How can we make "as-a-service" work for musicians?
A breakdown of the Patreon business model, from the artist lens
A quick Patreon primer
The onset of the COVID-19 pandemic was really the first time I’d heard of Patreon.
I saw a few musicians I really like launching on Patreon, so I poked around and ended up subscribing to a few of them.
I didn’t realize until I was listening to an episode of “How I Built This” covering Patreon that the founder, Jack Conte, was the guy from the band Pomplamoose that wrote a viral and somewhat controversial piece about the economics of touring bands that I’d read (as had many others) back in 2014.
As I’ve said before, I’m an amateur musician myself and very much a music fan, and in my day job I analyze pricing and monetization strategies of technology companies. So taking a deeper dive into Patreon was inevitable (BTW - Patreon is also in our XaaS Pricing dataset).
Patreon’s stated mission is to “fund the creative class”.
Functionally, and more tactically, the product that they provide is something like a creator-oriented subscription management and billing platform.
Patreon offers three plans for creators (see plans from Patreon’s website below), each providing additional features for an additional charge. Patreon monetizes by charging between 5% and 12% of monthly recurring revenue that creators generate.
That is actually more like 8% to 15%, because Patreon also charges payment processing fees of 2.9% plus 30 cents per payment for payments over $3 to 5% plus 10 cents per payment for transactions under $3.
More on the Patreon model to follow…but for the bulk of this presentation, I want to focus on Patreon from the artist lens, and explore a core question: Does Patreon’s business and monetization model line up with its stated mission to fund creators?
To do that, I want to look at Patreon by starting at the end of their value chain and exploring how typical creators monetize on Patreon.
Let me tell you about a band I like
Does that headline inspire nightmares of being cornered at the end of a bar?
Well I’ll spare you that full experience of me as gushing fan, even though I am going to take us a bit down that road.
I want to explore Patreon through the lens of the band Spanish Love Songs.
They are top-of-mind because they’re a great band that I’ve been listening to a ton lately, and I’m going to see them for the first time ever at the end of March.
I am also a Spanish Love Songs patron on Patreon.
If you do nothing else after reading this, GO LISTEN TO SPANISH LOVE SONGS AND GO SEE THEM AT A SHOW.
Now that that’s done, let’s dig into the numbers.
According to Patreon data site Graphtreon, Spanish Love Songs is the 115th ranked musical creator on Patreon in terms of patronage. Graphtreon indicates there are 15,641 Patreon creators in the “Music” category overall.
So Spanish Love Songs is firmly in the top 1% of all musical acts on the site. That makes them a very fitting case study for exploring artist monetization on Patreon.
Spanish Love Songs offers five plans on Patreon, which are outlined below. Charges range from $1 to $100. This is pretty much the Patreon standard for how artist memberships are set up. A quick an qualitative scan reveals that nearly all artists have at least the $1, $5, and $10 plans.
According to the Patreon site, Spanish Love Songs has 631 patrons.
Patreon does not publish data on how many Patreons fall at each plan level, so it’s difficult to build a bottom-up estimate of Spanish Love Songs’ monthly earnings.
Graphtreon estimates that the band makes between $1,000 and $6,000 per month on the Patreon platform.
I’m going to assume the actual figure is somewhere in the midpoint or less of this range (I hope I’m wrong).
Even though hard data is scant, sources suggest that most patrons contribute at the $1 and $5 levels. So let’s assume that something like 50% to 75% of the band’s patrons are on those first three plans ($1/$5/$10). We need to also factor in the percentage cut that Patreon takes. If those assumptions are fair, we’re somewhere in that middle range for monthly subscription revenue.
So for the sake of further illustration, let’s assume the band’s earnings fall in the midpoint of the Graphtreon range: $3,500 per month. Backing out the fees (let’s assume the band is on the midpoint Patreon plan that charges at 8% of monthly earnings), that’s an annual take-home of ~$39,000.
Spanish Love Songs is a five-person band, so that’s $7,800 a person for the year.
That doesn’t account for the other costs that factor into the creation of content and products to provide to patrons, and/or for the opportunity cost of the band members’ time spent to produce content for patrons. For example, Spanish Love Songs is providing merch discounts and providing producing products for certain tiers (custom vinyl, buttons, etc.).
That also doesn’t factor in that monthly earnings aren’t consistent. If subscribers churn out, that monthly return falls as well.
By now you’re getting the point - Spanish Love Songs (like many similarly-situated artists) isn’t being funded by Patreon.
Don’t get me wrong - it’s something. It’s a revenue stream Patreon has enabled. That’s a huge positive. But let’s not discount that supporting that revenue stream requires significant additional work to create the services made available on Patreon.
At the end of the day, to make the band a viable endeavor, they have to tour, sell merch, and hold day jobs, even though they are in the top 1% of over 15,000 musical creators (like Spanish Love Songs is). Bands are supposed to tour and sell merch if that’s what they want and are able to do. So there’s nothing wrong with that.
Patreon has cracked the door on an incredible, transformational opportunity. Transforming our favorite creators into viable as-a-service businesses with predictable monthly income could save aspects of the arts industry that are eroding.
