Patreon is a popular membership platform that creators use to get support from their fans via membership subscriptions. The company has a few key revenue streams.
Patreon primarily makes money via fees paid by creators who use the subscription membership service. The company also makes money from payment processing fees and platform fees.
Founded in 2013 by Jack Conte and Sam Yam, Patreon is known for helping artists and creators earn money via their service where their fans can contribute towards their work on a monthly recurring basis. In exchange, creators provide exclusive content, rewards, or other perks to subscribers.
Patreon was founded because Jack Conte was a musician looking for a way to make money off his YouTube videos. Initially, Patreon was designed to provide an artist with compensation when they created a work of art. It later moved primarily to monthly subscriptions.
Headquartered in San Francisco, California, Patreon is now one of the top platforms for crowdfunding.
What is Patreon & How Does It Work?
Patreon is a platform that allows artists or creators to make money off their art or content. Their fans sign up for monthly membership-based subscriptions to support the creation of their work. In return, patrons get access to exclusive content, sneak peaks, exclusive access to events, and the ability to engage directly with the creator.
Patreon is used by podcasters, video creators, musicians, visual artists, communities, writers, journalists, gaming creators, nonprofits, educators, and creators of all kinds. The platform boasts a large number of video creators but also has a large contingent of podcast and music creators. These are also the categories that generate the most in monthly earnings.
Fans can either search through the database of creators or follow a link to the site from a creator that they like. They can then pick a membership tier and start providing support.
Patreon boasted in 2020 that it had six million active monthly patrons. Those numbers suggest that the site is growing quickly. It increased its number of patrons by 50% from 2019 to 2020. These patrons collectively support over 200,000 creators. However, while some creators have tens of thousands of supporters, many only have a few patrons.
Only about 700 creators have over 2,000 patrons. The top creator is True Crime Obsessed, a podcast about true crime but it is unclear how much the podcasts makes monthly. In 2021, creators on Patreon earned $2 billion from patrons.
The point of Patreon is to give creatives the resources they need to continue to create the work their fans love. For some creators on the site, they would not otherwise be able to continue to do their work. For others, the money they make from Patreon supplements other income sources or allows them to monetize their work.
This has proven lucrative for many. For example, The Tom Dillon Show, a podcast, is estimated to have over 40,000 subscribers and make over $200,000 per month.
Creators are able to customize membership levels for their fans. That means that they can offer a number of different price points so people can choose the level at which they want to provide support. People at higher support levels often get additional access to the creator or more benefits attached to their membership.
For example, a comics creator might provide early access to new work and projects or exclusive access to certain installments in their comics series. Other creators might offer free merchandise or consulting with the creator at higher tiers.
Every creator has a landing page that explains their membership offerings and perks and lists the number of patrons they have. It also says how much the creator is earning per month off their work. Users can follow creators even if they don’t become patrons of that creator.
Many creators also post non-membership content that everyone can see. This can help them sell subscription memberships as people will get a taste of the kind of content they offer before supporting them. While Patreon gives supporters an option to pay for a year of support, the majority of people pay on a monthly basis. These monthly subscriptions can be cancelled anytime.
Patreon liberates many creators by giving them more creative freedom and control. By freeing them from the dictates of advertisers or the whims of companies that they work for, they’re able to spend less time focusing on making ends meet or other people happy. Instead, they can create more of the work that their fans love.
The recurring nature of the revenue creators get from Patreon allows many to achieve greater financial stability and pursue an independent creative career. It also gives many artists a community to test out new ideas and understand how their fans will react to them before investing a significant amount of time pursuing them. This creates a more interactive creative process.
This also helps early generate interest and support for projects that can help them make their next release successful. Ultimately, Patreon allows creators to build an interactive community to support them and their future work.
Business Model of Patreon
Patreon is a membership platform designed to help creators monetize their fanbase through recurring monthly membership subscriptions. The company has revolutionized the way work is done by creatives and changed how they raise funds to do the work that their fans love.
Patreon, ultimately, runs a payment processing company that enables individuals to raise money to deliver creative work. In the past, people creating work that others loved but which wasn’t well-compensated had to work other jobs or ask for support on an intermittent basis with a payment link.
Patreon changed that by providing a platform that allowed them to easily set up a profile page, determine monthly membership levels, and start accepting monthly payments. This simplifies the work artists used to do to fund their creative endeavors. It also gives them far more financial stability.
By attaching payments to a subscription level and giving fans perks for subscribing, Patreon also makes those who donate feel like they are receiving something in return for their support and money. That makes it easier for creators to ask for help.
While its free to get started on Patreon, the company has different levels of subscriptions for creators. Rather than pay a monthly subscription, however, Patreon charges a different percentage for memberships. Each tier gives creators different levels of support or functionalities on the platform.
Creators can leverage the platform to create business models of their own on the platform. They might focus their memberships on giving subscribers access to a community. Or they might ask their subscribers to pay for their educational work.
Many use a gated content model where fans can access some content for free but need to pay for exclusive content. Others use their fans’ interest in them to offer them more access or even personal contact like phone calls for higher tiered supporters.
Patreon does a lot of work to help creators develop their Patreon strategy so that they can maximize their conversions from fans to subscribers and increase their revenue. They provide suggestions for everything from rewards to offer to how to treat your Patreon services as a business.
