Why music isn’t a top-two category on Patreon (yet)
By: Cherie Hu
Tags: Business, Startup, Music, Crowdfunding, Technology

Cherie Hu: Hey, Wyatt, thanks so much for joining the podcast.

Wyatt Jenkins: Thank you for having me. I love talking about this stuff.

CH: So first off, given that this a music podcast, I would love to get a sense of music’s footprint on Patreon right now. Because there are, to my knowledge, a lot of artists that are making a substantial living and monetizing a significant portion of their fanbase on Patreon — Amanda Palmer and Ben Folds being two of the most prominent ones — but I feel like it’s still… I think it is gaining a lot of mindshare among artists, but not as much traction as I think it could get. So if we could start there, just to get a sense of what is the current size of music as a category on Patreon — is it growing quickly compared to other categories like podcasts or illustrators, or other types of artists?

WJ: Yeah. So music is currently in our top five categories right now … but, honestly, I think it should be number 1 or 2, and we haven’t yet reached that tipping point. And that’s the thing that we’ll probably talk a lot more about today, in terms of what I think it’ll take to reach that tipping point.

But it is still a major category for us, and it’s growing really well. Over the past few years, music has grown about 6x in the number of creators, and about 4x in revenue. So we’re getting more musicians joining, and the revenue those musicians are making is growing and growing. [EDITOR’S NOTE: A Patreon rep recently told TechCrunch that Patreon’s overall creator base grew 50 percent year-over-year in 2018, i.e. only 1.5x growth, which suggests that the music category is growing much faster than the platform average.]

But there’s just a bunch of blockers for musicians and Patreon at the moment that we’re still working through. It’s going to open up here in the next one to three years, is sort of my prediction … but we’re right at the beginning of that.

CH: When you say “blockers” for music growing more on Patreon, what exactly are you referring to? Is it just certain things that musicians would want that aren’t available on Patreon at the moment?

WJ: There are a couple of features, but that’s not the main blocker. I think if I had to summarize what the blocker is for musicians: all of their other revenue streams look, sound and act really differently from a membership. They’re coming from gigs, they’re coming from sales of music, touring — you know, all these other lines of revenue for musicians are these spiky, hustle-based lines of business. And Patreon’s over here saying: Hey, you can make a six-figure income by just having a close relationship with your fans, and delivering unique value to them in some form, whether it’s just them getting some backstage access to you, or them getting behind the scenes in how you made a song, or them getting some merch — you can create this other type of business.

Most musicians who I talk to, it’s very rarely a feature. It’s very rarely like, “oh, if Patreon did x, then I would join.” It’s usually like, “oh, wait, how would that work? Can I monetize my brand deals on Patreon?” And it’s like, no, no, no, that’s different. They try to take the model that they’re currently using, and put it on Patreon. And we have to say — so what Patreon’s job is, is to define membership for the whole world. That’s what we’re working on right now: we’re defining, what is a membership? And why do artists give a shit about it? I think that’s the biggest hurdle for us.

Secondarily, Patreon’s roots were that of crowdfunding. The origins of the company were very much like, “hey, I have a thing I make, and I would like funding for that thing.” And that doesn’t quite sit right with musicians … Musicians are saying, “I am a musician for life, and I don’t need funding for that — I make a thing of value, and you should become a member if you really care a lot about the thing I make of value.” That’s more the branding issue I was referring to.

In the early days, there were some big musicians like Amanda Palmer who said, “this is a great model, I’m going to take it on” — so you have all those early adopters, and people that are really forward-thinking who say, you know what, this is a great model, I’m going to do it. But then you have a bunch of folks who are, like, “oh, if I do that, does that degrade the relationship with my fans? Does it make it seem like I’m asking for money?” Those are the brand issues, and we’re now in year two of a five-year process of being a world-class membership product, where — no, you’re not asking for anything, you create something of value, and your fans love getting backstage access to that thing you create. So in that sense, for musicians, it’s a next-gen fan club, you know? That’s the way we think about Patreon.

CH: Maybe there’s also, in this current day and age where streaming dominates, a pressure to scale — [such] that just by nature of what a membership is, it’s not as appealing to some artists. There’s a lot of pressure to get on this one playlist, or get this one brand partnership or sync that will reach the widest audience. This is something that I’m experiencing first-hand: so, I have a Patreon, I’m really enjoying it and it’s going well, but it’s also just over 150 people supporting right now. [EDITOR’S NOTE: This number has since increased to around 170! :) ]

I can just imagine, if you’re bringing that to an artist, saying: you can have 150 people, or a couple hundred people, allowing you to make close to a full-time living on Patreon, or you can get put on this playlist that has five million followers. That gap is so big, and I think now in terms of the kind of mass-market idea of what success is in the music industry, there still is much stronger of a penchant towards scale.

