Two Years In, Patreon's Update of the Crowdfunding Model Seems to Be Working

Courtesy Photo
Amanda Palmer's Patreon campaign.

Composers and musicians of the Classical Era paid the bills as patrons of the nobility. Today, musicians, writers and other creators can make a living from their fans through a site called -- what else? -- Patreon.

Nearly two years old, the San Francisco-based service allows creators to accept patronage to provide ongoing support for their work. It's completely unlike traditional revenue streams like iTunes, Pandora or Spotify. The closest comparison is an online tip jar, or perhaps a recurring gift made to a non-profit organization. And it's the next big thing in crowdfunding.

The company recently got a boost when Amanda Palmer, the singer-songwriter whose 2012 Kickstarter campaign raised a record $1.1 million, joined in early March. Palmer was signed to Roadrunner Records as a member of the cabaret-influenced rock duo The Dresden Dolls. After two independent studio albums, her Kickstarter campaign helped define a new era of fan-funded projects. Patreon upturns the model even further. "The thing about this is it really flies in the face of everything else I've learned about the record industry," Palmer tells Billboard.

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Cofounder Jack Conte, one half of the band Pomplamoose, got the idea after spending $10,000 and three weeks on a video few people would watch. The cost-benefit ratio seemed out of whack. Even if hundreds of thousands of fans watched the video, he didn't think his royalties would amount to much. The answer was a platform to let fans support him every time he created a video.

Launched in the summer of 2013, Patreon quickly caught the eye of investors. The company raised $2.1 million of seed funding in late 2013 from Atlas, Charles River and other investors, then got another $15 million from SV Angel (Dropbox, Airbnb), Index Ventures (SoundCloud, Etsy) and Facebook vp of messaging products, David Marcus and other investors in mid-2014.

Timing is everything. Patreon landed at a time when musicians' -- and other types of creators -- creations can be difficult to monetize. The way content is released to fans has also changed. A new generation of artists is releasing a steady flow of digital goods rather than adhere to the old-fashioned album cycle. Artists need to stay in front of their fans. Gone are the days an average artist can release an album, tour and go into hiding for a year or two.

Crowdfunding has become commonplace in the last five years. Six-year-old Kickstarter, perhaps the best-known crowdfunding site, received $529 million from 3.3 million pledgers in 2014 alone. GoFundMe, IndieGoGo and other crowdfunding services have also become popular platforms for raising money for single projects like albums, tours and medical bills. Patreon is different. It lets fans provide ongoing financial support for creators of small things like songs, podcasts, videos and drawings. Patrons give money either per "thing" or per time period (a week or month).

Patreon's subscription approach is a "disruptive" business model that doesn't require a creator to convince a fan to support successive projects, says Danny Rimer of Index Ventures. "Rather, you can count on them to support your creation going forward. That, we felt, was really innovative."

Google Trends shows an increasing number of people are heading to Patreon. In the last 12 months, Patreon's Google search traffic has roughly doubled and, in the United States, has gone from 77% below Indiegogo' traffic to 5% above it. Although it has made gains on Kickstarter, Patreon has only 7% of its bigger cousin's global traffic.

These trends aren't surprising. The patronage model is a good fit for today's digital marketplaces. Access is replacing ownership. An artist's popularity is dictated not just by radio and touring but also by playlists and social activity. Albums are becoming less important (though hardly extinct). More commonplace are EPs, single-track releases and videos to provide a steady diet of entertainment -- and much of it from the cloud and with the corresponding royalties that many artists find problematic.

Musicians are the minority at Patreon. Podcast creators, video bloggers, journalists and other digital creators often face the same economic realities. A full-time creative career is difficult in the winner-take-all market for digital royalties. The long tail has turned out to be good for aggregators but hasn't lived up to the hype for most creators.

The recurring revenue is a major attraction for Amanda Palmer. A week after Palmer's arrival to Patreon in early March, her fans had pledged $27,643 per creation. "There's a real freedom and an incredible sense of freedom to look at that number on the Patreon screen and know that's what I've got to work with. That's my salary."