Pledge Changes

[UPDATE!!! Patreon has officially CANCELLED all of these changes. Ignore this whole post as it is no longer relevant]

Whew, got a whole lot to update you guys about!

So the first order of business is addressing Patreon's changes to the way they handle processing fees. If you support any other artists you probably already have heard what's happening, but I would like to address it once more for anyone who hasn't heard yet.

TL;DR you will be charged  2.9% + 35 cents per artist that you support through Patreon starting Dec 18. Be aware and prepared. It costs you more money to use Patreon and costs less money for artists to use Patreon than it did before. It also is more cost effective now to support one artist at a higher pledge than it is dividing that same amount of money among supporting several artists.


And yes this is an EXCEPTIONALLY long read. I want to be a thorough as possible. Kudos to anyone who actually reads the thing I just spent several unexpected hours working on.

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An INSANELY LONG Review of the Patreon Changes:

Here's all the topics: (Sorry you can't click on them to jump to the section. Limited use of HTML)

• What is happening?
• How did this process work before?
• What is the new process?
• Can you show me an example to help explain how this effects everyone?
• So what if I want to just keep paying the exact same amount *total* per month that I was pledging before to artists?
• What is the best way to support artists so they get the most and I pay the least?
• What about that * you never followed up on? (Hidden Artist Fee)
• Why use Patreon at all? Can't I just send money directly through Paypal and skip the fees?
• Can you switch to a different service and stop using Patreon?
• You didn't follow up with a point about "paying super close attention to what they are calling these new fees"!?
  
  

What is happening?

Starting later this month, Patreon will be collecting payment processing fees differently.  You will be charged  2.9% + 35 cents per artist that you support through Patreon starting Dec 18 .

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How did this process work before?

Before, you would give a creator let's say $5 a month. Patreon takes a cut of 5% (so they get 25 cents) and then depending on the payment method, a cut would be taken by Paypal or Stripe or credit card companies and that would be about 7-15% (35 cents to 75 cents) depending on the amount, currency conversion, and company's fees. Meaning that the artist only got between $4.40 and $4 in their pockets, which is between 80 and 88% of the original pledge amount.

In the grand scheme of things this was pretty fair, since Patreon provides special tools and platform to grant artists the ability to run and promote their own subscription service, where Paypal and Stripe provides the service to allow instant payments and credit card processing. Artists have always had to budget for these kinds of services to run a business and are responsible for paying for services they use, taxes owed, supplies they need, etc. known collectively as the "cost of business". Another way you can think about this process: you give an artist $5 a month, they get that whole $5 and then have to pay Patreon and Paypal/Stripe owed fees every month to use their services, just like any other business-related expense the artist may have in their lives to continue to be an artist... but that in reality the fees are just taken out first on the artist's behalf and the artists is simply given the remainder so everyone remains accountable and debts are squared off right away. That's why fees are upfront, it's simple and instant.

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What is the new process?

Ok so now the new way that Patreon is doing this is a little strange... because now instead of the artist paying all the fees to use the services, you guys, the patrons, are now partially responsible for paying these fees too. That $5 pledge that you were expecting to pay? Now it's changed and it will be $5 + a processing fee of 2.9% + 35 cents... PER TRANSACTION/INDIVIDUAL PLEDGE. That means for each person you support on Patreon, you are paying a lot more than you were before. But the flip side is that the percentage going towards artists is a lot higher now! Artists get 95% of the intended pledge before the fees and Patreon takes the remaining 5%. But the reason why they get a higher percentage of the money is simply because artists are sharing the mandatory payment processing fees they used to pay by themselves with you guys and we all have no choice in the matter.

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Can you show me an example to help explain how this effects everyone?

Let's say you gave 6 artists $5 every month. Normally on the old system this would have cost $30 for you and all your artists got between $4.40 and $4.15 each (collectively they physically received between $25.40 and $23, out of the $30 you tried to give them, and the and amount that the payment processing companies and Patreon got was between $4.60 and $7). As sucky as it is that a bunch of your money didn't directly go towards the artists you care about, that's how it always goes for us artists. We're used to it. And we still have to pay taxes on top of that later. (AKA it kinda sucks to be an independent artist sometimes.)