WJ: Well, I mean, gosh, we are all wired for massive reach unfortunately, because of the vehicles that have driven monetization of music, really for 30 years. Right? I mean, major labels were the culprit in the ’80s and ’90s who would sign a musician, and they only care about selling as many records as possible. So major labels would push artists to do weird things like make a terrible album because there’s two good songs on it — because the major label’s pressing for the packaging of the good that they’re going to sell the most units of.

Basically, that model started to break down, and we moved into this Internet world — and now we’ve just swapped it out for another thing, right? Now we have, “oh, who’s got the most eyeballs?” Because Google and Facebook, they care about ad revenue. And Spotify. So if you can drive listens or eyeballs with the thing you do, you will get fractions of a penny on the ad revenue. And again, these are just giant machines of scale that are trying to just do what they do best, which is make a lot of money off the most volume of eyeballs or listens. And again, we’re just back in a really fucked up situation, like we were in the ’80s and ’90s with major labels, only now it’s with major tech platforms.

CH: Kind of related to this, in terms of the role of tech platforms: I saw this blog post that you’d written back in February on Patreon’s website that I thought was so fascinating, and it was about how you argue that Patreon is not a discovery platform. And you’re making the distinction between discovery and membership.

I’ll link to this in the show notes for those who are listening, but in case you haven’t seen it, Wyatt is addressing this question that you’ve gotten all the time of, “why doesn’t Patreon help me get new fans, or grow my audience, or feature me on their homepage?” — questions that I feel like, in the context of music-streaming, artists and managers are jumping on all the time when they’re talking to the Spotifys and Apple Musics of the world. Right? Like, “how do you feature me on your homepage?”

There’s one specific paragraph that I want to read out loud, now, that I thought was particularly striking to me. So you wrote:

“If we were to become a discovery platform [we being Patreon], a platform where users go to browse new content, that would put Patreon in between creators and fans. Think about YouTube, Facebook, and Instagram. These sites are great discovery platforms, because they have all the eyeballs. [Speaking of eyeballs.] Their goal is to acquire and retain all the eyeballs. They love rich algorithms, designed to keep the content you will click on. Through their algorithms, they put themselves in between the viewers and creators by deciding which content to display.”

That just stood out to me because there is this gradual, ongoing reckoning with the fact that major streaming services like Spotify and Apple Music are gatekeepers — or they limit the extent to which artists can truly be direct-to-fan or direct-to-listener in the way that they can be on a site like Patreon, because Spotify and the like are very motivated by discovery, and so they’re always trying to feed new content to listeners, and so they control the pipes of how content travels in their platform.

I have a lot of questions related to this concept, but the first one is — so it seems that, based on this blog post, you don’t think the fact that Patreon is not a discovery platform is a disadvantage. I feel like for a lot of founders who are building start-ups related to helping creators or helping people create content, discovery and editorial are a necessary component of a “successful” company. It’s almost table stakes for even competing in this realm. But based on this blog post, you’re saying, no, that’s not what Patreon is about. We just want to take a backseat, and help creators connect with their supporters as effectively and as efficiently as possible without anything going in between. I would just love to get your thoughts on that.

WJ: Whoa, there’s a lot there.

CH: There is a lot. [laughs]

WJ: Let’s look at a bunch of industries. I think there are examples of other industries where people aren’t focused on discovery and they’ve grown very large businesses. I’d say Shopify is a really good example of that. When you buy a T-shirt from someone’s Shopify store, Shopify doesn’t tell you to go buy a T-shirt at some other Shopify T-shirt store. In a world of discovery platforms, Shopify’s strategy is: We will be the SaaS [software-as-a-service] platform of all these stores, where the store owners have complete control over their business.

So basically, we believe our core value and one of our real value propositions to musicians is that our product will strengthen the connection between you and your biggest fans. We will not degrade the connection between you and your biggest fans. And what I would argue, and what I’m saying in this piece, is that discovery platforms by their nature encourage the end user, the consumers, to keep looking at stuff or keep listening to stuff. That is the design; that’s the mousetrap. Just keep clicking, keep getting notifications, keep doing stuff — and by that design, it will always prioritize the engagement of the consumer over the needs of the person making the thing. That’s just the way they’re built.

In a world of discovery platforms, we think the pendulum’s swinging the other direction for the next ten or fifteen years, and a platform that strengthens the connections between you and your fans is going to actually be a long-term, viable, high-growth business. That’s the pitch, if I were to be talking to, like, a VC [venture capitalist] in Silicon Valley: Hey, this is not a discovery-platform mousetrap that you’re used to seeing in 20 other businesses that you invest in. This is quite the opposite. It’s a platform of lots of little memberships, and what our product does is strengthen the relationship of our memberships.

