Patreon Business Model

The Patreon business model is an innovative approach to monetizing creative content and building a dedicated community of supporters. This model has gained significant attention in the industry for providing a sustainable way for creators to earn a living while pursuing their passion.  

The platform offers tools for creators to manage a subscription content service and ways for musicians, artists, and other creators to connect with their fans and subscribers and provide them with special experiences.  

In this piece, we will review Patreon’s business model, including its revenue streams, customer segments, and value propositions. But before that, let’s explore the company’s history and how it has become a leading platform for creators.

A brief history of Patreon

Patreon was co-founded in 2013 by Jack Conte and Sam Yam. Conte was a musician struggling to make a living through YouTube videos.

Together, they decided to develop a platform that could connect creators with opportunities to commercialize their content and establish a reliable source of revenue after realizing that their followers were willing to directly support their work.

In May 2013, Patreon’s beta version was made available, which allowed authors to create subscription-based memberships for their followers. Independent creators, particularly those in the music and podcasting industries, swiftly took to the site.  Patreon received $2.1 million in startup capital from backers like Alexis Ohanian and Y Combinator by the end of 2014. 

The company continued to grow swiftly; by 2019, it was estimated to have earned its developers over $1 billion.

Who Owns Patreon

Patreon is a privately-owned company with Jack Conte as its CEO.

Patreon Mission Statement

Patreon’s mission statement is to “fund the creative class.” 

How Patreon works

Patreon, a subscription-based network, works by connecting creators with their fans, known as “patrons.” Patrons pledge a certain amount of money to support a creator on a monthly basis. 

On Patreon, creators can set up various membership tiers with unique rewards and advantages for their fans. These memberships are available to fans who want to support the work of their favorite creators. Patrons receive special content, access to new jobs, and other benefits.

Each transaction between creators and patrons is subject to a commission charge by Patreon. Most of the company’s income comes from this commission and fans’ optional tips for their preferred producers.

As a subscription-based platform, it means that creators receive a steady income stream from their patrons, enabling them to focus on creating content without worrying about financial instability.

How Patreon makes money

Transaction Commission

The commission it receives from transactions between creators and supporters is Patreon’s primary source of income. Fans can become members on the creators’ Patreon pages, with various membership tiers offering multiple benefits and prizes. Each transaction between creators and their supporters is subject to a commission fee on Patreon. Different commission rates apply depending on the membership tier and payment method.

For instance, the commission rate for creators using Patreon’s Pro plan is lower than that for creators utilizing Patreon’s Lite plan. To entice more creators to use it, Patreon’s Pro plan gives them access to additional services and has lower commission fees.

Products Sales

Patreon has explored the possibility of using item sales as a revenue source. In 2018, Patreon launched the “Patreon Merch” platform, which enables creators to produce and sell goods to their fans. 

Premium Features

Patreon offers creators premium features, such as creating a membership program or offering merchandise to their patrons. These premium features come at an additional cost to the creator.

Live Events

Live events have also been tested as a potential revenue stream by Patreon, which earns them money. A series of live events named “Patreon Assembly” was introduced by the firm in 2019 with the goal of bringing together creators and followers in person. Workshops, panels, and networking opportunities were all part of the programs. The COVID-19 epidemic, however, forced Patreon to postpone its 2020 and 2021 events.

Patreon Business Model Canvas

The Patreon Business Model can be explained in the following business model canvas:

Patreon Customer Segments

Patreon customer segments consist of:

• Creators: They are talented individuals who produce content that fans and patrons support. These can be musicians, writers, artists, podcasters, and more. Patreon recognizes that creators are in need of support and resources to continue producing their work, so they provide various tools and features to help creators grow and monetize their content. This includes offering exclusive content, setting up membership tiers, and receiving support directly from fans and patrons;

• Fans: These are the people who enjoy and consume the content that creators produce. They are an essential part of the Patreon ecosystem because they provide financial support by supporting their favorite creators and gaining access to exclusive perks and advantages. In contrast, creators use it to monetize their material and create a reliable income stream;

• Patrons: These are superfans who go above and beyond to support their favorite creators. They are willing to pay a premium for exclusive content and perks. Patrons are a critical customer segment for Patreon because they provide a significant portion of creators’ revenue. Patreon recognizes the importance of patrons, so they offer features such as early access to content, exclusive merchandise, and personalized rewards to keep them engaged.

Patreon Value Propositions

Patreon value propositions consist of:

• For creators: Patreon allows creators to turn their passions into sustainable careers, build a community of supporters, and share their creativity with the world by doing what they love. From musicians to writers, artists to comedians, Patreon offers creators the flexibility to create unique and compelling content while giving them the tools they need to monetize their work;

And the best part is that creators get to offer their supporters exclusive content and rewards as a way to say thanks;

• Fans or Patrons (supporters): Patreon offers supporters the unique opportunity to support the work of their favorite creators. These supporters help bring their favorite creators’ visions to life and are also a part of their creative journey. This direct support creates a more sustainable income stream for creators and helps ensure their work can continue.