But now let's look at the new system. If you don't change your current pledges and try to give $5 for your 6 cool artists, you'll get an interesting surprise when suddenly you're now being charged $32.97 instead of $30 at the beginning of the month! That's because you're now paying for the new processing fee: $5+2.9% (14.5 cents) +35 cents for each person. For some people an extra $3 is now out of their expected budget to support all six cool artists. So what we are starting to see happening is well-meaning people that WANT to support artist are sadly forced to cancel some pledges or lower them just to make it so they can give the same amount as it was before of money donated to artists.

The other interesting thing though is because that you guys have to help pay our fees (again Patreon is making you do this), is that artists will now get a higher percentage of the profits than before. This is kind of an illusion for a few reasons I'll review in a minute. So instead of after all the fees have been taken out, we used to get 80-88% of the money donated to us, now artists will get 95%! Artists will not be charged a processing fee to Paypal/Stripe from their patron supporters and just have to worry about that 5% to Patreon. (Technically they are careful to NOT word it like this either, they call the %5 a "fee" for creators/artists and the  2.9% + $0.35 part the "patron service fee" but I'll explain why I worded it this way later, just want to point this out for anyone paying super extra close attention).

This means that of the original amount of money *intended* to be donated (our example was $5), artist now get a guaranteed 95% and will receive $4.75. (Before we would only get between $4.40-$4). But key word is intended, because as we now know, you guys are not paying us $5 anymore, you're paying us $5+ service fees now... so that's $5.49 (and a half cent... so we'll just round it to $5.50 because that's realistically what they will do to you).

So as nice at it seems that instead of paying $5 and your artist getting $4 at minimum and $4.40 at maximum to "keep" (which I put in quotes because that's before taxes and other stuff), you now are forced to increase your amount paid by 50 cents and now your artist gets a guaranteed $4.75. More money going to the artists is good and all for artists... but that's because they are charging you more to make that happen. I just want you to be fully aware how this affects you!

Basically, in the example of a $5 pledge, it breaks down to you pay an extra 50 cents (by force) and your artists get an extra 35 to 75 cents more directly from you than they were before.

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So what if I want to just keep paying the exact same amount *total* per month that I was pledging before to artists?

So let's say that you just decided you can only pay $5 TOTAL, like you were doing before. In order to do that, you have to pledge $4.50 instead (this is rounded down but it's close enough and easier to calculate). Ok cool! Now you are pledging less, the fee hits, and now you end up paying the same amount of money as you were before. You can keep all your pledges to all your artists and keep supporting them like normal! Right?

....right!?

Unfortunately, your artist is now only getting to keep $4.28 after the fees and stuff. Compared to the original amount you were giving this could be a little bit better or a little bit worse than what they were getting to keep before: between $4 and $4.40. It's kinda in the middle. Potentially you were helping them out a little better before but potentially you are helping them more now. The problem is that it's harder to compare the two systems because of that variable fee cost of 7-15% they used to charge artists before. It may be better for some people or worse for others.

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What is the best way to support artists so they get the most and I pay the least?

The whole thing is just slightly more complicated for Patrons and slightly less complicated for artists, in the sense that we have a more clear understanding and ability to budget because we can more easily calculate how much money we're actually getting now from everyone*. But all of you guys will suffer from paying more forcefully, and it gets exponentially worse the more patrons you have and the less money you give them each. What do I mean by that? You will be paying what feels like a heck of a lot more money per dollar pledged and it will be felt strongest at the low $1 pledges vs the $5 or higher pledges. That's specifically because of that flat 35 cents per transaction service fee for each artist supported.

So let's look at it one last time. I PROMISE THIS IS THE LAST CRAZY MATH EXAMPLE.

Pretend that you only pay $1 to five different artists. That would be a total of $5 out of your pocket on the old system. All your artists used to get between 88 and 80 cents from that pledge. But now with the new fees, you are paying $1 + an extra 38 cents (rounded) to EACH creator... which for six people is an extra $1.90 total than you used to pay Patreon to give out your money, so your $5 suddenly became a total of $6.90. But at least all your artists just got 95 cents now out of that intended dollar instead of between 88 and 80 for an actual dollar on the old system. That's a much much bigger jump in percentages because of the flat rate 35 cent fee in there, proportionally it is quite a lot extra to pay just to give away a dollar (38% more money than before!) vs feeling like an insignificant amount for pledging stuff like $5 (which is 10% more money than before), $10 (6% more money than before), or higher. And it hurts you more the more people you support.