CH: Maybe that is an element of the branding or messaging challenge to artists, as well. I can imagine an emerging artist with maybe 500 listeners on Spotify — it’s a number, but it’s not that much — I can imagine an artist with that followership going to Patreon, expecting [Patreon] to be kind of a driving force in increasing listenership on streaming, because that is their priority. And so you’re saying that that is not Patreon’s role at all. It’s about strengthening those bonds that already do exist that artists and other creators have already built up elsewhere. Is that correct?

WJ: That’s correct. Like, I’m a fan of Ben Folds, and Ben Folds is on Patreon. And he dictates the design of that membership. He’s got things that he does for his fans: one thing that he does is livestream him[self] drinking and smoking a cigar, and listening to vinyl in his house. He does that, like, once a month or whatever, and occasionally he does a post, like, “oh, I’m at this tour, I’m at wherever.” He’s defining what the membership looks like that connects him and his best fans. It’s not, “I have to go do a post every day at five o’clock to continue to rank high in the algorithm.” It’s: “Hey fans, this is the stuff I’m going to do in my private membership. Is that interesting to you? And if so, join!” And he’s had tons of success with that, and I see a bunch of other musicians do that, too. But again, it’s just a fundamentally different model than all the other things that exist out there, and I think that’s why we have this challenge of defining membership.

The other big piece that’s challenging is a lot of people think a subscription and a membership are the same thing. And they’re really pretty different.

I have a subscription to Netflix. I pay for it every month, and I get content, and I love that content. It’s really good. But I don’t feel like I’m a member of Netflix. I don’t go to a hangout and talk to people about my Netflix subscription, or do live Q&As with the head of product or something like that at Netflix. I subscribe to content on Netflix.

So what Patreon is is a membership platform. And what that means as a patron, as someone who is a fan of a musician, is you are a part of that tribe. You have an inside view, you get the merch first, you get to understand what songs are coming out later, you can have creative input — those are all the kinds of things that happen in a membership that’s fundamentally different than a subscription. Back to what we’re trying to define here: we are defining membership on the web as a way to deliver really unique value to fans.

CH: Just playing devil’s advocate — one thing that I can see a musician saying is, “Oh, I’m already giving all of these kinds of benefits on platforms like Instagram and Snap already.” And obviously the big disadvantage of relying on those platforms is that you’re not getting paid for it, most of the time — like you’re not getting paid, or people aren’t supporting you, in exchange for an Instagram Live video the same way that they would on Patreon. I’m just wondering if you could elaborate on that, in terms of the types of benefits that artists are giving their fans, or the way they’re interacting with them, that has not yet been covered or is not yet as effective in the myriad of other platforms that a lot of artists feel pressured to pay attention to, like Instagram and Snap.

WJ: I’ll give you an example. I have a DJ friend of mine, who has not yet joined Patreon. She’s going to. [laughs] Or I’m going to die trying. Her name’s Honey Dijon. Do you know Honey?

CH: I do, yeah.

WJ: I DJ’d with her 25 years ago, back in Chicago, so we’ve known each other a very, very long time. And on Instagram, she has such a presence. Such a power. She has something to say. She’s a black trans woman, she’s deep in fashion, she’s always touring the world, she’s just such a force. I’ve known her for a while as a human, but also I’m just a fan, I guess, when I follow her on Instagram. And when I talk to her personally, I say, “gosh, Honey, you have such a force and the people that follow you, they really are interested in the things you have to say and all this nuance. Why do you give that away?” And she doesn’t have a very good answer. You know? It’s, like, “oh, yeah, gosh.”

And I hear this from a lot of musicians. They’re just doing it for eyeballs, because they think that funds the other things that they do. Like, oh, if I have a lot of followers, that means I’ll get brand deals and that means I’ll get tour … so this is, like, a means to an end. But it doesn’t have to be. I guess that’s the way I would talk to any musician. You don’t have to give all that away to the ad platforms. You can do your Instagram thing twice a week, and then take some of your really special stuff back into your membership. You can still get that kind of top-of-funnel eyeballs, but you can then make a wonderful membership with your top fans. It’s not one or the other; it’s just the one with membership actually gets you paid a lot in a very predictable way. So that’s what I would say to any musician who’s got a strong following on one of those social platforms.

CH: So on the flip side of that, something that I’ve also experienced firsthand that I know a lot of artists also experience is expectations versus reality of what it takes to run a successful membership program. Like you’re saying, on one hand, as an artist you’re not obligated to give everything away for free on these ad platforms. On the other hand, in the context of Patreon, if you’re just giving stuff away, and that’s it, maybe that can be effective but I feel like there’s a lot more to what makes a really memorable or successful membership program or initiative for an artist. I’m wondering if you could talk about what some of those elements might be, in terms of what people think goes into running a successful Patreon, versus what the actual reality is.

