Patreon Is Falling Apart, Is Unsustainable Says CEO
Patreon Is Falling Apart, Is Unsustainable Says CEO. A few weeks ago the CEO of Patreon said that his company is not sustainable and that they needed to find ways to generate revenue. Only a week or so later a massive site failure affected everyone on Patreon.The site was frequently up and down, Patreon kept claiming to know the problem, but every time they claimed it was fixed it shut down shortly after. Patreon eventually issued an advance due to the errors putting man accounts negative.This has been a pretty bad couple of months for Patreon. Jordan Peterson, Dave Rubin, and Sam Harris have all left and were some of the top accounts on the platform.Since the banning of Sargon of Akkad it would seem that Patreon is facing rough waters ahead.
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A couple weeks ago, CNBC ran a story about Patreon, where their CEO Jack Conte said that his company's generous business model wasn't sustainable, and they had to find other ways to make money.
At the time, I didn't think too much of it, because I, and many other people, have left the platform.
However, at the beginning of this month, I started receiving messages from people complaining about the site being down, and how they were concerned they weren't going to get their money.
As it turns out, Patreon had been down and up and up and down, and they kept saying they'd solve the problem, but they didn't know what it was, because it would come back later.
They eventually had to issue an advance to many people, sending accounts negative, as they tried to figure out why credit cards were processing slowly or weren't processing at all.
Some people told me that patrons had fallen off their accounts because cards got declined, and when they reached out to them, they had no idea what was going on.
That, in combination with the story, kind of got me worried.
It hasn't been a good couple of months for Patreon.
Some of their biggest creators have left in anger.
I left, for instance, and I'm glad I did, because you can see what's happening.
Today, let's take a look at what's going on with Patreon.
We'll have a more candid conversation about the state of Patreon's controversies, and some other good news that I mentioned before.
Subscribestar is back and functioning, so we'll talk about that too.
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Let's take a look at this story first from January 23rd.
Patreon CEO says the company's generous business model is not sustainable as it sees rapid growth.
Now, let me just point out It's not a generous business model because all Patreon does is act as a middleman, a financial processor, and honestly, they don't do that much.
It was not very difficult for me to leave the platform.
I'm rather shocked.
That they're framing it in this way, it's such a positive story for Patreon, when they're flat out saying their company isn't sustainable.
Crowdfunding service Patreon announced its latest benchmark Wednesday, with more than 3 million patrons supporting content creators each month through the company's platform.
Patreon allows illustrators, authors, podcasters, musicians, and other independent creators to receive crowdfunding directly from their audience.
The number of active patrons supporting artists on the platform in 2019 has seen significant growth, up one million over the last year, the company said.
The company is also on track to pay out $500 million to content creators in 2019, pushing the company to surpass $1 billion in payouts since its inception in 2013.
Under the company's current business model, 90% of funds are paid directly to content creators.
Patreon takes a 5% cut.
And the remaining 5% covers transaction fees.
The reality is, Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business.
The company does not currently provide contracts which allow users to retain 100% ownership of their work and full control of their brand.
The company plans to provide creators with value services, like options for merchandising to generate new revenue.
Creators will be given the opportunity to participate in these services, and it could ultimately reduce Patreon's generous 90% payout model.
I gotta point this out again.
This is insane that they're framing it this way.
It is not generous that Patreon is giving you 90% of your money.
I understand they take a commission, but a lot of people don't seem to realize just how easy it is To actually set up PayPal to take in subscriptions from your fans and customers.
Many people who left Patreon have simply set up a PayPal on their own website and are doing just fine.
And I gotta say, since leaving Patreon, I've actually done a lot better directly through PayPal.
PayPal only charges you a small percentage fee for transactions, and it's something like 2 or 3%.
Patreon's taking 10% of your revenue.
Now, the benefits of Patreon is that people can sign up to give numerous people small amounts, so all of your favorite creators are there.
But with the way Patreon's been going, with the problems we've seen at the start of this month, with them saying it's not sustainable, with them banning people for dubious reasons, it's not a safe place to keep your money.
And, you know, when I saw that they were facing these problems, When people were complaining about not getting their money, you know, I just kind of shook my head.
We said, many people said, you should get off Patreon, it's not safe.
