May 17, 2023

Voluntary Payment Platforms

What are the pros and cons?

Voluntary payment-funded companies are online platforms that allow users to access content for free and voluntarily ask users to make donations to the company. A great example of this is Wikipedia, which is free to use but prompts users for donations to keep the site running. Other forms of voluntary payment-funded companies include platforms that give creators a chance to monetize exclusive content, while also providing free content on other platforms such as Patreon and Buy Me a Coffee.

At the beginning of 2020, the number of users and creators grew 40 percent - with just over 6 million individual patrons on Patreon. Users are enjoying exclusive content from their favorite creators which can help support them and enable them to create future content.

In the last couple of years, voluntary payment-funded companies have grown in popularity due to the COVID-19 pandemic among other reasons.

This article examines the benefits and potential drawbacks of Voluntary Payment Platforms and if this business model is viable for creators and other online businesses.

Advantages of Voluntary Payment Platforms

Predictable Income

Patreon is a frequently used platform by content creators, such as YouTubers, Influencers, and Podcasters as a monthly membership tool to bring exclusive content to fans. Patreon allows subscribers or fans to financially support their favorite creators, in some cases for as little as $1 per month. The site features a tiered membership system, in which creators can set different tires for more exclusive content. Out of the 200,000 creators on Patreon, an estimated $2 billion has been earned among creators. Having the option to monetize content gives creators a steady flow of income that is predictable and scheduled. Payment is also very flexible, with the option to view balances on the site and disperse earnings whenever they want.

One of the most popular creators, The Tim Dillon Show, has a total of 43,521 patrons and earns CA$275,510 per month. With two pricing tires, Skull and Bones at $7 per month, and The Rothschilds at $27 per month, the show provides options for users to choose which benefits they want to receive in exchange for a monthly fee. The Tim Dillion Show operates a YouTube channel and uses Patreon as a means for a more stable revenue stream. It’s easy to see that from the 429 thousand subscribers on YouTube, almost 10% of that audience is a member of Patreon.

Creating a Strong Online Community

Having a voluntary payment-funded platform creates a closer-knit community to which only your biggest fans would choose to subscribe. This helps build a stronger relationship with your audience and allows creators to invest more time into tailoring content to what they want. Having access to your top followers and being able to strike conversations about content will result in new content that better serves the audience.

Growing a committed audience on such a platform gives creators a way to gain filtered feedback that comes from trusted voices. On public platforms, spam and online trolls take up the comment section which can lead to frustration and useless feedback.

Using one of these platforms also frees up time for creators as they don’t have to spend significant time booking brand deals or finding sponsors to support their content. If your online audience is large enough, you may be able to survive financially by just using Patreon or Buy Me a Cup of Coffee. This leaves more time for developing content and expanding your online community.

Customer Benefits

Customers, or patrons, reap many benefits when accessing content from their favorite creators. The biggest benefit is seen through early access to content, with 37% of creators using this as the main feature for their patrons. In addition to early access, patrons can also subscribe for exclusive content, which is usually what drives them from YouTube to Patreon. They would also gain access to a library of content, watch parties, private Discord servers, and more.

Creators who have higher tiered memberships may offer merch to members, which Patreon offers as an add-on for 3% more per month. It’s popular enough that 15% of creators offer this package, which can be one-time, time-based, or recurring merch. Merchandise can include anything from branded stickers to pins to clothing. All creators have varying benefits for single-tiered or multi-tiered memberships that are specific to their content.

Disadvantages of Voluntary Payment Platforms

Platform Concerns

Platforms, such as Patreon and others, which offer tired membership options can create overhead and management issues for creators. With each tier of membership, more exclusive content or rewards are required. On top of typically running a YouTube channel and other social platforms, providing monetized content creates significantly more work for creators. There is added strain of providing more exclusive content for higher tiers and making sure that patrons find enough value in the content.

Another issue with running a site like Patreon is that success on the platform is tied to having other platforms and online communities. Patreon, or Buy Me a Coffee, are platforms that simply manage recurring payments. It’s the creator’s job to move fans from other, usually free, platforms to the voluntary payment-funded company in hopes of converting them to a member. However, generating a community on a site like Buy Me a Coffee ultimately undermines the other communities the creator has made on other platforms.

Membership Challenges

The membership business model can be difficult to sell, especially when most of the time fans can find their favorite creators for free, like on YouTube. Many users watch dozens or even hundreds of creators on YouTube without paying anything, so being a member on Patreon for a single creator takes commitment. However, fans may find the monthly subscription intimidating, with some feeling pressured to continue the membership after the first month.

