Hi. Apparently, Patreon is not a sustainable business according to the Patreon CEO Jack Ponte himself. here's an article on CNBC It's a little bit old, so a bit late to the party here. Patreon CEO Says the company's generous, generous business model is not sustainable.

As it sees rapid growth, Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business. Wow Patreon will send creators more than half a billion dollars to fund their membership businesses in 2019. Wow 500 million bucks. More than 1 billion dollars will be paid out to Creators.

Since the company's inception in 2013, there are more than 3 million patrons supporting more than 100,000 creators on Patreon. How can Patreon not be sustainable? This is ludicrous. Let's find out: Company is also on track to pay out 500 million dollars to Content Creators in 2019, pushing the company to surpass 1 billion dollars in payout since its inception in 2013. So they've basically been paying out 500 million dollars up until this point, with over the last, say, five years with another 500 million dollars to come in 2019.

So they're certainly growing under the company's current business model. current business model: 90% of funds are paid directly to content creators. Patreon takes 5% and the remaining 5% covers the transaction fees Depending on which credit card process in you know, service is being used or whatever. and that's true I Can see that in my stats on Patreon Patreon CEO Jack condescending interview that the platform will soon be facing the challenge, the challenge of maintaining a profitable model as the company continues its growth.

As in, Patreon is a company that when it grows, it requires more funding to keep it going. It's a website that just offers basic payment, middleman, payment processing services and along with a little bit of functionality. but it's basically just a website. 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 allows users to retain 100% ownership of their work and full control of their brand. Always sure hope they don't plan on changing that because if they do, they're sunk because it'll just be the Moldy Channel network all over again. And of course MC Ns are failing across the board. It's just basically a dead business model, but they plan to provide creators with new value services like options for merchandising to generate new revenue and creators will be given the opportunity to participate in these services.

Gee, thanks! Like the one I already have that's integrated with YouTube Teespring integration with YouTube and merchandising integration and stuff like that. And there's countless platforms out there for content creators to do merch. You get emails. When you're a content creator, you get flooded with emails from all these merchandising companies wanting you to join up with them to do much.

Since they're Patreon is a bit behind on the merch bandwagon they're trying to catch up. Hey, I wait up guys, wait up. Can we join two or have to re-examine how we charge for new services as we put them out? Conti Said with added revenue streams, the company will continue to redefine the space of creative content creation and aggregation currently dominated by YouTube Spotify and other various subscription services. What the hell are they going to do? start their own CDN content Delivery Network to compete with YouTube and Spotify unbelievably stupid if they're going to try and do that and we won't get into the editorial controversies that plagued Patreon and over everyone's like all content, major content creators are leaving and Patreon shot themselves in the foot.

But we won't get into that. Let's just find out how Patreon is not sustainable. This doesn't add up, so just looking at some stats for Patreon on a graph tree on here which is an excellent website by the way. Um, Five point? No.

Almost Five point. Two million individual pledges. Twelve million dollars per month. But that doesn't include a lot of Patreon accounts hired how much they earn, but Patreon a saying it's more in the order of five hundred million dollars in 2019.

So it's gonna be like say, 50 million a year instead of twelve because a lot of people hide that so you know it's pretty much growing. They're doing pretty well. They've had a few little blips there, but so let's run some numbers here. And please double check because I'm not that good at the arithmetics here.

So by their own admission, they've bought in five hundred million dollars in the last over about last five years and they take a five percent cut of that. That's always been the case. So that's 25 million dollars. in the last five years.

That's a pretty decent income, but in 2019, they plan to bring in five hundred million dollars again just in the one year instead of the five years that they've been growing. So once again, that's 25 million dollars income in 2019. Just from there, they don't really have any other a source of revenue that I'm aware of. anyway.

So 25 million dollars a year income for a website that basically just is like a middleman. a payment process in middleman between content creators like myself and content consumers, the audience. And really, they don't do a huge amount. They don't host much content, it's pretty much just you know, all text if you go and have a look at my post.

For example, I often post a videos early and that's what most content creators do. Some content creators give like exclusive content and stuff like that, but it's not like they host the videos or the podcasts or anything like that. But most of the time content creators use other platforms like YouTube to host videos and other audio content delivery services for podcasts. For example, that I'll actually use Patreon.

