Deep Dive
How Subscription Platforms Have Become Revenue-Generating, Real-Time Fan Clubs
In the absence of touring, Patreon, OnlyFans and a handful of startups have experienced explosive growth as artists turn to them to make up for lost revenue. But what happens when concerts resume? …
Digital subscription platforms that filled the void left by the touring shutdown that began in 2020 say they are coming off 12 months of unprecedented subscriber and revenue growth thanks to the slew of artists that have joined their services.
Patreon and OnlyFans and a slate of new startups that enable artists to connect directly with their biggest devotees — and generate revenue in the process — have become the Generation Z equivalent of real-time fan clubs, made for a demographic that has grown up with micropayments and maintaining multiple digital subscriptions, such as Netflix and Spotify.
These services, along with the advent of video-sharing platforms TikTok and Triller, have sparked the kind of rapid growth in the music industry that was last seen in the 2010s, when Spotify, YouTube and Pandora, among other digital service providers, helped push the industry toward a streaming-first economic model, while social networks such as Facebook, Instagram and Twitter changed marketing and promotion.
The difference between then and now: Subscription services give artists the ability to develop revenue streams that accrue directly to them. “If I want to do an album listening party exclusively for fans and earn money at the same time, I’ll put it on OnlyFans,” says Dre London, manager of Tyga, who is on the platform. “If you asked five years ago, no one would have thought that anyone was paying for this content. No one.”
Trending on Billboard
But, with live events expected to resume in full force, or close to it, in 2022, these platforms are preparing for a time when fans may divert their disposable income from subscriptions to concert and festival tickets, as well as the subscriber fatigue that a major survey says is inevitable.
At a glance, here’s where the two incumbents stand:
Patreon
Subscribers 6 million
Cut of subscriber revenue 5%-12%
Best-known artists Joe Budden, Jacob Collier
Valuation $1.2 billion
Paid to creators to date $2 billion-plus
OnlyFans
Registered users 100 million-plus
Cut of subscriber revenue 20%
Best-known artists Cardi B, Anitta
Revenue $400 million (2020)
Paid to creators to date $2 billion-plus
Patreon, which pioneered the membership platform in the United States, has been operating since 2013, but co-founder/CEO Jack Conte says the company has experienced unprecedented growth over the last year. “Starting in March,” he says, “we saw more creators launch on the platform than in the history of the company.”
According to a September 2020 blog entry by Conte, Patreon has paid out $2 billion to the more than 200,000 creators on its site since its launch. The first $1 billion was distributed over six years, the second over 15 months in 2019 and 2020.
Conte says music is the second–fastest–growing category on Patreon, which has 6 million subscribers, or “patrons,” as he calls them. (He declined, however, to provide an estimate of how many music artists use the service.) “We saw almost 200% month-over-month growth in music [between February and May]. In podcasts, video, writing and journalism, we saw about 100%,” he says.
Patreon doesn’t disclose its financials but based on Conte’s assertion that the service is now paying out $1 billion a year, which he says will be used as a baseline moving forward, Billboard estimates the company’s annual revenue is $100 million. Patreon raised $90 million in a Series E funding round in September, which valued the company at $1.2 billion, and is reportedly considering an initial public offering in 2021.
Conte — a musician who is one half of the duo Pomplamoose with his wife, singer-songwriter Nataly Dawn — founded Patreon with president/chief technology officer (and former college roommate) Sam Yam after becoming frustrated with low payouts for his YouTube videos. “I’m not Diplo, but when I released something, a million people tuned in to see it,” says Conte. “And the next day I’d see that my ad revenue payout for that video was going to be about 200 bucks.”
Patreon quickly attracted attention thanks to its creator-friendly revenue splits. The service takes between 5% and 12% of subscription revenue (plus payment processing fees), compared with YouTube’s 45% cut of ad revenue. (YouTube also has a membership program in which it takes 30% of subscription revenue.) Creators can set their own subscription pricing and offer multiple tiers for their content. Conte says some Patreon creators are making “millions of dollars a year” with their offerings.
They are also reaping the benefits of data that Patreon shares with them. Conte says one reason rapper-turned-podcaster Joe Budden moved to Patreon (from Spotify) was the increased control over data that isn’t found on other platforms. “[Budden] wants to own the relationship with his customers; he wants to own his data,” says Conte. In 2018, the service unveiled its Patreon Relationship Manager — a customer portal that enables creators to access potentially valuable information about their audiences including names, email and shipping addresses and how much those users have spent on content. That information can be exported, and creators can bulk message their subscribers for more precise targeting.
OnlyFans debuted in 2016, initially as a direct-to-consumer subscription platform for adult entertainment performers and sex workers. Then, last April, Beyoncé name-dropped the company on the remix of Cardi B and Megan Thee Stallion’s Billboard Hot 100 No. 1 hit “Savage,” propelling the once niche service into the mainstream.
