| Dig­i­tAL mEDici

You no longer need to be rich to be an arts bene­fac­tor. But can crowd­fund­ing site Pa­treon save cre­ators from the star­va­tion wages of on­line ad­ver­tis­ing?

Forbes - - CONTENTS - By kath­leen chaykowski

You no longer need to be rich to be an arts bene­fac­tor. But can crowd­fund­ing site Pa­treon save cre­ators from the star­va­tion wages of on­line ad­ver­tis­ing?

It’s 10 p.m. on a Sun­day in Novem­ber at Cal­i­for­nia’s Bur­bank Air­port, and Jack Conte, the typ­i­cally beam­ing, bearded half of the hus­band-and-wife mu­si­cal duo Pom­plam­oose, is lean­ing back in a chair, his hoodie pulled over his head, try­ing to get some rest. Conte, 33, spent much of the week­end in Los An­ge­les jam­ming with his funk band, Scary Pock­ets, and now it’s time to re­turn to San Fran­cisco for an en­tirely dif­fer­ent type of gig: his day job run­ning Pa­treon, a web­site and mo­bile app where fans pay monthly sub­scrip­tions to sup­port their fa­vorite cre­ators, from pain­ters to pod­cast­ers, singers, dancers, writ­ers, game de­sign­ers and pho­tog­ra­phers.

The mo­ment per­fectly cap­tures what Conte light­heart­edly calls his “iden­tity cri­sis”: be­ing CEO and founder of a 100-per­son startup (val­ued in Septem­ber at an es­ti­mated $400 mil­lion) with­out com­pletely giv­ing up on his pas­sion for mu­sic, which is what led him to in­vent Pa­treon in the first place. “A lot of cre­ators de­pend on us be­ing a high-per­for­mance team,” Conte says dur­ing an in­ter­view at Pa­treon’s San Fran­cisco of­fice. “That’s the most im­por­tant thing in the world to me, so there’s less time for mu­sic.”

Conte’s ded­i­ca­tion stems from a con­vic­tion that Pa­treon can save con­tent cre­ators from hav­ing to sur­vive on dig­i­tal ad­ver­tis­ing—an all but im­pos­si­ble task for most— or re­sort to one-time cam­paigns on sites like Kick­starter and Indiegogo. The com­pany is built on a coun­ter­in­tu­itive bet that fans are will­ing—even ea­ger—to pay monthly sub­scrip­tions for con­tent that they could get for free as long as it helps sup­port their fa­vorite artists and it’s easy to do. There’s rea­son to be­lieve he’s right. More than a mil­lion Pa­treon users are help­ing pro­vide some 50,000 artists with a pre­dictable monthly pay­check. “On Kick­starter and Indiegogo, cre­ators es­sen­tially have to start over ev­ery time,” says Danny Rimer, a part­ner at In­dex Ven­tures who is a Pa­treon in­vestor and board mem­ber. “It’s the same rea­son soft­ware com­pa­nies went from li­censed soft­ware to sub­scrip­tions: pre­dictable rev­enue and bet­ter ser­vice for cus­tomers.”

Since Conte started Pa­treon four years ago with his Stan­ford Univer­sity room­mate Sam Yam, 33, who is CTO, the com­pany has paid out more than $250 mil­lion to its artists—$150 mil­lion in 2017 alone. Pa­treon’s trac­tion is fu­eled by a sim­ple pledg­ing sys­tem and the di­rect line it opens be­tween artists and fans, or “pa­trons,” who get ac­cess to perks like live Q&As or ex­clu­sive chats with the artists, and more ca­sual be­hind-thescenes footage than an artist might share on Instagram or Face­book. It also doesn’t hurt that be­ing al­tru­is­tic makes peo­ple feel good. In other words, Conte didn’t need to change hu­man na­ture to get Pa­treon to work, he sim­ply needed to fa­cil­i­tate the ex­change be­tween fan and artist.

While Pa­treon is no longer the only player in its cat­e­gory (Kick­starter launched a com­peti­tor called Drip in Novem­ber), it is the largest— and it’s grow­ing faster than ever. The num­ber of pa­trons and cre­ators and the amount pledged are all dou­bling yearly. Now Pa­treon is us­ing some of the more than $100 mil­lion it has raised from in­vestors, which in­clude Joshua Kush­ner’s Thrive Cap­i­tal and Freestyle Cap­i­tal, to dou­ble its head count over the next year.

By some mea­sures Pa­treon’s suc­cess de­fies logic. The av­er­age user pledges $12 per month, more

than the cost of a ba­sic sub­scrip­tion to Spo­tify or Net­flix, which of­fers ac­cess to im­mense cat­a­logs of video and mu­sic. (Some users pledge per piece.) Dozens of artists make more than $30,000 per month, in­clud­ing video re­viewer Blind Wave and a capella singer Peter Hol­lens, who made about $400,000 on the site last year.

