Patreon and the Growth of Crowdfunding
Every day, it seems, another music artist launches a crowdfunding campaign to underwrite an album, tour, or some creative undertaking. And while we hear about notable successes – Amanda Palmer’s $1.2 million Kickstarter campaign from 2012 comes to mind – few artists enjoy the fan dedication, loyalty, and sheer numbers to approach this level of support.
Palmer, the queen of all things social, has used a range of platforms to offer her fans an opportunity to support her career and art. But San Francisco-based Patreon is providing Palmer and other artists a new way to engage with fans and solicit sustainable financial support that changes the game for indie artists.
Instead of a short-term, “set a goal and try to reach a goal” campaign that's typical of most crowdfunding platforms, Patreon allows artists to ask their fans for a fixed amount of money, either on a recurring monthly or per-project basis. Rather than a one-time hit to a fan’s credit card to support a project, a “Patron” enters into an ongoing monetary relationship with an artist. It’s analogous to paying $10 to see a movie in a theater versus subscribing to Showtime. In this case, you’re subscribing to an artist’s channel.
Crowdfunding is growing
Crowdfunding is growing at a phenomenal rate. In 2013, the World Bank reported $6.1 billion was raised using 344 crowdfunding platforms: in 2015, crowdfunding topped $34 billion. The World Bank estimates that in 25 years, crowdfunding campaigns are likely to raise more than $90 billion annually. The potential for nonprofits, start-ups, bands, filmmakers, and podcasters to benefit from this growing trend is extraordinary.
Palmer creates, on average, one new “thing” per month. With 11,200+ patrons pledging an average of $4.50, she can project an annual income of $594,000 for her work. That’s not all profit, as she incurs expenses to create new works and pay her full-time staff.
She discusses her model in her Patreon post, explaining why she migrated from Kickstarter (a seriously date) to Patreon (getting married). It’s important to understand that, since Palmer has already developed an extensive social media network, her cost to announce her new works is basically the time it takes to craft her message across her social media platforms: that’s the payoff of developing your artist brand online.
According to Graphtreon.com, Palmer is currently the third-highest ranked creator on Patreon based on number of patrons. The top creator is a political podcaster, The Chapo Trap House, with more than 17,000 patrons. Other music groups who are succeeding wildly on Patreon include Home Free (4,400+ patrons, $29,761 per video), Peter Hollens (3,750 patrons), and Pentatonix (3,300+ patrons, $17,000+ per video).
The Patreon creative roster includes newscasters, video game developers, filmmakers, podcasters, graphic artists, and comic writers – all of whom are finding success on the platform. At the time of this writing, Patreon is estimated to be distributing nearly $10 million per month from over 2.5 million patrons. Patreon keeps five percent of every payment and charges an additional three percent for credit card processing fees, which means 92 percent of the pledged funds go straight to the artist.
Patreon was started by Jack Conte of the band Pomplamoose, who wanted to find a way for DIY artists to develop a sustainable financial income. With his friend and programmer Sam Yam, he launched Patreon in 2013, and within 90 days the company drew the attention of investors and received $2.1 million in seed money. Since then, the number of artists using Patreon has skyrocketed, as has funding from investors, which gave $47 million betting on Patreon’s long term success.
In an interview with Billboard in 2014, Conte stated, “On the Internet, it’s not just content that’s king… it’s regular content. But models like Kickstarter don’t work for regular content. And the advertising you earn on YouTube is nice, but it doesn’t seem to assign the appropriate value for the amount of work and passion that goes into certain types of content.”
A 2014 article in Forbes cited a stark example of YouTube vs. Patreon earnings for an artist named Molly Lewis. One of her YouTube videos got 14,000 views, a pretty decent number for an emerging artist, but it only generated $28 in earnings. The same video posted on Patreon earned her $2,000.
Further highlighting the difference between platforms like YouTube and Patreon, Conte argues that ad-supported platforms treat each viewer as being equal, while Patreon “reflects the actual strength of your fan base, and monetizes engagement accordingly,” meaning a super fan can pledge $100/month while a casual fan can get on board for $1.
Patreon gives creators an entirely different way to monetize content
Many Patreon artists set different levels of access based on the size of a patron's support, similar to how it works on Kickstarter or PledgeMusic. For instance, at $1, a patron might get access to the latest video; for $5, she may get that plus an exclusive “making of” video and a link to a song download. More expensive subscription perks might include a Skype session with the artist, or credit as an “Executive Producer” on the video. The options are only limited by the artist's creativity. Patreon also has a support team that advises artists on how to scale their perks and advise them on how to to make and deliver content on a schedule that is sustainable for the artist.
Can it work for you?
Patreon isn’t just for social media superstar creators. The charts below (via Graphtreon) give a breakdown of how much Patreon creators are making and how many patrons they have accumulated (as of March 2016).
Looking at the first chart, in March '16, only 100 of Patreon’s 4,647 creators had 1,000+ patrons, and 403 had more than 300+ patrons. 65 percent of the total number of creators had 30-99 patrons. It is worth noting these 3,000+ artists are receiving supplemental income to whatever else they do to support themselves (guitar teacher, day job, bar band, etc.). As they continue to build their patron base and create new content, their Patreon earnings will increase.
This second chart, which tracks creators’ revenues, mirrors the first: a small percentage of Patreon's creators are garnering the biggest earnings. 213 creators receive $3,000+ per month/work, while 726 are earning $1,000+. The fact that so many artists are gaining direct, predictable payments from their fans points to a future where an artist can build a community of patrons that can provide sustainable income and support original art.
But this can only happen if you have a clear voice and create consistent art that inspires a fan base to pledge support for things you have yet to produce. It takes great art and great communication to receive adequate support to sustain yourself.
Special thanks to Brandon Dill for research assistance for this article.
Keith Hatschek directs the Music Management Program at University of the Pacific. He has written two music industry books, How to Get a Job in the Music Industry and The Golden Moment: Recording Secrets from the Pros.