WJ: Yeah, I think this is a critical facet of why creators do or do not join Patreon, especially musicians. Because a lot of times, folks from the outside look at it and they’re like, “oh, it seems like a lot of work.” I’ve heard that a bunch. It’s interesting, because it’s whatever you make it. You can literally just take the things that you currently do, and make those into the benefits of your membership, so that you do almost zero new work. That’s a path I’ve seen a lot of successful creators take: okay, I’m going post about some topic once a week, I’m going write a song once a week — whatever the things they do, now I’m just going put those in different membership tiers. Because the whole point of Patreon is for musicians to continue to be creative, and to do the things they love. It’s not for you to take a second job. [laughs] You know what I mean? It was designed by Jack Conte, a YouTuber and musician, and now myself, a former, DJ and electronic musician — so it wasn’t built to create an extra layer of work for someone to do. It was built for someone to do the things they were going to do anyway creatively, and just have a great relationship with their strongest fans about that.

But let’s talk about some real benefits that people deliver, just because they’re fun. So, I always like to say that there’s unique tangible or intangible benefits that musicians or creators can deliver to their fans. And honestly, the tangible ones are pretty straightforward, and it’s actually the intangible ones that I often find to be the ones the fans go the craziest for.

Tangible benefits are exclusive content … [like] early access to a new song I’m writing, or a half-written thing that I want feedback on. Also, merch. We have a new merch product that helps you deliver merch to people on your membership. It’s cool because we’re not trying to be a merch store — Patreon does not have a storefront where anybody can walk up and buy merchandise — but we’ve built a merch product that helps someone deliver unique merch to somebody within a membership. Maybe after three months or after six months, you get the cool, purple hoodie if you’ve been on Patreon for a year that only a super fan can get — that’s a type of merch. So merch and exclusive content are examples of tangible benefits you can have in your membership, and we’ve built products and services that help you do that stuff really easy … Those are straightforward.

Now, there’s all kinds of what I would call “intangible benefits.” One intangible benefit is recognition. It’s amazing how far a little bit of recognition goes to making fans feel really special. You can imagine a musician saying, “Hey, thank you to so-and-so who’s been a fan for over a year on my membership,” just on Twitter or something, or in a public place, and putting their name on that — people love that. A lot of musicians do name-in-credits, they’ll be, like, hey, these are my patrons that support me and help me do this album and they do a whole page, with patrons who supported them, and then we also have communities we sync up with where you can get a little badge for being a patron for a period of time. Those are all what I could call “recognition-based” benefits. And people love them, and they’re pretty low output from the creator. The musician doesn’t have to do a lot of work; you just log in once or twice a month, and you give some shout-outs to folks who’ve been longtime fans.

Another type of [intangible] benefit is involvement. A lot of fans just want to see how the sausage gets made, and they would love to give feedback, even if the artist doesn’t do it. I see musicians ask about half-finished songs: “Hey, what do you think about this direction I’m taking this?” I see authors ask their fans, “Hey, which direction should I take this character next season?” And there are polls, and things like that, where creators can ask their fans to take a quick survey so they can get some direction from them. These are all the things that are kind of creative involvement.

Another type of benefit is a gated community. So, a lot of creators use Discourse or Discord or one of these community products we have; we also have a Reddit integration, and they basically create a community that you can only be a part of if you’re a member. And in that community, you have people talking back and forth about insider information, and usually there’s a community moderator who’s been a longtime fan of that artist or musician.

The last type of benefit I’ll talk about is access to the creator. A lot of creators will do a monthly video chat with a small crew of their patrons, or they’ll do group chats in Slack or something. A lot of musicians do patron-only shows; they’ll go to a town, they’ll figure out who the patrons are in that little town, and that musician will go to a bar that holds 50 or 60 people and it’ll be a patron-only show. These are all forms of access that someone couldn’t get if they weren’t part of a membership.

With all these, you can kind of see how there’s ways to do them that are very lightweight for the musician — you could just do one or two touchpoints a month, and keep your fanbase super engaged and interested.

Okay, I talked for a long time there. Does that all make sense?

CH: Yes, it does. And I’m really glad to hear you say all of that because those are all things that I’m trying out in some way with my own page, and it’s been super interesting to try to navigate tangible versus intangible benefits. I actually initially started my Patreon to focus on intangible benefits. Historically, the value of those types of benefits have been really hard to measure. Maybe with the help of a membership platform like Patreon, it is easier to measure, because now you’re able to quantify how many people would be willing to pay for access to your songwriting process, if you’re an artist — or, in my case, the process of putting together an article. I don’t know if that’s something you’ve thought about or tried to productize at all, in terms of measuring the monetary value of intangible benefits.