Basically, the incentive here is that if you want to support an artist efficiently, your money will go further with less cost to you and more into the pocket of the artist if you kill off the individual $1 pledges to five artists and instead supported one artist at the $5 or higher level. This means that you will pay $5.50 to give one artist an intended $5 (but they actually get $4.75) instead of paying $6.90 to give five artists the exact same amount of money.

So it makes sense to save money and stretch the value by only supporting one artist instead of five. BUT that means all those artists you were giving a dollar to now will get zero dollars from you, and not just you but a lot of their supporters will also do the same.

And suddenly that artist who just lost all their $1 support doesn't feel like they got that 95% of all profits anymore on Patreon's new system... they got zero. All the artist can hope for is that they are the lucky few who get that new, more efficient $5 pledge from the patrons who chose to give that $5 they use to have spread out as $1 pledges to five different artists. What most artist fear is that they will see a significant decrease of $1 pledges and a sense of shattered trust from patrons who can't afford or just don't want to pay some dumb fee all of a sudden and that they will lose more $1 pledges and not gain enough $5 or higher pledges to make up for it.

But of course, all we're talking about here at the end of the day is a few cents. Cents definitely add up but this is definitely causing some interesting responses. This will go into effect December 18 but we are already feeling the effects as a huge decrease in pledges is now happening across the entire platform. And it's entirely not your fault! Don't feel obligated to keep supporting artists at the higher amounts than you were expecting to pay, especially if you cannot afford to do so. No hard feelings from any of us for you to do what you must.

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What about that * you never followed up on? (Hidden Artist Fee)

Oh and I didn't even mention... there is actually a third hidden fee Patreon kinda sneaks in there too. This is the fee that gets charged to use Paypal or Stripe to send the artists the money that Patreon collected for them. Yes you read that right. For all that Patreon is trying to do to "make it easier for artists to know they will always get 95% of pledges" artist actually do NOT get that amount in their pocket either. They have to pay extra to get it into their pocket.

Patreon is the middle man of middle-mans. They used to charge artists a fee to collect money from supporters, take a cut for themselves, and then charge the artists a second fee to send the collected money to them. Double-whamy. But with the new system thanks to you guys, the supporters now pay the first fee to send the money to the artist, Patreon takes a cut, and the artist pays to have the collected money transferred to them. So no, artists aren't getting a totally free pass on dumping all their fees onto you guys, they still have to literally pay to get paid.

Think of it like this: Patrons (you guys) give a pledge, that pledge has a Paypal (or credit card) fee on it for transferring funds. Except in the process, that money doesn't go from one Paypal account to another, instead it gets turned into what I'm going to call "Patreon Credit". Patreon Credit is like a gift card that only works at Patreon, it has cash value but once it's turned into Patreon Credit it is stuck on Patreon. One nice thing about this set up is that Patreon Credit can be transferred from artist to artist.

It gives me a headache trying to figure out the numbers or if there's any sort of hidden fees to this but I'll give them the benefit of the doubt and hope that the credit you give to an artist keeps its value and no extra fees are taken out... buuuuut I am fairly sure that Patreon still takes another %5 anyways because they do that per pledge made, independent of the source of the money. But at least we don't (theoretically, maybe someone can confirm!?) have the processing fee from Paypal to support a fellow artist so long as we have Patreon Credit from our own pledges still inside the Patreon system. So artists still get the same cut of the profits by being supported from a fellow artist than they do from a non-artist (95%), but it now costs less for the artist sending the money to a fellow artist because of no Paypal fee, thanks to Patreon Credit than it does for a non-artist sending the same amount of intended money because they have send it using Paypal. I hope that made sense. And actually I am simply GUESSING here and haven't seen any real evidence for this and we won't know if I'm right until the new system launches. I just hope that I'm right because it completely makes sense to operate like this. So if I am right, the morale here is if you are an artist, and you support other artists, don't cash out your Patreon Credit each month until your pledges to other artists go through and you'll (probably) save a little more money!