“We’re seeing up to 500,000 new users joining the platform daily, so it really is growing at a fast rate,” says OnlyFans founder/CEO Tim Stokely from London, where the company is based. “We saw over $300 million in fan payments in December, which was a 370% increase from the previous December. We’ve got over 100 million registered users and over 1 million content creators. We’ve got well over 100 creators who have earned in excess of $1 million. I think I’ve proven that OnlyFans can be not only very lucrative but also a real career path and business for any type of creator.” (OnlyFans says it is unable to provide information on the total number of musicians on the platform because it does not categorize creators.)
The platform, which takes a 20% cut of subscriber revenue from creators, made a reported $300 million in earnings before interest, taxes, depreciation and amortization on $400 million in revenue in 2020.
In part, because of the adult content found on the platform, OnlyFans is privacy-centric, and the data it shares with creators is limited to subscribers’ usernames and actual names.
That has not deterred artists from opening up shop. They include Cardi B, Swae Lee, Jermaine Dupri, Chris Brown, The-Dream, Bella Thorne and Tyga. Recent sign-ons include Anitta, DJ Khaled and Fat Joe, the latter two of whom launched a joint account in January to highlight their new single “The Light.” Their account promised behind-the-scenes content for $20 a month.
“OnlyFans has changed people’s perspectives on the value of their content,” says London. His client Tyga charges $20 a month for a subscription, for example, which offers behind-the-scenes content (much of which has been of the adult variety). “Everybody knows that hip-hop has a certain lifestyle, and we’ve been giving it away for free on Instagram for the last, how many years?” says London. “So now, everyone’s starting to think, ‘Hold on, this has value.’”
The latest entrant to the market is Fanbase, founded by Isaac Hayes III, which charges users $3.99 for its subscription option and takes 20% of that revenue. The company, which now has over 37,000 users, raised $2.7 million through the crowdsourcing platform StartEngine. Music artists who have jumped on board include rappers Snoop Dogg and Trippie Redd.
Similar products like Encore, an app from former Facebook engineer Jonathan Gray and hip-hop artist Kid Cudi that is in private beta, may expand the market, but the real competition will likely come from the major digital and social media platforms. Since 2018, both YouTube and Facebook have offered subscription products for creators, with YouTube Channel Memberships and Facebook Fan Subscriptions, but both platforms limit access to creators who have a certain amount of subscribers (1,000 for YouTube, 10,000 for Facebook) and take a 30% cut of revenue. Facebook’s platform allows artists to monetize their following on Instagram, a subsidiary of the company that doesn’t support subscriptions yet. If Facebook’s revenue–sharing terms become more competitive with Patreon and OnlyFans, it could be more attractive to creators who have numerous Instagram followers and don’t want to build an audience from scratch on another platform.
Hayes, who is the son of late soul legend and actor Isaac Hayes, says the revenue generated by subscription models can put an artist on firmer financial footing when it comes time to negotiate other industry deals. “It gives you a little more leverage when a record company offers you a record deal and you’re already making money,” he says.
He also predicts it will become a competitive advantage. “If you’re an artist right now and you’re not monetizing your content in some way,” says Hayes, “in the next two years you’re going to get overshadowed and outperformed by a younger artist [that does].”
Whether or not these subscription models continue their growth trajectory when live shows return, industry observers see pitfalls ahead. They predict that subscription fatigue — in which consumers take a hard look at the monthly charges they’re incurring for entertainment and pare them back — will soon become a major issue for developed countries, According to Deloitte’s digital media trends survey of 1,100 people, which it released in October, U.S. consumers who subscribe to paid video streaming services have maintained an average of five subscriptions since the onset of the pandemic, up from the three they had in January 2020. That’s a notable increase, but 46% of those consumers had cut a subscription service in the six months before the survey concluded. It’s a sign that churn — the rate at which customers cancel their subscriptions — will continue to be an issue for all companies that rely on this model, most notably when concerts and live events return over the next few years.
While subscription fatigue may be a long-term issue for Patreon and OnlyFans, the platforms are pushing ahead, building off their growth with new initiatives and services preparing to launch throughout 2021. Later this year, OnlyFans will implement co-streaming and one-on-one experiences. The former will allow, for example, two members of a band to interact with fans simultaneously, and the latter will make fan interaction more personal by allowing creators to stream directly to a single user. The service also plans to launch OFTV, a free, on-demand video streaming platform. The move could help OnlyFans shake its adults-only reputation by offering a curated collection of content that will abide by the restrictions platforms must follow in order to be available in Apple’s App Store. (OFTV is in beta and scheduled to launch later this year.)
Patreon has focused on building “horizontal features” that are designed to better serve creators. In addition to its Relationship Manager, the service improved its payment infrastructure to allow payments in more local currencies earlier in February, and is providing support for creators that sell merchandise, including sales support, shipping and tracking.
Both platforms are also augmenting support teams that help onboard creators and assist with establishing best practices.
Conte says Patreon will continue growing, albeit possibly at a slightly slower pace once the world returns to normal. “The last year has shown artists that subscription platforms are another revenue stream that they can develop in addition to touring and use to offer exclusive content tied to their live shows,” says Conte. “Every artist, every creator in the world is going to have a membership line of business — just like they have a touring line of business and a merch line. Creators are very much realizing the importance of diversifying their incomes. And Patreon happens to be a beneficiary of that.”