WJ: Yeah. We are currently in the process of ensuring that all of the benefits on the entire Patreon platform are structured. In the early days, creators would just sort of add whatever blob of text into Patreon, around their benefits, and currently we’re moving towards a model where 95% of benefits will fall into some type of taxonomy. This isn’t like a rocketship future, this is in the next six to 12 months. Any new creator that signs up [can see]: hey, these are the benefits that systematically work really well for creators like you. Oh, cool, you’re a rock musician? Here are the benefits other rock musicians have a lot of success with, that drive patron engagement and retention. You can do whatever you want, but here’s our recommendation.

When you think about the product, that’s the core data that we sit on that’s really exciting and interesting: we know, across thousands and thousands of creators, which are the best benefits and why they work.

CH: And I guess that enables a very different kind of discovery, in terms of what you’re recommending to a new musician of a certain style who may be looking for recommendations on what to do. It’s like discovery in the sense of just how to run a successful and effective business.

WJ: Correct, that’s it. And, you know, we’re a platform, so as these benefits get more and more structured, more and more third parties will attach to our platform. Most ad platforms at this point are closed; they don’t play well with others, because they’re trying to keep the traffic on their site. Facebook and Google are trying to keep you in their world, and so they don’t necessarily have a lot of partnerships. Whereas we’re sort of an open door and we have a platform strategy, where we want to have as many partners as possible.

For example, Bonjoro is a partner, and what Bonjoro does is it just links up to our API and it says, hey, these are your fans that have crossed the one-month threshold or the three-month threshold, and you can do a quick video thank you to them. And when fans get a personal “thank you” from a creator that’s in a video delivered right to their phone, they love it, and they’ll be a fan for years. It just takes those nudges and those little thoughtful moments that strengthen the connection between fans and creators, that we’re designed to do really, really well.

CH: Great. And one more higher-level organization-related question comes to mind, going back to what you wrote about. I’m wondering if you think there’s ever a situation where discovery- and membership-oriented mechanisms can coexist and be baked into the same product.

One example that a lot of people have speculated about concerns PledgeMusic, which is going through all sorts of problems right now in terms of its future. For those who aren’t familiar, PledgeMusic was a crowdfunding and direct-to-fan sales and engagement platform for artists, but they failed to pay a lot of artists the money that they raised directly from fans on time, because they were abusing and pulling those funds back into running their own business, and there was a whole controversy around that. [EDITOR’S NOTE: PledgeMusic’s website went offline in late July amidst bankruptcy proceedings in the U.K.]

And so their future is uncertain, and a lot of people have suggested that companies like Soundcloud or Spotify acquire PledgeMusic. Their logic behind that was Soundcloud and especially Spotify are arguably not fan-first platforms. They’re discovery platforms. They’re promoting this model of all-you-can-eat, we have millions of tracks and we want you to keep discovering new music, rather than necessarily trying to strengthen bonds between artists and fans. And so by owning a company like Pledge, you can start to really make a meaningful dent in that space and do things like improve the merch product on your platform … which right now is relegated all the way to the bottom of the [artist’s] profile page [on Spotify].

I’m wondering, at a higher level: Do you think that’s possible, in terms of a more discovery- and eyeballs-oriented platform running a successful membership business within the same product? Or do you think that fundamentally they have to be different?

WJ: Yeah, I mean … I have a weird background: I was a musician for 15 years or so, and then I was one of the founding team of a company called Beatport [in 2002, and since Beatport I’ve been head of product at a number of organizations, [including] Shutterstock, Optimizely, Hired and now Patreon. And so I have this really weird mix of having a really deep connection with being a musician, and having seen multiple SaaS business models, marketplaces and discovery platforms. I’ve worked at all of them at this point.

When you think about companies and how they operate — big financial organizations — really all you have to do to understand their priorities is follow the money. It’s very simple math. What we’re doing, what Patreon’s doing, to answer your question directly, is prioritizing the needs of musicians and creators in general. When you log into this product and you use it, it’s designed for the creator first. And our business model: we take a percentage of creators’ revenue, which means that we’re only successful when the creator is successful. So if you, Cherie, make zero dollars, we’re going to take between five and 12% of zero dollars. If we were to ever go public, or if you were to look at Patreon in five years, you would know what our priorities are. You’d be able to go, well, their first priority is creators making money. Like, they care a lot about that.

Any time you do “discovery,” you just have to know where the priorities lie. Like, YouTube’s not a bad company — those are good people. And they care about creators. I believe that. But if you look at their financial model and their business, you realize very quickly that creators are the third priority. The number one priority is advertisers. Period. And the number two priority is end users, because they need the end users to get the advertisers. You can tell by demonetization that when the shit hits the fan, they got to change the algorithms, because advertisers are the ones paying. And then the next most important thing is to make sure people stay watching video. And then the third most important thing is to make sure that people make stuff for people to watch.