But there’s a distance between the promised land that Patreon teases for its creators and the realities of the results most of them realize. That distance is what I want to define and explore in greater detail.
Patreon’s artist monetization problem
What’s the root issue at play here? I think it lies within the ways value is created and captured along the Patreon value chain.
Let’s start with Patreon. They hit a $4 billion valuation based on a 2021 funding round.
So they are doing ok.
Patreon is serving patrons well - they are connecting them to artists in new and personal ways, and giving them additional services and experiences for a monthly cost that is a fraction of a concert ticket or a band t-shirt.
Where the value chain breaks is in the middle, with the creators.
Yes, there are a group of high-earners making hundreds of thousands to millions of dollars annually on the platform. But for most, even those ranked highly within their category (like Spanish Love Songs), Patreon isn’t yielding expected returns.
This points to Patreon’s artist monetization problem. This isn’t a unique Patreon problem, by the way, but they are the category-maker in this space and a tech unicorn, so it merits analyzing this topic through their lens.
From my view, there are a number of issues that collectively define the artist monetization problem:
Artists are only capturing a fraction of their audience on the Patreon platform (Spanish Love Songs has 631 patrons, but 100,000 monthly listeners on Spotify)
Pricing for artists’ plans is static and not tied to value (almost everyone just charges the same - $1/$5/$10/etc.)
Much of what artists provide is not scalable - it’s trading time for dollars (i.e. personalized interactions/videos/content, handwritten stuff, etc.)
Some of what artists provide has a cost impact on other parts of their business (i.e. merch discounts)
Patrons likely land and stay at a single plan (capped willingness to pay, limited upsell potential) versus moving up over time
Patron “churn” is high - if there is less time to create content (because of tour, album writing and recording), creators produce less, and patron attrition rises
How to fix the artist monetization problem
Broadly, the fix lies in Patreon’s ability to evolve from a provider of membership and subscription tools for creators to a complete creator monetization solutions provider.
Patreon does some foundational things to support creator monetization today. They provide content, community resources, and Starter Kits to guide new builders. For users in the Premium tier, a dedicated Partner manager provides additional services to support monetization, such as custom analytics and pricing recommendations.
These are a good start, but they are more descriptive than prescriptive, and limited to certain users. For example, a recommended “new ventures for musicians kit” gives generalized best practices, but it doesn’t specifically help me, if I’m in a particular genre, with unique goals and unique fans, build a business to pursue my those goals.
So what could be offered to make the Patreon platform more prescriptive, and thus a more viable on-ramp to successful, sustainable as-a-service businesses for creators?
Here are a few ideas for Patreon:
Provide guided starter kits based on specific sub-community creator types and/or creator goals
Provide onboarding and/or monetization advisory services
Provide audience building and management services
Bring creator discovery onto to the platform
Structure the creator experience and workflow around goal design
Build in price testing and experimentation tools for artists to use to more dynamically test different pricing
Provide sub-user analytics on patron personas to help creators better understand who buys and most often
Provide churn and retention analytics and management tools
Extend into related areas that are complementary (i.e. virtual events, digital product creation)
What can artists do today?
The meta-challenge with Patreon for most artists, I imagine, is one of commitment. Things like an album cycle, tour, and merch, require different commitments and levels of time than the content produced on Patreon.
Today, there’s a long-term tipping point where an artist has to make a decision to go “all-in” as a Patreon-first creator, perhaps at the expense of other traditional modes of engagement and monetization.
This is probably why most of top creators on the site today are in categories that are already suited to sell subscription-type services, such as podcasters, community builders, newsletter writers.
So for the rest, there’s a balancing act question - how do I optimize what I can earn on Patreon while doing the other things I / we do?
Here are a few recommendations on the best routes to as-a-service business optimization for the creator:
Ask peers at a similar level in their Patreon journey how they are making it work; use sources like Graphtreon to find similar peers that you might not be thinking of in other creative spheres
Ask different types of patrons about the pricing of the memberships and the value they get out of different types of experiences
Consider increasing prices on a consistent, periodic basis (every year)
Consider packaging services tiers to incentivize annual memberships versus month-to-month memberships
Focus on creating content that is one-to-many, such as media and digital products (a Spanish Love Songs “how we write songs” e-book is written once and then consumed by many, whereas “write a song for me” is a one-to-one service that requires trading time for each output)
Launch different types of Patreon experiences around the “focus of the moment” (if the band is recording an album, provide subscription experiences around that, or if the band is touring, provide a different set of experiences around that)
Consider banding together (bad pun, sorry) with creative peers or touring partners to create “community” subscriptions - there may be more willingness to pay for access to content, experiences, etc. from multiple bands versus just one, especially if tied to an “event” such as a tour
Consider a competitive option to Patreon with better platform economics and/or a better fit of services for your specific category - this AppSumo blog does a good job introducing some other options
Evaluate whether building your own community and membership site, and/or working with a trusted community member (often a superfan) to build a membership site, can work for you
I hope this helps, particularly for the creators out there seeking to “productize themselves” and grow sustainable subscription businesses on Patreon.
If you want to discuss these ideas further or add to them, shoot me a message or reply in the comments. And if you like this type of breakdown, please subscribe (it’s free) - I'll be putting out stuff like this every week!