And sure enough, for the numerous reasons it wasn't safe, because they don't follow their own terms of service, for instance, many people have now lost patrons, lost subscribers, they're losing money.
And Patreon actually paid an advance out, putting people's accounts negative because the credit cards weren't being processed properly.
This is what my account balance looked like.
Negative $287.87.
Now, I haven't deleted my Patreon.
I'm just not using it.
I didn't want to just shut it off because there are a lot of people who aren't following the news, and I know there's a political statement to be made.
I'm not too interested in making a political statement.
I just want to make sure that you guys can support my work in a way that makes sense.
So, I just basically left Patreon alone.
Most of the people have left, but some people are still there.
It says, We initiated a payout advance this month, providing earnings for unprocessed pledges before payment processing completed.
Due to the payout advance, you may see a negative balance.
As we continue to process your patron pledges and run our retry process, you will see your balance return to normal.
This is what's interesting.
They said, As we continue to process your patron pledges and run our retry process.
I think what was actually happening, as per some messages I received, is that cards were being declined for some reason from active users.
I did receive messages from people who were talking about how cards were being declined from people they actively communicated with.
I asked them, did you send them a message and ask what was going on?
And they said it just told them they didn't process yet.
So it would seem that with Patreon saying there's a retry process, something failed on their end.
Cards weren't being processed properly.
People were falling off automatically.
People were losing money.
So Patreon fronted people money.
Patreon announced status.patreon.com to show what's currently going on.
Right now, it says all systems operational.
We can see that according to this little graph, everything seems to be good.
But let's take a look at the past incidents.
Look at this.
From February 4th and down, we have all of these instances of weird errors affecting the website.
There was something that happened on January 30th where they said, high latency on patrons website, we're investigating the issue, and it seems like they resolved it.
But then we saw this.
Payments processing delay.
On the first, they said they were going into maintenance mode to investigate the issue, and then said it was resolved.
But when we look up, we can see that on the same day, they had numerous issues.
Updates, updates, updates.
From the first, second, third, fourth.
They kept talking about how they were experiencing problems they couldn't fix for four days.
Right now, I personally think Patreon will probably be fine.
You know, maybe they'll figure something out.
But when the CEO himself says their business isn't sustainable, I have to wonder what they're doing.
All they do is process money for other people.
But this should be alarming to everybody.
Recently, something interesting happened with what's called an MCN, a multi-channel network.
It was Defy Media, I believe that's what it's called.
They abruptly shut their doors.
Many people lost their money.
There was a viral video from MatPat who hosts Game Theory where he said his money was just gone.
It was taken.
These companies that hold your money and then pay you out later are putting you at great risk.
And I understand that risk.
Especially when you see what happened to MatPat and his other creators.
If Patreon processes this money and then goes under, or their system fails, you aren't going to get your money.
And God knows where it's actually going to go.
Right now, a lot of people are talking with the bank that work with Defy Media, trying to get their money back.
So there's an inherent risk.
But I will point out, too, with Patreon, they process your money at the beginning of the month and then basically transfer it to you.
So they're not holding it as long as the MCNs do.
They hold it for like 30 days.
But I have to wonder, what's Patreon going to do?
They consider themselves to be generous?
They're taking 7 or 8% more out of your money than you would if you used PayPal.
They also use PayPal.
So it's interesting then that if you're on Patreon, the money's gonna go to them, then be sent to you to PayPal when you could have just put it through PayPal anyway and saved 7 or 8%.
I don't understand why Patreon thinks they deserve so much money.
But it's not like Patreon's the only one.
There's also Subscribestar, functions basically the exact same way.
Now, after many people left Patreon, activists started attacking Subscribestar and got them shut down because they attacked their payment processors.
But Subscribestar has prevailed.
They've reintegrated a new payment processor, and now it's functioning completely as normal, and I have to say to everybody who's giving to me on Subscribestar, your money's being processed just fine, and I appreciate the support.
Patreon is experiencing a ton of problems, and I would encourage people to get off the platform, please.
The CEO said the company is not sustainable.
Back over at the CNBC story, they talk about what may be contributing to these problems.
They say, Patreon is no stranger to the editorial controversies that plagued other big tech companies in 2018.