In that way, Patreon is supporting creators in creating their own small businesses. Patreon’s model for doing this is different from some other models that emerged around the same time.
Crowdfunding sites like IndieGoGo and Kickstarter, for example, focused on helping creators and entrepreneurs get one-time funding for big creative endeavors. These services also allowed creators to give out perks and rewards for supporting creators. However, they were transactional in that supporters often expected to get a physical product or service from it.
Other services like Substack are focused narrowly around supporting content creators with subscriptions to newsletters and other content. Then there are sites like Kofi, which allows people to make both one-time donations or sign-up for monthly memberships to support creators.
Another way creators monetize their content is through direct requests for cash donations via PayPal link or other peer-to-peer payment processing services. Patreon distinguishes itself by providing monthly revenue for a wide variety of creators while also providing a platform to create community.
The business models of these companies are not necessarily in competition. For example, a creator who has a Patreon might still use Kickstarter to crowdfund a large project. Or they might ask people to make one-time donations to them via Ko-Fi.
In 2021, Patreon is estimated to have generated around $160 million in revenue after paying its creators. The amount that they made in profit has increased significantly in recent years, doubling from 2020 to 2021.
However, Patreon likely has significant expenses from running their growing platform. Things like staffing, advertising, hosting, and development costs are also likely to increase as they grow. As a private company, it is unclear how profitable they were after covering their expenses.
How Does Patreon Make Money?
Patreon makes money in more than three different ways. These include a percentage of the subscription fees they collect, payment processing fees, and merchandise fees.
As the company is private, a breakdown of how much the company makes from these individual revenue streams is not publicly available.
Subscription fees make up the core of Patreon’s revenue. Patreon earn anywhere from 5% to 12% from subscriptions. However, the amount varies depending on the plan creators choose.
Here are Patreon’s pricing tiers:
- Lite: This plan charges just 5% on all income earned on Patreon. It gives creators access to a hosted creator page, communication tools, and Patreon workshops.
- Pro: This plan charges 8% on all income earned on Patreon. It gives creators access to membership tiers, analytics, special offer tools, creator-led workshops, the ability to send merchandise, and app integrations. It’s designed to help create meaningful experiences for fans and generate more income.
- Premium: This plan charges 12% on all income generated on Patreon. It also includes a dedicated Patreon partner manager to help maximize a creator’s income, the ability to send merchandise to membership, and team accounts. It’s designed for established creators to save them time and make building their membership easier.
It is unclear which of these tiers is most popular among creators.
Payment Processing Fees
Patreon charges payment processing fees to cover the expenses of processing payments and fighting fraud. These fees are also meant to cover things like setting up recurring billing, chasing down declined payments, and reminding people that their credit cards are expiring.
There are two fee rates:
- Standard rate: For payments over $3, they charge 2.9% and $0.30 per transaction.
- Micropayment rate: For payments under $3, they charge 5% and $0.10 per transaction.
Patreon sells branded merchandise that creators can customize and send out as perks to their membership base. The company deals with creating the merch, shipping, tracking, and providing support to buyers.
Examples of merchandise include prints, stickers, mugs, tote bags, posters, t-shirts, scarfs, and hoodies.
Merch is only available for Patreon Pro and Premium members. Creators can then apply artwork, words, or a design to these items based on what their supporters would like. Merchandise is a great way for creators to encourage supporters to give at higher tiers and reward those who do.
Global shipping is included in the price of the merchandise.
Patreon Funding, Valuation & Revenue
Patreon is currently a private company. Their financials are not often shared, and much of what’s available online about their financial results are estimates based on amounts the company has said it has raised for creators.
So far, Patreon has raised $413.3 million in venture capital funding during ten funding rounds. Notable investors include Raison and Maximize Capital. In 2021, Patreon was valued at $4 billion after raising $155 million in a funding round.
Patreon has increased its revenue significantly in recent years. They brought in an estimate of $160 million after paying creators in 2021, up from $80 million in revenue after paying creators in 2020. That represents significant revenue growth. Given that consistent and strong growth, there is a good chance the company can continue to increase its revenue in years to come.
Is Patreon Profitable?
Patreon is likely not currently profitable. While the private company rarely releases details about their financial performance, estimates suggest that they brought in just $160 million after paying creators in 2021. Given that the company is likely to have significant expenses, it is likely that they are still pre-revenue.
The fact that the company continues to raise venture capital also suggests that they aren’t yet profitable. However, given the company’s recent growth, there is a chance that Patreon could become profitable in the future.
In conclusion, Patreon is a unique platform that has the potential to change the way content creators are able to make money. With the help of their loyal patrons, Patreon allows artists and creators to receive support for their work and continue creating. This is why we believe Patreon will be successful in the long term.
Patreon’s business model is based on the idea that people want to support artists and creators. This is a great thing for artists and creators because it gives them more control over their income and allows them to make a living doing what they love. It’s also great for fans because they get access to exclusive content, experiences, and rewards that they wouldn’t otherwise have access to.
The company has been able to expand its user base at an impressive rate, and it looks like they will continue doing so in the future. We’re excited to see where it goes from here.
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