So if you just look at the core business model of a discovery platform, the people who make stuff are the third priority. Spotify cares most about end users listening and advertisers selling. Oh, and retaining on subscriptions. Right? But all those things are before musicians monetizing. And that’s why Daniel [Ek] couldn’t go out and say, “we spent the first ten years on being a great discovery platform and now we’re going to switch to creators.” Really? Your entire business model is predicated on subscriptions and ads. You know what I mean?

It’s sort of like Facebook: “For the first ten years, we focused on ads. Now we’re going to change everything and turn it upside down.” I don’t think you actually are, because you have to answer to shareholders, and shareholders want to see the current business grow. [Mark] Zuck[erberg] would have to say, “Hey everybody, actually, hold on a second. Don’t worry about this whole ad business that drives $50 billion a year. We’re going to do this other thing. It’s going to be great. Now, it’s going to take about ten years for it to grow, but trust us.” [laughs]

Just follow the money, and you’ll understand the priorities of organizations. Patreon is making this huge bet — it’s a crazy bet, honestly, but I deeply believe in it — that we can be creator-first and grow a real business.

CH: This is the last question before the final segment, but I did want to talk about this element of being creator-first — specifically in the context of building a SaaS that appeals to them.

In a previous interview with TechCrunch — they published a really fascinating deep-dive on Patreon and where they’re going and how they got here — you’re quoted as saying that Patreon’s goals are to build “the world’s best membership SaaS product for creators.”

This is something that I’ve also noticed a lot of other music companies are trying to compete on. I wrote recently about Stem, which is a music distribution platform that recently pivoted from more or less fully long-tail, to essentially trying to build effective business and accounting software for a select group of independent artists and their teams. And so this is, I think, a high growth area for a lot of companies now.

I would love if you could share what you think is missing right now from this landscape, in terms of membership and business-management SaaS for artists — specifically for musicians — and how Patreon specifically might fill that gap.

WJ: Yeah, Stem in particular we are currently not at all competitive with. A lot of the SaaS products we’re seeing out there are kind of this model of how to do rights management and how to pay people in your team.

We will become competitive someday, and the reason why is because an obvious future for Patreon is to move further into the back office. Because what Patreon represents for musicians looks and smells like a steady paycheck. You get this monthly, recurring thing — it varies a little month to month, maybe you got a few extra fans this month, maybe you lost a few more this month — but it starts to resemble this really steady predictable income, and if you have the predictable income there on Patreon, there’s so much more we can do for musicians once that’s solidified. That’s pretty much the future roadmap.

So you can imagine the world in five or ten years — not even five or ten years — where Patreon gets into capital, for example, because we have a really predictable income stream. We could go to a bank, and say: I can tell you what this musician’s going to make for the next three years, within 5% error, because it’s very steady and predictable. So we can get into loans, we can get into capital, kind of the way Square Capital does.

So we will move further into the back office in the future, because of the way that the revenue component works for creators … If creators have a big project they want to do, there’s no reason we can’t be the source for them to loan the money against their revenue stream over longer periods of time.

I do imagine us getting somewhat competitive with folks, but most of the SaaS products I’ve seen out there are starting in the purely back office, where it’s like accounting and paying your team — whereas Patreon is strengthening the fans and creators, so the way you post, the way you deliver benefits and the way you run a membership. So longer-term, I think we’ll be competitive; for the next three years, I don’t see that. Did that answer your question?

CH: Yeah, totally. I think it’s definitely a compelling proposition given that even today, it’s still really difficult for an artist to get a clear picture of their finances, generally. And this is a lot of what, as you’re saying, a lot of other music-oriented SaaS products are working on. But starting with a point of predictability that just happens to not be tied to streaming royalties and then building up from there — that’s a super interesting thought.

WJ: I mean, Jack [Conte] and I have the same story, but a decade apart … I was a DJ, and I had a good year sometime in the late ’90s, I think I made over $100,000 — which, for a DJ playing vinyl at nightclubs and raves, was kind of a lot. It felt like a lot. I was living in Denver, Colorado at the time, and that year I wanted to buy a home. And I was, like, I definitely had more than enough for the down payment, and I had been a successful DJ for almost a decade at that point — but I couldn’t get a loan. The bank wouldn’t loan me money as an artist because I didn’t have pay stubs. I had made $100,000 that year off of my various revenue streams from touring and selling music, and someone who worked at the post office and made $30,000 a year could get a loan from the bank, because it was predictable, and I couldn’t.