So Patreon is basically just a big text-based website II thing that sends out I'm sure you know millions of emails and stuff like that, so I'm sure they need decent services, but you know it's not a huge content delivery network so to speak, so it's not that hard. I'm not going to say it's easy to make a Patreon competitor, but jeez, in the scheme of things, it's not that hard. They don't do a huge amount there, but once the platform is built, it doesn't really cost them much, if anything more. Once they've built the website and it all works and runs smoothly, It doesn't cost them any more as they grow from, like, say, a hundred and thirty two thousand at the moment, number of creators up to half a million or a million creators.

It really, it's just some extra bandwidth on their website and storage servers. and you know, miscellaneous stuff which the cloud these days it it's It's not a huge expense, but of course you got costs associated with running a business like employees and stuff like that. So let's look at LinkedIn here. They've got just over 300 employees at twenty five million dollars.

Income? that's you know. Just like wages alone that would be, they could pay each employee eighty three thousand dollars a year. That's a US right? So that's a pretty decent wage. So I Greatly doubt they're paying their employees on average eighty three thousand dollars a year.

But hey, you've got other expenses like big fancy, you know, apartments? Where are they based? Are they in? Yeah, this are in San Francisco Rents expensive there, so you know you've got those swanky building to house all your employees in. But basically twenty five million dollars a year for 300 employees? I'm not necessarily sure they need 300 employees to run such a website. Really in the scheme of things, you don't need a to scale proportionally with as you grow if you've got a hundred thousand creators at the moment. If you get two hundred thousand creators, it's not like you need suddenly need six hundred employees instead of three hundred.

It doesn't work like that. most of the time we don't, ever, we just use your website we don't need to contour. I Don't think I've ever contacted somebody at Patreon like I did these. Nidoking bunch of website techie nerds and and a bunch of people who handle the financing and maybe a few support people and stuff like that it.

I Don't know where the 300 is coming from, but gee, maybe we should actually have a look at the job titles. So I'm just kind of finding it hard to believe that with 25 million dollars cash, income, consistent income from a subscription-based service, basically that they can't profitably run a website that doesn't deliver a huge amount of content, really doesn't need a huge amount of resources in the scheme of things. And a website that's already built and working and you could just leave it and it'll be fine. It'll just be a cash cow.

Moo You can't do all that for 25 million dollars a year? I Don't know what it is? Oh, of course, the investors patreon have taken in over a hundred million dollars in investment money. First round back in 2013 when they started 2 million dollars. Oh okay, you get your initial C capital and all that sort of stuff. You could have bootstrapped a business like this pretty darn easily.

Um, and but anyway. okay, they accepted the money back then. Then they took in another 15 million bucks in 2014 and another 29 million dollars in 2016. And just on like a year and a half ago, they took on almost sixty million dollars.

So yeah, unsustainable, my ass. So unsustainable business model. No, but in terms of return on these in for these investors, Yes, its unsustainable. You know, it's been almost a year and a half since they gave them the 60 million bakshi at the tap on your shoulder and you say hey, you know we're expecting a ten-time return on this.

Or maybe you know where we're after that magic unicorn, the magic billion dollar valuation and we want to cash out. And where's this growth? We want to see the growth. 25 million bucks a year income for a hundred million bucks invested and not good enough. You're gonna have to up the game.

So therein lies the trap of venture capital funding. These people don't just want to double them. They don't want to triplet. They, you know they might be happy with a tenfold return on their money when they flip this sucker to the next sucker up the ladder.

Whoo, You know it's but come on Patreon, This is not a business that you should have invested in as in like as a serious investor like this. Yes, it's a nice private business and a regular cash cow Moo right. It's a fantastic business to be in my ass. You can't make this sustainable.

with twenty five million dollars a year income that's just complete and utter. The problem is, the investors want a huge return and it's just not gonna happen. So sorry Jack, but you took the money and yeah, well, now you've got a scramble to try and make it bigger. Change it? Possibly hinting at here.

Perhaps in this article that are they there might be contracts for creators I Don't think Jack actually said that. That might be something that the author of this articles are implying. But yeah, and it's let's move to merge. Merge ain't gonna do it either.