Patreon offers supporters exclusive access to content and personalized perks. This creates a sense of connection and community between supporters and creators, allowing supporters to feel like they are a part of the creative process. Plus, they can connect with other like-minded people in the Patreon community and maybe even make new friends.

Patreon Channels

Patreon channels consist of:

• The Patreon website;
• The Patreon iOS and Android mobile app;
• Social media platforms, such as Twitter and Instagram;
• Creators’ personal websites and social media accounts.

Patreon Customer Relationships

Patreon customer relationships consist of:

• The platform’s ability to connect creators with their fans’ exclusive content and benefits;
• Patreon also provides customer support to creators, fans, and patrons through email and social media.

Patreon Revenue Streams

Patreon revenue streams consist of:

• Transaction Commission
• Products Sales
• Premium Features
• Live Events

Patreon Key Resources

Patreon key resources consist of:

• Platform
• Creators
• Fans/Patrons
• Data and analytics resources
• Brand
• Intellectual Property

Patreon Key Activities

Patreon key activities consist of:

• Platform development and maintenance
• Community management (creators and supporters)
• Marketing and promotion
• Payment processing
• Data Analytics
• Customer support
• Partnerships

Patreon Key Partners

Patreon key partners consist of:

• Payment processors
• Content platforms
• Influencers and media companies
• Brands and sponsors
• Non-profit organizations
• Technology partners

Patreon Cost Structure

Patreon cost structure consists of:

• Payment processing fees
• Platform development and maintenance
• Marketing and promotion
• Customer support
• Partnerships
• General and administrative costs 

Patreon Competitors

Patreon faces competition from various other platforms that offer similar services to creators. Some of Patreon’s main competitors include:

• Ko-fi: Like Patreon, Ko-fi allows creators to receive support from their fans, but instead of monthly subscriptions, supporters can make one-time donations or “buy a coffee,” as Ko-fi likes to call it. This can be great for creators who don’t want to commit to producing regular content but still want to receive support from their fans;

• OnlyFans: OnlyFans allows creators to offer exclusive content to their fans, much like Patreon, but with a greater emphasis on a pay-per-view model;

• Kickstarter:  While it’s not explicitly designed for ongoing support like Patreon, Kickstarter allows creators to crowdfund specific projects, whether it’s a new album, a book, or a film. Supporters can pledge money in exchange for rewards, and if the project reaches its funding goal, the creator can bring their vision to life;

• YouTube: A site for sharing videos, unlike Patreon, a subscription-based platform. However, YouTubers can earn money through content monetization, ad revenue, sponsorships, and advertisements.

Patreon SWOT Analysis

Below, there is a detailed swot analysis of Patreon:

Patreon Strengths

• Established platform: Patreon has a long history and is primarily regarded as a leader in the creator economy;

• Diverse creator base: Numerous types of creators are supported via Patreon, including musicians, podcasters, and artists;

• Strong community: The active creator and supporter community on Patreon fuels usage and platform growth;

• Flexibility: Patreon allows creators to set their own pricing tiers and receive recurring payments from supporters.

 Patreon Weaknesses

• Dependence on creators: Because Patreon’s business model depends on the success of its creators, the company may be susceptible to changes in the creator economy;

• Competition: A number of other platforms that provide creators with comparable services compete with Patreon;

• Limited scalability: Patreon’s business model is limited in terms of scalability due to the niche nature of its platform and the subscription-based revenue model.

  Patreon Opportunities

• Growing creator economy: The creator economy is expanding quickly, giving Patreon plenty of room to keep growing its user base and revenue sources;

• Partnerships: Patreon has the opportunity to develop new partnerships with content platforms, influencers, and brands to expand its reach and provide additional support to its users;

• International expansion: Patreon has already started to broaden its platform internationally, but there is still a lot of room for expansion into other markets;

• Platforms Development: As more tools and platforms are added to Patreon, creators will find it easier to make money from their work and grow their fan populations.

    Patreon Threats

• Recession or economic downturn: As artists and patrons may have less discretionary cash to spend on content, a recession or economic downturn could have a negative effect on Patreon’s business;

• Regulation: Modifications to rules or legislation governing online payments or content creation may affect the business model and revenue sources of Patreon;

• Technological disruption: New platforms or tools can permanently alter the Patreon business model due to the quick speed of technological advancement.

Conclusion

A leader in the creator economy, Patreon offers a platform for creators to monetize their work and create long-term revenue streams. By leveraging its network of creators and fans, Patreon has created a vibrant community that drives engagement and growth on the platform.

Through its diverse revenue streams and partnerships with payment processors and other tools, Patreon has built a sustainable business model well-positioned for continued growth. Patreon has significant opportunities for further expansion and innovation as the creator economy expands.

However, economic downturns, legislative changes, and technological disruptions pose substantial competition for Patreon and possible risks. Therefore, it will be crucial for the business to keep innovating and adapting in order to stay ahead of the trend and keep its position as an innovator in the economy of creativity.