And that was, as an artist, this moment for me where I was, like, “oh shit, I’m not in the system.” [laughs] I’m this weird thing that the regular financial world doesn’t recognize as legitimate. And the future of Patreon, of course, is legitimizing artists in a way that’s super compelling. So that’s something that I’m personally passionate about, because I never for a minute felt like I was a big risk for a bank. I think that was, what, 1998 or 1999 — so twenty years later, here we are, solving that problem.

CH: Yeah, that’s amazing.

In the interest of time, I’d love to transition to the last segment of over- and underrated music news. I’d love for you to start because I know you have a super interesting and topical one that you want to bring up.

WJ: Yeah, I guess for me … every single podcast app on the planet right now is building a gated subscription, and I just think this is really overrated. Like, do we all need seven podcast players? It’s just not going to happen. I literally see a new one every week, and some of them are like subscription[-based], and some are sort of membership-y, and some of them are sorta social-y — but honestly, consumers are simply not going to use six or seven podcast apps. There’s no chance. [EDITOR’S NOTE: Examples of these paid podcast platforms include Luminary, Brew and Slate’s Supporting Cast.]

This feels like a really hot trend right now, and I’d like to think Patreon has something to do with that, because we’re decently successful and membership is getting out there, and I think we’re seeing power move back to the content creators. So those trends are all true. But what I don’t think is going to happen, the overrated part, is I don’t think consumers are going to start to use a bunch of different apps to start to listen to podcasts. They’re going to want that in one or two spots.

CH: In that sense, it really strongly parallels the TV and film space. This is the same problem that TV and over-the-top, on-demand video streaming services have faced for several years. I think in TV and film, maybe because they’ve been around for longer, there are people who pay for multiple [services] — like, who will pay for Netflix, but also Hulu and HBO. But I also don’t know people who are paying for six or more different services.

And maybe what these podcast apps are trying to do is take a similar path, saying, “oh, we can create premium content just like HBO does for video; we’re going adopt a similar business model to an HBO or Netflix.” But yeah, just by the nature of the [podcast] format and its history, and how it’s been made, historically, very widely accessible, [and] the process of creating it is very democratized — yeah, I agree, it doesn’t really align with subscription that well.

WJ: It’ll be fun to watch it all play out, because there’ll be a lot of carcasses over the next 18 months. And there will be a few winners who manage to get traction because they’re able to get enough consumers to drive it. But, boy, it’s sort of like more discovery products in a world of discovery products.

CH: Exactly, yeah. To bring that full-circle. [laughs]

So the piece [of news] that I had in mind was pretty recent. [EDITOR’S NOTE: this was from late June 2019, which can still be considered recent-ish.] It’s this news that the Jonas Brothers, who just released a new album, also now have their own vinyl membership club. And I am visualizing “club” in massive air-quotes, because it’s just, like, a vinyl bundle.

The way that they’ve priced it is super premium. The lowest price is $399.

WJ: Whoa.

CH: Oh yeah. And in exchange for that, you get eight different vinyl records, so there is a lot of catalog involved. [You get] ten different singles, you get a customized slipmat for your turntable if you own one, and you also get a bunch of posters. The only other tier above that is $599, and that includes a bunch of other exclusive content, I think.

It’s not really a club, because I actually don’t think there’s any community aspect to it. And they’re marketing it as a subscription, but the only part of it that’s a subscription is the fact that you could opt in to pay in four different segments of payments, instead of just paying it all upfront. But that’s not a subscription. That’s just, like, a payment cycle that’s more spread out.

In general, I think it’s overrated because — I will admit I listened to the Jonas Brothers a bunch when they were first starting out, but I’m not the kind of person to be buying a turntable and listening to vinyl records personally. And not to generalize my very specific, anecdotal experience, but I doubt that the current Jonas Brothers fanbase is willing to pay that high of a premium for catalog in a streaming age. Especially because the material is also not coming immediately; it’s going to be spread out over a much longer period of time. So, yeah, I’m not super convinced. [EDITOR’S NOTE: There is now a wait list, according to the website, so people did buy the bundles after all.]

To me, it’s almost like an overpriced VIP experience at a live show. I personally have some qualms about that — like, paying several hundred dollars just to get a handshake and a photo with someone like the Jonas Brothers — but, yeah. Those are my two cents.

WJ: I mean, it sounds like a record label tried to do a subscription.

CH: Yes.

WJ: Because it’s not really ongoing value … it’s sort of like a lumpy bit of value smoothed out over six to eight months. If you’re paying $399 a month, does it have a cap? Does it end? Or is it just forever?

CH: It’s not $399 a month, it’s just a one-time fee.

WJ: Oh. It’s a one-time fee, that you can pay in increments.

CH: Yes. So it’s not even a subscription, is what I’m trying to get at.