And so backing up a bit, we got real money turned into Patreon Credit that stays in an artists' account until they want to be "paid out". And Patreon sends them all the money they collected, buuuuut not before Paypal takes a cut of that transaction too. So Paypal (or Stripe) gets its hands on charing a fee on both the patrons money to Patreon and and the artists money from Patreon. Yuck.

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Why use Patreon at all? Can't I just send money directly through Paypal and skip the fees?

If you REALLY wanted to support artists most beneficially, you could just Paypal them $5 and then Paypal takes a nominal cut fee from the artist as usual. This way Patreon gets nothing and Paypal gets to collect only one fee. However if all an artist's patrons send them Paypal money and stopped using Patreon, this turns into a bunch of small fees instead of one big fee on the first of the month that Patreon has organized to charge on the artist's behalf. And then the responsibility to issue out correct rewards and updates to individual Paypal supporters to keep them on the same kind of level as the Patreon-used supporters becomes a nightmare and a lot of extra work for the artist to keep track of. Heck that extra money you're giving directly to me? No. Please don't. You can keep it, put it through the Patreon system and I'll deal with the fees like a responsible adult, even if you have to give less than you did before. It is hard enough keeping up with Patreon posts and updates and rewards as it is, the extra cash in my pocket just isn't worth the hassle I have to go through to circumvent the system for a couple more cents in my pocket.

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Can you switch to a different service and stop using Patreon?

There isn't a strong competitor to Patreon quite yet, but a few are in the works: like http://D.rip by Kickstarter. So we'll just have to wait to see how it goes. It's invite only right now but I can see it having a big effect on the market.


Now if any of these fees and hurdles seems unfair to you, keep in mind this is actually a pretty decent setup for independent artists. Even if Patreon is getting rich quick, they are nowhere near the crazy level of let's say, the profit that Google makes off of YouTube creators. Google takes 45% of the revenue YouTubers make from ads on their videos. Pateron is only asking for 5%. And there is also still fees taken by Paypal for Google/YouTube to send you that money collected from ads too, just like Patreon. And we don't even want to talk about how insignificant of a percentage an independent artist could expect get out of various kinds of contracts for their work before the birth of the internet. For once in history, we can actually have a pretty decent way to make a living for ourselves and quickly grow with these modern tools. 18-year old millionaires who just like playing video games all day? Yeah the world is a crazy place now.

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You didn't follow up with a point about "paying super close attention to what they are calling these new fees"!?

Oops you're right. I suck at seguing these topics.

SO I found it very interesting that that were very careful not to word it like "Patreon takes 5% from creators and then we will make you pay an extra payment processing fee of 2.9%+35 cents." That's effectively what is happening, but they can't say it like that. You may not even realize there is a significant difference by putting it into these terms. I still think it's kinda borderline but effectively one of the first things that came to mind when I started breaking this down was Paypal's very strict policy about surcharges.

A surcharge is not allowed per Paypal user agreement. (And credit card companies). The term surcharge in the credit card world means you charge an extra fee to recoup the credit card fees you pay. Whereas charging something more ambiguous like a "handling fee" can be for additional processing costs not related to credit card fees. Basically, one cannot say or advertise that any additional fees for covering your credit card fees. It's even illegal in some ways to do that. This is also why small businesses may have a minimum payment required to process credit cards, they can't charge fees to cover the surcharges and it hurts the business to run a card on a small payment when it would cost more in fees than the amount the customer actually paid. Or don't accept all credit cards because that means more premium fees to accept more forms of payment. Big companies are so rich they can eat the costs on small transactions.

I have actually seen so many artists break this rule, especially in fursuit makers though not as common anymore because people are wising up... where let's say hypothetically you commission an artist and they ask for payment in Paypal or a check. But if you pick Paypal, they suddenly charge you like an extra "Paypal fee" because they don't receive the full amount you were paying them if you had just sent them a check instead. And on a large amount like a fursuit payment in the thousands, this Paypal fee is monstrous, sometimes taking out hundreds of dollars from the money that could have been in your pocket if the client sent a check instead. Trying to get around this rule and making people pay that hundreds of dollar fee on your behalf to the amount you get in your Paypal account equal the same as the amount they would have wrote a check is a no no no no-no. If you see an artist doing this, then they could get their Paypal account shut down because they are charging their clients a Paypal Surcharge. You're paying for the convenience, speed, and security of Paypal vs the risk and longer wait of sending a check (which could be fraudulent or get lost) in the mail. So you pay a company a fee to avoid these issues. It's a fair trade (...to a point) and if you don't like it or the benefits don't outweigh the detriments, use a different service. It's a free market.