From the start, Pa­treon has taken a 5% cut of each pledge. That’s the same cut taken by Kick­starter and Indiegogo but far less than rev­enue­shar­ing pro­grams on YouTube and Ap­ple iTunes, which keep 45% and 30%, re­spec­tively. “The mis­sion is to send as much money to cre­ators as pos­si­ble,” Conte says. The com­mis­sions gen­er­ated an es­ti­mated $8 mil­lion in rev­enue last year.

Pledgers sign up for “tiers,” gen­er­ally rang­ing from $1 to $10—though some pay much more— for ac­cess to the artists’ perks. Ukulele per­former Cyn­thia Lin, who of­fers fans live lessons, de­rives about half her in­come from Pa­treon and grew her

fan base from 400 to 1,400 in the past year. With video “sketch­book tours” and chats, Chilean il­lus­tra­tor Fran Me­ne­ses pock­ets more than $4,000 per month, which sup­ple­ments in­come from her Etsy shop and Instagram pres­ence.

Cre­ators join Pa­treon for free and don’t have to prom­ise ex­clu­siv­ity. The site of­fers them in­struc­tions on how to use it most ef­fec­tively. It also pro­vides a grow­ing list of back-of­fice tools such as an­a­lyt­ics and email man­age­ment to help cre­ators run mem­ber­ship cam­paigns mod­eled on those of NPR sta­tions. For now, Pa­treon is de­signed for cre­ators who al­ready have estab­lished fol­low­ings but aren’t house­hold names. Long term, Conte hopes to help fund big­ger names and prove that tech­nol­ogy can help re­store the fi­nan­cial un­der­pin­nings for con­tent cre- ators that the in­ter­net has largely eroded.

Pa­treon’s artists-first ethos may be lu­cra­tive for some, but it comes with pit­falls, es­pe­cially in a world where dig­i­tal busi­ness mod­els change fre­quently. “Cre­ators need to di­ver­sify their in­comes as much as pos­si­ble so the rug can’t be pulled out from un­der them,” says Laura Ch­ernikoff, ex­ec­u­tive di­rec­tor of the In­ter­net Cre­ators Guild.

For Conte the mis­sion is per­sonal. He grew up in bo­hemian-chic Marin County, just north of San Fran­cisco, and was hooked on mu­sic from age 6, when his fa­ther taught him the blues scale. While study­ing mu­sic and com­po­si­tion at Stan­ford, he started mak­ing YouTube videos with his then girl­friend, Nataly Knut­sen, in 2007. (The two mar­ried in 2016.) In 2013 he drained his sav­ings ac­count, maxed out two credit cards and spent three months mak­ing an elec­tronic mu­sic video, com­plete with robots and a replica of the Mil­len­nium Fal­con cock­pit. His fans loved the video, which got more than a mil­lion YouTube views in its first year. How­ever, Conte pock­eted just $54 from ad rev­enue over the video’s first month. To date, it has gen­er­ated about $1,000. Not in­clud­ing Conte’s time, it had cost more than $10,000 to make. “It was this rock-bot­tom mo­ment for me as a cre­ator,” Conte says. He knew he’d cre­ated some­thing of value but would never be paid for it. “That dis­crep­ancy led di­rectly to the for­ma­tion of Pa­treon,” he adds.

Conte dis­cussed his idea with Yam, who pro­grammed the site in months. It went live in May 2013, and within min­utes more than 100 fans were pledg­ing up­wards of $700 a month to sup­port Conte’s work. Within months Pa­treon had in­vestors.

Conte is now eye­ing a num­ber of op­por­tu­ni­ties for growth. First is over­seas ex­pan­sion: The site is in English and takes only U.S. dol­lars, yet 40% of pa­trons are out­side the U.S. Over time, Conte imag­ines more im­mer­sive fea­tures, such as vir­tual re­al­ity con­certs. Far­ther out are some­what fuzzy no­tions of turn­ing Pa­treon into a provider of small-busi­ness ser­vices, in­clud­ing tick­et­ing and mer­chan­dis­ing, to help artists turn their pas­sions into pro­fes­sions. “Artists don’t have to starve any more,” Conte says.

“I don’t be­lieve in art. I be­lieve in artists.”

Pa­treon co­founders Jack Conte (left) and Sam Yam watched the in­ter­net de­stroy the busi­ness mod­els that sup­ported scores of con­tent cre­ators. They say their tech­nol­ogy can be part of the so­lu­tion.

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