[Edit: Update the graphs with axis labels.] [Edit 2: Added examples and discussion of patrons giving one dollar each to ten creators.]

I woke up to a bunch of noise (maybe I’m late) about Patreon changing their fee structure. Immediately, my inner game designer went to work because this change is not super straightforward. I’m willing to believe that this isn’t strictly greed-based, though I do think it’s going to be worse for patrons and creators overall.

Apologies, ’cause there’s about to be math here. And/or you’re welcome for the math. :)

Update:

Patreon has posted an article where they describe in fairly nice detail the problem they’re looking to solve. My conclusion still holds, however, that they haven’t presented this well and are now in damage control.

The Math

According to Patreon, under their old (active until 18 December, 2017) structure, patrons would be charged exactly what they signed up for, Patreon would take 5% as their cut, and use between 7% and 15% percent as a “fee”. This leaves creators with 80–88% of the amount.

Patreon’s original breakdown. Green = what you pay, orange = what the creator gets, red = fees, purple = Patreon’s cut.

This old way scales pretty easily, as you’d expect. If a patron signs up to pay $X. Patreon claims $0.05X, and uses $Y where 0.07X < Y< 0.15X as a “fee”. Here are three common examples. The first is patrons giving one dollar to one creator, second is patrons giving ten dollars to one creator, and third is patrons giving one dollar each to ten creators (which is likely the most commong scenario):

$1

Patron pays: $1 (easy!)

Patreon gets: $0.05

Fees: $0.07 to $0.15

Creator gets: $0.80 to $0.88

$10

Patron pays: $10 (easy!)

Patreon gets: $0.50

Fees: $0.70 to $1.50

Creator gets: $8.00 to $8.80

$1x10

Patron pays: $10 (easy!)

Patreon gets: $0.50

Fees: $0.70 to $1.50

Creators get: $0.80 to $0.88 (each)

So under the new structure, the patron who signed up to pay X will end up paying the agreed amount AND the fees, which are calculated as $0.35 + 2.9% of the patron’s selected payment (that is, X*0.029). The equation for what you pay, when signing up for $X will now be $(X + 0.35 + 0.029X). Patreon still only claims their 5% (0.05X, which doesn’t appear to have changed).

The new setup, same colors. (Green = what you pay, orange = what the creator gets, red = fees, purple = Patreon’s cut)

But this is a much more complicated system (though to be fair, the 7–15% from before was a bit too vague for my taste, like, what determines what end you fall on the spectrum?), so let’s take another look:

$1

Patron pays: $1.379 (I assume it gets rounded up to $1.38.)

Patreon gets: $0.05

Fees: $0.379 (likely 0.38)

Creator gets: $0.95

$10

Patron pays: $10.64 (10 + 0.35 + 0.29)

Patreon gets: $0.50

Fees: $0.64

Creator gets: $9.50

$1x10

Patron pays: $13.79 ($1.379 x 10)

Patreon gets: $0.50

Fees: $3.79

Creators get: $0.95 (each)

As you can see, Patreon is still claiming the same amount for their own operating costs. But the fees are looking pretty different. The crossing points for fees on one payment of are around $3, where the fee is definitely higher under the new system, and then after about $8.50, where the fee is definitely less per payment. (In between, it depends on whether the fee cost is 12% or 20% before the change.)

But looking at the $1x10 scenario, each patron is now charged $3.79 on top of their original contribution. The fees collected are more than 5x that for the single payment of $10 to one creator. Meanwhile, the creators are all doing better per-patron.

What Does It All Mean?

I don’t work for Patreon, so I can’t speak about anything internal for a fact. But we can infer some things fairly confident from this. If you compare the fee costs between the two system, you can see that the fee amount gets dramatically lower as you get toward higher donation amounts. This tells me that the fees possibly don’t cost as much as they have been collecting. The fact that there’s a fixed amount also suggests this and it looks very much like a shift to charging just what it actually costs Patreon in fees for each transaction. Transactions don’t typically carry all that much cost, and the way they followed the donation amount so high (almost if not more than $1 of fees collected at $10?!) shouldn’t be how the actual fee structure works under the hood.

You can see how the fees are higher early on, but the actually drop below the original fee amount and they stay low as you go higher. (Dashes = original, dots = new.)

Also, given that the base fee for payments of less than $3 is notably higher than before (combined with my knowledge of human spending habits on digital goods), I suspect that Patreon has a much higher ration of $1 subscribers than they’d originally thought they would. With the old system, a business could take the higher fee collection for larger payments and use it to supplement the lower fees for smaller payments (which wouldn’t have been enough). So now there are much higher fees for all those $1 payments.

It’s also worth noting that, while there’s mystery surrounding what all the “fee” is used for, without evidence to the contrary, I’m reluctant to claim or believe that this extra fee amount is actually going to pad a CEO’s pocket book. Having done business with mobile markets and advertisers and the like, I know that everyone wants their cut of the pie. Heck, Apple’s cut is 30% of literally everything (though they likely pay credit card transfer fees and the like out of that cut). So when Patreon breaks it out into their cut — which hasn’t changed, remember — and “fees”, I’m tempted to believe that those fees are actually going to some other company.

Patrons Cover Fees

The biggest piece of this change that I think will hurt the system (at least initially) is that the responsibility for the paying the fees has now shifted to the patrons from the creators. As I mentioned above, Apple doesn’t ask people to pay “20% + 10% fees”, they just take 30%.

