After Amazon switches payment options for creators, Subbable sells to artist platform Patreon
Again and again, small startups are warned against relying too heavily on large third-party platforms. Just as publishing businesses built on Facebook traffic are at the mercy of Zuckerberg's News Feed algorithm, ecommerce companies that rely on Amazon's infrastructure may fall prey to the company's whims.
That's precisely what happened to artist funding platform Subbable -- which lets fans send monthly payments to creators they love -- when Amazon discontinued what's known as Flexible Payment Services (FPS) in favor of "Login and Pay with Amazon." The differences between the two services are largely cosmetic, but what matters, according to Subbable founder Hank Green, is that the switchover required every creator on Subbable's platform to re-authenticate each fan's payment information or else the money would stop flowing. Green, who is also one half of the team behind Crash Course, an educational YouTube channel with over 200 million views, was rightly worried that most of his users wouldn't come back to re-submit their payment information, even if prompted to do so. That was sort of the beauty of the platform: set it and forget it.
So Green took a bold move: If his creators and users would be forced to move to a new payment platform, why not make the most of it? And so Subbable has sold itself to a similar but better-funded service called Patreon, and Green's creators -- who in aggregate have generated over one billion YouTube views, resulting in over $1 million in annual revenue -- will move to Patreon, if they wish to stick with him.
The partnership has been in the making for a long time: Green had been an advisor to Patreon for over a year, and when the company's CEO Jack Conte -- who also sings in the indie pop duo Pomplamoose -- first decided to launch his platform, Green was one of the first creators he contacted.
"I sent him an email hoping one of his channels would launch on Patreon," Conte says. "We talked about the ad revenue model, and he said, 'I'm three months in and several thousands dollars into building it myself.'"
Despite launching after Subbable, Patreon has become a bit of a darling among venture capitalists and angel investors. Last summer, it raised a $15 million Series A round from a murderer's row of backers that included Index Ventures, Charles River Ventures, SV Angel*, Reddit cofounder Alexis Ohanian, and ex-PayPal President David Marcus. In addition to the funding, the platform and payment expertise of guys like Ohanian and Marcus certainly gave Patreon an edge in its friendly rivalry with Subbable.
Conte did not share the exact terms of the deal, but he did say that Patreon will match up to $100,000 in user payments made to Subbable artists who make the leap to Patreon. That $100,000, Conte says, makes up "the bulk of the money that Patreon is spending on the deal, far and away."
This news comes amid a somewhat up-and-down few weeks for Patreon. On one hand, the platform has shown impressive growth since launching and now boasts 250,000 active patrons who send $2 million to creators every month. On the other, Patreon took heat last month for failing to build a creator-friendly solution to an extremely problematic change to Europe's tax code that now makes selling goods to European consumers a nightmare for independent merchants. [UPDATE: Patreon announced on March 11 that it would "handle the collection, filing, and remittance of VAT payments on behalf of our creators."] Making matters worse, other big creator platforms like Etsy and Gumroad did take steps to ease the impacts of this change on creators. In Patreon's defense, however, doing so appears to be more challenging for its platform, which unlike Etsy and Gumroad exists as a strange hybrid between crowdfunding and ecommerce.
Tax issues aside, the Subbable acquisition is a nice win for Patreon, and an acceptable outcome for Green. After all, these platforms are only as good as the creators who choose to use them. And in Subbable, Patreon has added a crop of wildly popular digitally-native artists to its roster.
[illustration by Hallie Bateman]
(*Disclosure: SV Angel and Stan Chudnovsky are investors in both Patreon and Pando.)