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The Downsides Of Disruption

So this came across my Twitterfeed a little bit ago:

Earlier this year, we announced that we’d partnered with @kickstarter to build a new platform to succeed @drip. Today, we’re announcing that we’re cancelling the project. We wrote a little about why.

To catch everybody up, Kickstarter was turning the task of building a Patreon-killer over to The Andys. It held out great promise. The reason that Drip: The Next Generation is not gonna happen? Economics:

Our platform would prioritize the large population of smaller creators in our community, with a focus on raising up work from new and marginalized artists. We were designing strong community moderation tools, and writing progressive policies and guidelines. Discovery and curation would be based on personal recommendations, rather than an over-reliance on algorithms.

Ultimately, we couldn’t find a way to make the business viable. We explored a number of different options—voluntary subscriptions from users, premium features, increased fees—but the resources required to support a high number of lower-volume creators always outpaced our revenue. [emphasis mine]

A few thoughts:

The lack of business viability is disturbing. I’ve been operating under the assumptions that Patreon has been bungling a golden egg situation, and trying to bleed creators with their various pricing scheme changes. But what if that’s not the case? I’m not aware of any public number from Patreon on its burn rate, which means we don’t know if it’s actually making money. Their emphasis on the biggest creators (the opposite approach of The Andys) may alter the math somewhat, but what if they don’t have a positive cash flow?

What if they’re Uber, but for subscriptions?

Uber, remember, has lost money on every ride, and only maintains negative double-digit profit margins (as opposed to triple digits) by knuckling their drivers. They cannot make money in any rational economic manner of free exchange of goods and services, only by subsidizing the growth process of crushing existing for-hire services, then shifting costs to their employees. Now Patreon’s creators aren’t like Uber’s drivers, but if Patreon cannot make money without VC support, the eventual crash of this (again, Uber-like) quasi-monopoly will be devastating. A few super-rich people will have gotten richer, a series of moderately rich people will lose their investments, and a lot of people that depend on the service for income will be SOL.

Quoting again from The Andys:

We were intent on running a sustainable and independent business. Even if we went the traditional route and raised venture capital, it didn’t appear likely to survive once that funding ran out. We were building this for the community we care about, and many of the artists and creators in our community are already financially insecure and vulnerable. The idea of launching something with so much uncertainty and risk felt irresponsible and unfair. [emphasis mine]

That’s a wholly ethical and admirable thing — they aren’t going to take people along for the ride if they don’t have confidence where they’ll end up. It’s a huge disappointment for everybody that was waiting for an actually viable Patreon competitor (or replacement), and noneso more than early adopters:

We’re working with our friends at Kickstarter to help migrate the remaining Drip beta creators elsewhere. And then we’re returning the remaining seed funding back to Kickstarter.

There’s the collateral damage in all of this — the people who’d made the shift to Drip (as it is now) were waiting for the new platform, but since it’s not happening and Kickstarter announced that they were shutting down Drip in favor of The New Thing, those folks have limited options. It’s going to be an uncertain time for those that were on Drip, and I think it’s only going to magnify down the line.

Hrrrm. If Patreon crashes it will be very nasty.

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