Sorry dude. it's just too many platforms out there and creators already have their favorite much platforms already set up. It's one you're gonna integrate with. Teespring too.

Whoop-dee-doo They're going to create new value services. You already give me everything I Want: As a content creator, you give me the ability to look at who my patrons are, to provide them exclusive content or early content and stuff like that like a private messaging type system I Can get all their contact details is better than PayPal. For example, when it's like harder just to maintain a list and push out content to a like an early content for example to a bunch of random PayPal people, but ultimately, like, you already do exactly what I want. That's why you've been successful.

For content creators, you're in the right place, at the right time, with the right kind of service. You took a quite reasonable fee. Nobody's really complaining hugely about the 10% We can get a cheaper elsewhere, but it doesn't matter. I For example, you can go into right here on my website and you can go in and PayPal is an option.

and PayPal because I've got a business account with PayPal and it only takes like 2.2 percent or something 2.4 percent. It's not much, so like half of what. well, a quarter of what Patreon effectively take. But then I've got to transfer the currency and do all sorts of stuff.

But anyway, like yeah, there are cheaper options out there. but I like the services that Patreon actually provide. but it's nothing that a competitor that isn't tied to all this venture capital funding and is being pressured to grow and grow drastically. Otherwise, they're going to fold someone like Subscribe Star for example, which yes, I just have my account approved on Subscribe Star I've currently got 2 subscribers.

thanks for that. But I'll provide a link down below if you want to go over to Subscribe Star or if you're an entrepreneur and you're looking to start up a you know you're a programmer or whatever you want to start a good business and you won't think you can solve the problem and not get D financed by the likes of Patreon and Stripe and all the other payment processors. As what happened with Subscribe Star, which is an absolute joke, there's currently a lawsuit going on about that anti-competitive type theme, but I don't think it's hugely difficult technically to come up with an alternative to Patreon because you provide some nice services. They aren't tiered stuff and things like that, but it's ultimately something some clever programmer in their basement can't do.

So yeah, you better watch out Patreon, because you took the money and now you might be paying for it. So one of the problems with building a competitive Patreon is of course the payment processes. Because we've already seen Subscribe Star being effectively shut down for a while, they are back in business Now they found an alternative. but they were shut down by effectively D Financed by PayPal and Stripe, which is a credit card processor.

And if you're starting up a competitor and you accept, you know PayPal from people and you accept credit cards and stuff like that and you also pay out creators with PayPal and all that sort of jazz then well, yeah, if you get shut down, do do whatever reason that we won't go into then. Yeah, it's not good. but ultimately amp. the future could be encrypt or of course, but of course crypto kept crypto is great, but the problem is most people don't have the ability to like, you know they don't.

They're not into crypto, they don't know how it works, they don't have the ability, they don't have accounts that are easy to transfer and that sort of stuff. It's only a very small percentage of people that might you know, change in a few years time, but it's probably going to take a lot longer for you know, for the general consumer to actually pick that ups. So what's needed is a competitor that seamlessly takes crypto in the forms of just regular credit cards. but then you come back to the site and then converts it into crypto and changes over.

But then you've got the same system if you get shut down for whatever reason by these payment processes. yeah, it's pretty hard to find alternatives anyway. I Along with that, many other creators do accept direct crypto donations. lots of choose your flavor, so it actually be cool if there was a crypto even just a bare-bones crypto competitor to Patreon that actually had like different tiered levels and membership levels.

And you can like a similar sort of functionality. but it's simply accepted crypto from people and then paid it back to us creators in crypto and stuff like that. But once again, it's yeah. You know it's just the numbers quite aren't there yet, but it'd still be cool.

So Jack you're in a bit of a pickle. You took the VC money and now they want their pound of flesh. Congratulations yeah, you're not doing so well. Oops.

So I don't see how Patreon can expand as much as they need to, or even you know, even close to it without screwing the creators. So yeah, between a rock and a hard place. So whether or not that's going to lead to, you know, some cost-cutting at Patreon layoffs and things like that to make it a bit more sustainable because I don't see where else it's gonna come from these value services? Good luck with that. Jack Anyway, let us know what you think the future of Patreon is down below.

I Hope you enjoyed it. Catch you next time you.