Basically Patreon is doing the same thing that other artists should be doing instead of asking for a surcharge: re-word their fees so it has enough grey area that you can't tell where the fees and what amounts of your total payment are going to Paypal/credit card companies exactly, or work it into your overall prices and don't be as transparent about breaking it down and just trust that the amount paid will all add up. Does that sound sketchy to you? Kinda, yeah. But this is done all the time. Like for example there's a big campaign underway about exposing how much hospital bills can vary by thousands because of "random fees" for the same kind of procedures depending on where you go for healthcare, affected by issues such as how limited your options are (local area coverage) or how desperate you are for a specific treatment. And there's an ethical investigation into that for evidence of extortion. Because of the lack of transparency in knowing how an artist or a business or the government breaks down fees for something, they can get away with a bit of extortion and you would be nonethewiser.

That's getting off-topic now. But basically Patreon is like... kinda giving artists a way to have surcharges when using Paypal. To an extent. And it's weird. Patreon doesn't seem to gain from it directly on the surface because it goes supposedly to "services" of some kind that I guess aren't covered by the 5% Patreon cut? But the point of a variable fee in the old system is because the fees for using services like Paypal varies per transaction because of the amount transferred and the currency exchange, there is no flat fee for everyone on Paypal. So it's possible this new flat fee Patreon has thrown on you guys will cover most Paypal transaction fees in full (and credit processing fees direct to card companies, they do have both Paypal and direct card methods of payments if that wasn't clear) and it's maybe possible the service fee won't be enough on its own to cover the payment processing company's charge in some cases, but it's not realistic to assume it will balance out in the long run and undoubtedly Patreon will have some leftover collected under the guise of "service fees".  That's why the old fee was called a "Payment Processing Fee" and it is not called that now. The "Payment Processing Fee" was completely variable because it was set by the payment service used, Patreon never got its hands on this money nor had a say in the amount taken. And now that's changed to that they will get their hands on any leftover money after Paypal/credit card companies take their cut to process the payment... and do something "servicey" with it.

So where is that extra money collected going towards, hmmmm Patreon? If it is not all going to some defend-able form of "fee processing service" of some sort, is it legal or in line with services like Paypal's user agreement? Certainly the answer is that they are totally in the clear legally and allowed to do this. Patreon could not exists without the ability to process Paypal transactions and Paypal would take an extreme hit not earning profit from processing all those fees. So even if it's questionable and could be investigated, Paypal and credit card companies might just let it slide because it risks hurting them. It's just not in their best interest to mess with it, and on their end they are processing higher payments (if people don't adjust their pledges to compensate) so they benefit more from the new system as well by collecting higher fees. And Patreon probably gets richer and expands their "services". Yeeey.

So it's just an interesting observation about the specific wording and what it implies. Not implying Patreon is evil or mishandling money. Only that I see why they did it the way they did.

And also a warning to people relying on Paypal for income and payments by clients and still don't know about this surcharge rule. But luckily Paypal competitors are becoming more of a thing now too if you don't like the rule, or do stuff like adult art (which Paypal also does not allow the use of its services for anything adult-oriented. Watch out furries! You can be reported by your clients and yes this has happened.) I just don't know enough about the other kinds of Paypal competitors yet. That's why Bad Dragon's website Furry Network sought to create their own payment system: so adult artists can legally use a Paypal-like service. Wonder how that's coming along or what other cool payment systems are in the works?

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But all in all, just want to say thank you to everyone who has supported thus far. And not just me, but all artists out there who exist and do what they do because of your support.

If you have any questions about this let me know and I'll do my best to answer. I don't know yet if I'll be changing around my pledge tiers but I'll be sure to let you guys know before anything is implemented.