Top Patreon creator, author, and podcaster Sam Harris deleted his Patreon account in December and accused the company of political bias after several conservative accounts were removed for being associated with hate groups.
Now, that's not necessarily true.
Sargon just said a naughty word on someone else's livestream eight months prior.
We don't allow hate speech, which other platforms say they don't as well, and Patreon really means it, Conti said.
You can't just say anything you want in the world, and we don't want to build that platform.
I want to make sure I stress this before moving on, where it says the company does not currently provide contracts, which allows users to retain 100% ownership of their work and full control of their brand.
I don't know why that would be relevant.
It would seem like there may be conversations emerging about Patreon taking control of your IP, which I doubt would happen.
That would be a huge backlash.
But it's weird that they brought this up in the first place.
Patreon is dangerous.
I've said this before.
I've said it time and time again.
Now, I am biased.
I know some of the people who are personally affected take that for what it is, but I'm gonna tell you again.
It is dangerous to use Patreon to bring in money, and now we're seeing the negative consequences for those that didn't think so.
A lot of people wanted to stay on the platform.
I can understand it.
It's easier to use.
Your fans, your donors, they're already there.
But now look what happens.
Patreon for days is facing these huge problems.
The CEO says his company isn't sustainable, and it all happens shortly after Dave Rubin and Jordan Peterson pull their money off of the platform.
A lot of people are starting to get into conspiracies about what's really going on behind the scenes at Patreon.
How are they growing?
Where is this money coming from?
Where is it going?
If they're gonna bring in 25 million dollars this year, where does that money go that they're unsustainable?
Something doesn't seem right.
But more importantly, it seems to me that Patreon is trying to make itself a multi-channel network for everything.
The MCNs that worked with YouTube created a lot of problems.
Not all of them.
Some of them were good.
But now we can see what happens with Defy Media.
Some people signed up and gave money to a company in exchange for nothing.
Seriously!
People signed up thinking they needed to and they didn't.
And they just gave a portion of their money.
Now we're seeing the exact same thing with Patreon.
Why is Patreon taking any of your money?
They're simply a payment processor.
PayPal does this and only charges a tiny fee.
Why does PayPal charge something like 2-3% but Patreon charges 10%?
Why is Patreon talking about policing your speech in the world?
You can't just say anything you want in the world and we don't want to build that platform.
What does what I say somewhere else have to do with your platform?
And that's the scariest issue.
I can warn you again, I can say it a million times, there will come a time where you say something they don't like and then your money is gone.
Sargon did not This is established.
The CEO told me personally that it was ambiguous and wasn't on their website and that's why we didn't understand why Sargon got banned in the first place.
The rule said on Patreon.
Sargon was banned for something he said on someone else's stream eight months ago.
They allow their platform to be weaponized.
They allow other people to break the rules.
They're taking money for you in exchange for almost nothing.
The CEO said the company isn't sustainable.
And then we see the huge status maintenance impact for the beginning of the month where it seems like, yeah, he was right.
It's not sustainable.
Only about a week or so after he said his company wasn't sustainable, they start shutting down, popping up and down, and had to front people money.
So I will say, if they're fronting people money, then it would seem like they at least have money to, you know, to pay people.
But it also shows that their system isn't working properly.
Something bad happened just after he said his company wasn't going to be sustainable.
So that's got to be another warning for all of you.
And I'm not going to say it again.
If you stay on that platform, and the time comes when your money evaporates, is gone.
It's not going to be anyone's fault but your own.
Fool me once, shame on you.
Fool me twice, shame on me.
With all of the problems Patreon has seen, banning creators for dubious reasons, with the problems we've seen, with the statement from the CEO, if you're going to stay on the platform, it's no one's fault but yours.
It's foolish for anybody to have only one income stream.
Patreon is a tiny fraction of the revenue I'm generating because I've mostly gotten off the platform, told people to go sign up in other places, there's YouTube ad revenue, there's other ways to make money.
And if your only means of income is this one platform, you've got all your eggs in one basket.
And as we've seen, that basket can break, and the guy holding the basket said so.
But let me know what you think in the comments below, we'll keep the conversation going.
You can follow me on Mines at TimCast.
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