If some users find that they are unhappy with their membership or forgot to cancel, getting a refund is challenging. Since each creator oversees their page, users must contact the creator directly. They then must wait for a review by the creator and a possible refund may be issued. This can be frustrating for users and may deter them from another membership opportunity with other creators.

High Fixed & Variable Fees

Creators pay a percentage of donations to Patreon as a fee to operate on the platform. Patreon offers three pricing tires, Lite, Pro, and Premium, in which they take 5%, 8%, and 12%, of monthly income, respectively. If a creator is just starting, the Lite versions would likely be enough. However, it offers very limited capabilities and any sort of growth on the site will eventually force the creator to upgrade to the Pro or Premium plan.

With the high variable fees from Patreon, creators can lose hundreds or thousands of dollars per month. On top of that, payment processing fees are high, at 3.2% plus CA$0.35 per payment over $3 and 5% plus CA$0.10 under $3. This fee is fully incurred by the user, which adds to their already generous donation.

The same can be said for Buy Me a Coffee, which takes 5% per transaction for access to all site features. Buy Me a Coffee also doesn’t have payment fees, which reduces the cost for customers and likely increases the chance of membership. Overall, the creators miss out on a significant portion of their revenue and members are required to pay more to the platform handling the transaction.

Is The Voluntary Payment Model a Viable Way To Do Business?

Voluntary payment-funded companies are a great resource for online creators to gain a steady stream of income, connect with their audiences and grow their platforms. They also provide many benefits to users, allowing them to voluntarily support their favorite creators and be rewarded with a series of benefits.

Some issues arise with high, unavoidable fees for both creators and users, which provide revenue for the platforms. Overall, this business model is viable for creators with existing audiences and a demand for more content from fans. However, without a sizable following, creators may find it difficult to turn a profit using this model.

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Is Canada Really in a Recession?

23 Dec, 2023

Context A CBC News article discussed the possibility of the Canadian economy heading into a recession, or whether the country has already passed that threshold. The article discussed this possibility based on slowed growth, high inflation, and the Bank of Canada’s continued interest rate hikes. Analysis A recession is a significant reduction in economic activity that occurs over a length of time, usually months or years. One of the most accepted definitions of a recession comes from the economist Julius Shiskin in 1974, who identified the threshold to an economic recession as two consecutive quarters of declining GDP, although economists often argue about the comprehensiveness of this measure. The causes of a recession can be quite complicated and have many contributing factors. Some common examples include a sudden economic shock such as the recent COVID-19 pandemic, excessive debt, asset bubbles, inflation, deflation, or large technological changes. One major factor influencing the probability of an economic recession includes rising interest rates from the Bank of Canada, which has implemented the highest hike in the shortest amount of time in all of the bank’s history, raising the rate over eight times since 2022. The Bank of Canada increased interest rates in order to curb inflation since rising interest rates discourage taking on debt and spending. This further encourages companies to lower prices or slow inflation to increase demand. Currently, the Bank of Canada is keeping at the 5.0 percent rate but has said that further hikes are not off the table as inflation may continue to exceed acceptable rates. Increases in interest rates can certainly contribute to or precede a recession. In fact, the Bank of Canada has raised interest rates three times to slow inflation since the 1960s and all three times this action led to an economic recession. Current fears of a looming economic depression are also not unique to Canada, as following the COVID-19 pandemic, the global inflation rate increased to 8.73 percent in 2021. This was due to supply chain issues, as well as the effect of the Russia-Ukraine War creating rising food and energy prices, as well as general fiscal instability. A majority of the World Economic Forum’s lead economists agreed earlier this year that we could see the beginning of a global recession starting in 2023, which would certainly affect the Canadian economy. The article also discusses the Canadian economy’s slowed economic growth, as the GDP has stagnated in the second quarter of this year. However, it suggests other factors may explain the decrease, including striking port workers in British Columbia, and the resulting negative effect on economic activity. An RBC report mentions how on a per-person GDP basis, there has already been a decline for four straight quarters despite a surge in population growth, and concludes overall predictions for GDP growth do not look promising despite local factors including Canadian wildfires and strikes. They also point to a 0.5 percent increase in the unemployment rate over the past few months, which has historically tended to indicate a looming recession.

