6, 2019 6:14 PM

              Agreed. I guess he can't just come out and say that, if that's what the situation is.

      • reply
        February 6, 2019 8:20 PM

        So reading this I realize it’s another one of those cases where it seems like everyone feels they understand the business, and they don’t. Every business has so many inward facing things that people outside just don’t understand. I see and hear it all the time in my line of work, and I’m sure most here do as well.

        Everything seems so simple from outside.

      • reply
        February 6, 2019 8:42 PM

        He sounds very:

        - realistic
        - honest
        - grounded
        - humble

        and like anyone who has started a company and had it FUCKING EXPLODE like Patreon did, he's seen some shit.

      • reply
        February 6, 2019 10:37 PM

        All that sounds like to me is "we're trying to raise more money from VCs so we need to bring in more revenue".

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          February 7, 2019 12:22 AM

          If you look at the claim they did a billion dollars in funding last year. That means that their cut was 50 million, then 50 million for transaction fees. Which is not a lot of money considering you are looking at 100-200k per engineer after benefits (especially those located in SF), and things like renting office space in multiple cities, etc.

          So it looks like they hit that inflection point of "hey this is a neat idea" I'm going to get in on the ground floor and let's fully monetize it later VC's. To the "grow this company as fast as possible" and let's make some money before it goes public VC's.

          Patreon faces the same issue Steam has and Netflix had. In that they provide a service, but they don't provide the content. So if they raise prices too high, or for any other reason Creators can and will leave to other platforms. Especially because I don't view Patreon being as a sticky a platform as say a Steam since there are little features there to keep patron's involved in the platform outside of the content creators they subscribe to. So as soon as Patreon raises fees too much you will get your Origin's, and Epic Game Stores start to rise up and there is little Patreon can do other than add in some contract language that forbids their creators from using other crowdfunding services if they want to continue to using Patreon (similar to how Twitch does it).

      • Zek
        reply
        February 7, 2019 5:53 AM

        Yeah everybody always underestimates the human cost required simply to hold back entropy in a company's operations, forget about explosive user growth.

    • reply
      February 6, 2019 3:24 PM

      Maybe he should start a...

      ... oh.

    • reply
      February 6, 2019 3:27 PM

      Nothing he said indicates why he thinks their current model is unsustainable. If their costs are rising, doesn't that mean they should be charging more than the amount they currently collect (5%) that goes towards transaction fees? Or is this simply corporate whinging about the fact that their 5% take isn't enough profit?

      • reply
        February 6, 2019 3:53 PM

        And why did it take them 5-6 years to figure out/decide that 5% isn't sustainable?

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          February 6, 2019 3:58 PM

          Isn’t he the other half of the band Pomplamoose and had never done tech or corporate anything before he founded Patreon?

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            February 6, 2019 4:27 PM

            Holy shit, you're right! He mentioned in his Twitter thread that he'd never been involved in engineering or dev up until a few years ago... I didn't consider it was because he'd been involved in a completely different type of work.

    • reply
      February 6, 2019 4:53 PM

      They've also been making business decisions that have led to some high-profile departures in protest. Dave Rubin and Jordan Peterson both quit the platform after they banned Sargon. I doubt it made a measurable dent in their revenue, but it certainly didn't inspire any good-will towards the company.

      • reply
        February 6, 2019 7:21 PM

        So I didn't understand what your post actually meant and I had to look up what Sargon was.
        LOL he's a nutjob!

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          February 6, 2019 11:08 PM

          He is pretty extreme. I don't care for his content, but I still think Patreon is in the wrong.

      • reply
        February 6, 2019 7:21 PM

        The "success" of Gab vs Twitter is all you need to know about the cost of kicking alt-right and alt-right adjacent idiots off a platform

      • reply
        February 6, 2019 10:15 PM

        Damn. This makes me root for Patreon even more. Some quality curation of some uninformed, know-it-all nerds? I'm down with that.

        • reply
          February 7, 2019 1:28 AM

          Yup we have enough companies already that hide behind we don't want to restrict content when they really mean we don't want to have to spend time / money monitoring content.

        • reply
          February 7, 2019 2:51 AM

          Couldn't you just not listen to them? I guess they could put labels on them like they did with music with explicit content. But would it be enough to protect the children?

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        February 6, 2019 10:39 PM

        Good riddance to all three losers.

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          February 6, 2019 10:39 PM

          Dave Rubin may be one of the dumbest motherfuckers alive

    • reply
      February 6, 2019 9:43 PM

      I can't fathom how this is even possible, you're collecting a fraction of money for virtually nothing, for tens of thousands of people a month, some of them for tens of thousands of dollars.

      Like... h.. I don't understand? How are they not bleeding money? How hard is it? I know there's paperwork tracking, managing disputes, hosting the website contents, approving things, sure ok I get that but I mean once it's up and running smoothly you're just cashing cheques like a grubby little real estate agent (realtor) in Aus, who collects a fraction of my rent, monthly indefinitely, or some gross recruitment firm who helped me get a job as a contractor and then also get a fraction of the money, ongoing - for exceedingly little work.

      These people have got to be utterly inept.

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      February 6, 2019 11:02 PM

      Have they consdiered starting a patreon for patreon?

    • reply
      February 7, 2019 1:37 AM

      It seems like the Silicon Valley funding model has made it a failure for companies to become successful, mature medium-sized businesses.

      • reply
        February 7, 2019 1:49 AM

        Absolutely, that's not what startup-model finding is for. People seeking the funding know that from the beginning though.

    • reply
      February 7, 2019 6:25 AM

      Only religion seems to have succeeded with the donation model.