WJ: Yeah, that’s a really interesting model. I’m sure they’ll get a few takers. That’s cool. But the takers of such a thing, I think, are a better fit for a true membership. Like, if you’re a person willing to spend 600 bucks for that stuff, you’re probably really interested in the Jonas Brothers. [laughs]

CH: That’s so true — and from the label or artist’s perspective, you should be trying to engage them more and capturing more of that value more regularly. I totally agree.

WJ: Yeah, make it 20 bucks a month for, like, years. That’s a really highly-engaged segment of your audience that you’ll probably want to be close to.

You know, one of the reasons Patreon doesn’t always work, by the way, is that … if you want Patreon to work, you have to like your top fans. You have to, like, want to ping them every once in a while, send them a post, say hello, jump into a chat room. And you know, a lot — not a lot, but a percentage of artists, I’d say less than a quarter, really don’t want to engage with their fans. [laughs] Like, I’m just thinking about this Jonas Brothers thing: it’s not like they are engaging with their fans. It’s just some stuff somebody made for their fans. Like, if I’m really into the Jonas Brothers, it’s not like, “Oh, cool, I get to know more about the Jonas Brothers.” No, you just get some stuff.

CH: Right. Just objects. Speaking of more intangible benefits that aren’t tied to the artists, it’s not like you’re getting to, like, talk with any of the members of that group.

WJ: Yeah. Sometimes I’ll meet a creator or musician who’s very popular, and then I’ll ask them about their fan relationship. I’m like, how often do you chat with your fans? And occasionally I meet someone and I’m like, “oh, you shouldn’t do a membership.” Like, actually, this isn’t for you. Because if you’re, like, disgusted by them, or you don’t want to talk to them, like, that’s probably not going to work. You have to really like your fans. [laughs]

CH: Yeah, and it’s good that you say that, because membership is definitely not a one-size-fits-all [model] — just like streaming, arguably, is not a one-size-fits-all [model] for every artist. It all depends on what you prefer to do, what your existing relationship [with your fans] is like and what your goals are. All of that.

WJ: Yeah. Streaming is awesome for the .01% who get massive plays … tt’s just not very good for 99% of musicians. I think membership, when I think about the market size, is a really good business model for, like, 70% of musicians. And maybe not a great business model for the top 1%, unless they like that fan relationship … because if you’re, like, Taylor Swift, your top fans can be kind of insane, right? You may not actually want to hang out with them. [laughs] I don’t know.

CH: Yeah. I think Taylor Swift had her own social app a while ago that ended up not getting that much traction, for multiple reasons that we just touched upon now. One, she just posted, like, a couple of selfie videos and that was it, so engagement definitely went down after a while from her. Two, there were a couple fans who were hyper-engaged, but then also there was a point where some fans were hostile to other fans, and I guess Taylor’s team either didn’t care or they just didn’t know how to handle that. Those are things that, as [you’re] running a membership platform, you will have to grapple with in terms of very hands-on customer service.

WJ: Totally. And, like, Amanda Palmer makes it work really well, because of Hayley [Rosenblum, Amanda Palmer’s manager]. She has a person who manages that membership incredibly well, and she’s got a really high-volume, large membership, [such] that it works wonderfully … Hayley, like, runs that thing, and Amanda swoops in to do really cool stuff with her fans, and Hayley makes sure Amanda comes in at the right points. But yeah, the bigger the artist you are, the more careful consideration you need to have about the level of engagement with your fans, and when you as an artist need to actually go in and engage.

CH: Yeah, absolutely. Thank you so much for joining and for chatting, this was super interesting.

WJ: Oh, I love talking about it. And as a former musician, I would love for music to be number one or number two on Patreon. Video and podcasting are just running away right now, they’re growing so fast — but music is growing fast too, and I do think there’s going to be a tipping point in the next couple years because it’s such a good model for most musicians.

As a DJ in the ’90s, I had a thousand true fans, easily. Probably 5,000 true fans. Any time I would play an event or a club, I would have twenty people around the booth who knew every song I’d ever made and came out to see me. Any time you’re at a performance at a venue, people have varying degrees of connection to your history as an artist. So if I’m at a venue with 1,000 people, maybe 100 people know exactly who I am and they’re here for that and they’re like, “Wyatt, are you going to play that one song you made a year ago?” Those are my superfans, and they would love to have a deep connection with me as an artist on a platform like Patreon, and that would’ve been really nice back then. And I’d say for a lot of artists, it’s the same way. You know you have that level of fandom, and so this is just an opportunity for you as a musician to monetize them better.

CH: And to have an easier time just interacting with them in a more central place.

WJ: Yeah. Something that strengthens the connection and doesn’t get in between it.

CH: Yeah, exactly. Awesome. Thank you again, appreciate your time.

WJ: Thank you so much! Have a great day.