Ottawa Mayor and Lansdowne Park

21 Dec, 2023

Context The City of Ottawa Mayor, Mark Sutcliff released a statement about a revised plan for the redevelopment of Lansdowne, an urban public park containing historic landmarks and commercial venues. The project includes the demolition of a sports arena complex, stadium stands, and the building of a new event center, residential units, and retail space. Despite suggesting the new plan has addressed the concerns of residents, many issues remain. Analysis The City of Ottawa and the Ottawa Sports and Entertainment Group (OSEG) have been in partnership to develop Lansdowne since 2012 and finished an original redevelopment of the park back in 2014. A few years later in 2019, the financial sustainability of the park came to the city council’s attention, and in 2020 the partnership was extended another 10 years with direction to develop a new plan to revitalize Lansdowne. Consultation with community members started in 2020, with the original concept released last year in 2022, and a revised version released this month. Community feedback was acquired through various platforms including public information sessions, an open email for feedback, and public surveys. A summary report of that feedback was published on October 6th, which highlighted the six most common themes of community residents’ concerns. The first concern was related to the size and number of the multiple high-rise apartments which were designed to exceed 30 floors. In the new plan , they have removed one of the three planned buildings, with fewer total units in each, and only one tower with the potential to be built at 40 stories. Residents were also concerned about the loss of greenspace due to the new event center construction. Many people suggested they wanted that greenspace allocated elsewhere, or alternatively, an accessible greenspace roof on the event center. Although in the original plan the city had conceptualized a greenspace rooftop on the event center, this was scrapped in the new plan as it was deemed too expensive to maintain. Respondents wanted a restriction of vehicles to the premises to promote pedestrian safety, a concern that has existed since Lansdowne was first renovated back in 2014. They also wanted more public transportation infrastructure to and from the park, whether that is the local city buses, trains, or cycling infrastructure to reduce congestion on connecting roads. Relatedly, residents also desired more accessible public use space from washrooms to water fountains to usable and free space for people to occupy. The new plan has reduced the number of parking spaces for the residential buildings to meet the Bylaw limit of 0.4 spaces per unit, down from 739 to 336 spaces, while they added 36 new spaces for the event center. In terms of accessible public space, the new plan includes 27,000 square feet of space originally earmarked for the third residential building, now available for an unspecified “public realm.” Residents also wanted more local and less corporate or big-box businesses, to reflect the unique local community better. The new plan does suggest the amount of retail space has been reduced from 108,000 square feet to 49,000 square feet but does not directly address the desire to attract smaller, local businesses. Finally, there was also a concern about financial transparency of how the project is being funded and the resulting impact on the City. The Federation of Citizens Association (FCA) which represents over 70 community groups voted unanimously to oppose the new plan, which comes with a very costly price tag of $419 million, increased from $332 million of the first plan. They cite that the debt comes at a time when the transit system is facing major issues, and the city is struggling with a housing affordability crisis.

Danielle Smith - Conflict of Interest

20 Dec, 2023

Context Newly elected Premier of Alberta Danielle Smith has defended her cabinet which is coming under fire over conflict-of-interest concerns. Environment and Protected Areas Minister Rebecca Schulz’s husband, Cole Schulz , may be lobbying the government in the areas that the Minister works in. Cole Schulz's firm is working on removing the protection of a threatened caribou range to make room for the oil and gas industry – which has raised concerns over who has Minister Schulz’s ear. Analysis The company that Cole Schulz is a partner with, Garrison Strategies, was hired by the Explorers and Producers Association of Canada and is working to influence the government on the issuing of reclamation certificates for oil and gas sites. The lobbyists are working to gain more access to protected caribou habitats to expand the oil and gas industry. They are hoping to “ address the moratorium on tenure in caribou regions ” which would effectively give them better access to land and investments. The Little Smoky and A La Peche herds in northwest Alberta were protected by a moratorium in 2013 which stopped the granting of new energy leases in this area. At the time, 95 percent of the herd’s range was heavily damaged. Phillip Meintzer of the Alberta Wilderness Association found that though records show that Garrison didn’t contact Environment and Protected Areas directly, the firm’s causes are “ too close for comfort ”. Meintzer also notes that as Garrison works on opening the protected caribou land for Alberta Energy, Environment and Protected Areas should be working on a protection plan for the federally and provincially designated threatened animal . Minister Schulz is working closely with the ethics commissioner, however, Danielle Smith confirmed that “ the ethics commissioner has looked at it, given guidance and there’s no violation [of the Conflicts of Interest Act]”. Cole Schulz also indicated that his firm wasn’t aware that Minister Schulz breached the Act at any time. Meintzer suggests that this situation “ calls for a further look ” from a third party. Sources https://globalnews.ca/news/9988998/alberta-premier-danielle-smith-rebecca-schulz/