Cost to patrons comparison at the same tiers. Dashes = old cost to patrons, dots = new cost to patrons

Customers don’t like to pay fees. This is primarily a game design issue. It’s psychology. We call it “framing”. People like to feel that the numbers are good, and if you can phrase the breakdown in a way that makes your users/clients/customers feel good about something, like they’re getting a benefit, they’re all in and they love it. You can just as easily phrase things poorly and even though the mechanics may be the same, people will hate it and call you nasty names. Given these mechanics, I’m not sure that there’s a good way to frame them, however. Charging patrons a new fee to give money to their creators just won’t feel good. It increases the barrier to entry, and you’re going to get a lot of people (remember how we inferred that there are a ton of patrons at the $1 tier, which is the hardest hit?) who just withdraw their patronage.

It is also vital to note that patrons who budget, say, $10 a month for supporting creators they like will have to remove 3 creators to stay within their budget (for $1x7, you would be charged $ 9.653, likely rounded up to $9.66). So while creators are looking at potentially an 18% increase of their share from patrons, you’re looking at likely a loss of up 30% of your patrons.

What About Another Way

So let’s accept (for the sake of argument) that Patreon needs to adjust their fee structure. As said before, it looks like their higher-tier fee collections weren’t enough to cover for the lost cost of fees on all the lower-tier payments. Let’s further assume that Patreon is taking for their cut what is actually just fair at 5%. (Considering what other companies take, I feel like this isn’t too far of a stretch. 5% is pretty low in the grand scheme of things.)

What if we move the burden of fees back onto the creators under this new system? It’s probably slightly different, but for simplicity, let’s assume the same cost of fees. What would we see?

$1

Patron pays: $1.00

Patreon gets: $0.05

Fees: $0.379 (likely 0.38)

Creator gets: $0.57

$10

Patron pays: $10.00

Patreon gets: $0.50

Fees: $0.64

Creator gets: $8.86

$1x10

Patron pays: $10.64 (10 + 0.35 + 0.29)

Patreon gets: $0.50

Fees: $3.79

Creator gets: $0.57 (each)

Creators would absolutely earn less money on all payments less than $3, and only earn more at $9 and up.

What we see here, going back to the inference that the vast majority of patrons are only contributing $1 each, is that creators who were making $0.88 (at most) on every $1 patron payment would only make $0.57. This is a loss of about 35% — and if you ONLY have $1 patrons, there goes up to 35% of your income. (On the low end, if they were only getting $0.80 on the dollar, their $0.57 is only about a 29% loss, which is still not great.)

Conclusions?

Look, I’m just a game designer and math lover. I don’t have the internal number that Patreon has for what ratio of patrons subscribe at what tiers. I don’t know what causes the fees exactly (though some of it is pretty obviously credit card transaction fees). I don’t even know if the companies who claim the fees have suddenly changed their pricing, which would require Patreon to adjust in kind. If I had more of these numbers I could make a better recommendation and analysis.

What I can say is that Patreon isn’t explaining this very well and a lot of people are assuming that “fees” are going into Patreon’s pockets. And I don’t see that that is very likely the case. Patreon still seems to be dedicated to getting Patrons more for their creations — though I think they missed some important sides on this one when it comes to accomplishing that goal.

Charging fees to the patrons rather than the creators seems like the wrong way to go. Patrons are customers. They don’t want to have to understand all the financial logistics, they just want to feel good about donating their money to content creators who they love. Charging them what feels like an extra fee to do so seems certain to put a sour taste in their mouths.

I may be wrong, but it doesn’t sound like there was any outreach or discussion with the community over this fee shift. I’ve heard from several creators who’ve posted videos talking about how they understand if their patron want to withdraw their $1 subscription after this. Mostly everyone seems to agree that this is feel like a dick move, regardless of what may have instigated it.

There’s a very real possibility that moving the whole fee cost over to creators — dropping their bottom line depending on how many $1–8 donations they were getting — might not only have been preferable to the majority of creators, but also that the number of patrons lost to this new system could be on the same level as the amount creators would’ve lost the other way I suggested. Of course, I can’t say this for certain without more information.

In the end, if you want good will from your users (on both sides) you need to engage in a discussion with them. Run some polls. Have a few forum threads or a live chat. Patreon is supposed to be about connecting content creators with the people who love them and want to support them. They should’ve made sure to connect themselves with those same creators and patrons to make sure they found a system that benefits everyone.

Update: Patreon’s Reasoning

Patreon posted this article defending and explaining what they’re trying to do. I recommend you read it, but I’ll summarize what I think is the most relevant part.

Patreon has typically had two pay modes: pay-per-creation, and pay-per-month. Currently, you get charged at the start of the month for all pay-per-month and subscriptions from the previous month. This has two key problems:

1. Users (and I guess some creators) get confused being charged at the end of the month for a variable number of creations throughout the month.

2. Patrons can easily unsubscribe from monthly plans right at the end of the month to avoid paying.

There’s much more detail in their article, and reproducing it here in my own words would be a waste. But their goal is to make payments more reliable and less confusing for everyone without introducing a ton of new fees.

The end result is that they seem to have just increased the cost of supporting creators very significantly for the vast majority of patrons. So while I can see better why they need to change, it still seems pretty obvious that this change would’ve caused major backlash. Again, Patreon needed to either consult openly with their community, or taken into account framing and weighed more heavily the backlash from patrons.

They do claim, “ As it turns out, patrons weren’t nearly as sensitive to the amount of the fee as we predicted” in their blog article, however without knowing what their criteria and methodologies were, I can’t comment other than to state that the current backlash suggests there were major flaws in how they acquired or interpreted their data on this one.