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.
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!
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replyBrittany Vincent posted a new article, Patreon's CEO says the company's model is not sustainable
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Well that's not good, I thought they took a small percentage of all donations in order to cover CC fees and costs?
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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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Sounds about right. I figure most of their costs were banking related and maybe also marketing.
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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.
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Feel free to make an actual argument if you have something worthwhile to say.
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Are you going to enlighten us or what?
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I'm waiting with masturbaited breath.
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He is trying to do damage control on Twitter:
https://twitter.com/jackconte/status/1093223206805106688?s=21-
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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
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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.
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Agreed. I guess he can't just come out and say that, if that's what the situation is.
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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.
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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).
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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?
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And why did it take them 5-6 years to figure out/decide that 5% isn't sustainable?
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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.
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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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I doubt anyone is surprised by your thinking on this.
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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
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Damn. This makes me root for Patreon even more. Some quality curation of some uninformed, know-it-all nerds? I'm down with that.
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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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Only religion seems to have succeeded with the donation model.
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