Patreon Forced to Pay the Apple Tax: The Death of the Follower and the Price of Payment
Patreon Forced to Pay the Apple Tax: The Death of the Follower and the Price of Payment
#626
GM,
Recently, I’ve gained a new layer of understanding about web3. Decentralization usually doesn’t offer immediate benefits—unless you find yourself in a difficult situation.
Last week, the subscription-based platform Patreon revealed that they had received a "threat" from Apple. If they don’t comply with the requirement to pay the 30% Apple tax by November, they will be kicked out of the App Store. Patreon is being forced to pay this tax, and ultimately, the cost will likely be passed on to everyone. Online discussions about the Apple tax have focused on legal issues, debating whether Apple is monopolizing the market. These lawsuits can drag on for years, and Apple has even had slight victories. But does this mean that if the courts rule that Apple isn’t a monopoly, people will just have to obediently pay the tax?
This article approaches the issue from a decentralized perspective, offering a different way of thinking. Let's start with what Patreon is.
Death of the Follower
Patreon founder Jack Conte’s entrepreneurial journey is a reflection of the rise and fall of web2 creators. He fully experienced the evolution of web2.
Before starting Patreon, Jack was a full-time music creator. In the past, when he performed on stage, the audience was sparse. But in 2007, when most people were still passively browsing content online, Jack had already launched a YouTube channel to share his work. This was during the transition from web1 to web2, and Jack unexpectedly experienced the joy of becoming an online celebrity.
YouTube helped Jack find an audience, and the "Subscribe" button brought him a group of dedicated fans. Once, Jack organized a charity event where fans could exchange books for albums, and the recipient organization ended up receiving thousands of books from Jack’s fans all over the world, valued at $140,000. This experience gave Jack a real sense of the power of fan-based economies.
However, platform algorithms began to create more distance between Jack and his fans. Even with hundreds of thousands of subscribers, it became increasingly difficult for fans to see his creations on the platform. No matter how hard Jack worked to produce quality content, he was left with only meager ad revenue.
Jack called this phenomenon the "Death of the Follower." With platforms flooded by ads, true creators found it hard to survive. That’s why, in 2013, Jack decided to create Patreon, to help creators break free from platforms and establish direct relationships with their fans. Through subscription-based revenue sharing, Patreon aligned the economic incentives of the platform with those of the creators.
Today, Patreon has become a unicorn company, with a valuation reaching $4 billion in 2021. The awkward part is that while Patreon aims to help creators break free from platforms, it isn’t independent enough itself. A significant portion of its traffic is concentrated on the iOS app, which has become Patreon’s biggest vulnerability.
Last week, Patreon announced that it had received a "threat" from Apple. In the future, 30% of the subscription fees paid by users will go towards the so-called "Apple tax." If Patreon doesn’t comply, it will be removed from the App Store.
The Cost of Payments
If Blocktrend were a creator on Patreon, with a monthly subscription fee of NT$100, I would previously receive NT$92, with NT$8 going towards Patreon’s service fees. But in the future, Apple will step in and take a 30% cut, meaning I’ll only receive NT$62. To maintain the same income, creators will have to raise prices. According to a report from TechCrunch:
Apple has issued a threat that Patreon must fully adopt Apple’s in-app purchase system by November, or else it will be removed from the App Store... Patreon has already informed creators that starting in November 2024, they will be switching to Apple’s billing system, forcing creators to decide whether to raise subscription prices to cover the Apple tax or absorb the costs themselves.
The Apple tax is very similar to publishing a book. The content of a book is the painstaking effort of the author, but they still rely on the publisher for editing, printing, and distribution. These are the main costs of publishing, and in the end, if the author can receive 10% of the book’s selling price, they are considered fortunate. The Apple App Store is like a "publisher" for software developers, helping to get the software in front of consumers.
I found an article about the history of the Apple App Store. Before the iPhone was introduced, developers who wanted to get their games into mobile app stores had to face commission rates of 80% to 95%, much like in the publishing industry. In contrast, when Apple launched the App Store in 2008, they only took a 30% cut, which was a groundbreaking deal at the time! But why has that rock-bottom rate from back then become today’s much-dreaded Apple tax?
Prices are all about comparison. In the past, delivering software to consumers was costly. Game CDs had to be stocked in physical stores like Tsann Kuen and Guanghua Digital Plaza, making Apple's 30% commission seem quite cheap. But now, obtaining software has become increasingly easy—downloading through browsers or setting up payment systems isn't difficult anymore. In this context, Apple's 30% cut seems unreasonable. In other words, this commission no longer reflects the value provided by the App Store, but rather the low level of competition in the market.
Last week, Substack co-founder Hamish McKenzie published an article titled The Price of Payment: How Should In-App Purchases Work in the Era of Independent Creation? He sympathized with Patreon while also offering some defense for Apple:
Apple's in-app purchase system is powerful. It greatly simplifies the online purchasing process, allowing users to make purchases from anywhere in the world... But creators are not Apple's direct customers. They aren't programmers or game developers. They don't actually hold a place in the App Store. They merely deliver content through the platform, yet they are treated the same as Netflix. This is somewhat strange.
Apple's commission, unchanged for 16 years, reflects the increasing importance of the platform to developers. Otherwise, they could simply leave iOS. But people begrudgingly pay this fee, leading to the development of convoluted user flows to avoid the Apple tax. Netflix doesn't allow in-app membership upgrades, Kobo's eBook store can't sell books in the app, and Substack can't offer paid subscriptions to Blocktrend in the app—all to dodge the Apple tax.
Recently, a reader asked me directly why the Substack app doesn't have an option to subscribe to Blocktrend. That's because these apps are all disguised as "readers." When users want to pay but hit a wall, they need to be savvy enough to realize that the Apple tax is at play and try the web version instead! Creators are forced to either absorb the 30% Apple tax themselves or pass the cost onto their paying customers. This is the "price of payment."
To ensure a smooth subscription process, Patreon preemptively raised subscription fees by 30% for creators. But I believe they will eventually find other ways to help creators connect with their fans and bypass Apple's control. After all, empowering creators to be independent and free from platform domination is the very reason Patreon was founded.
Patreon's dilemma highlights the importance of decentralization. Otherwise, a company that aims to help creators break free from platforms will ultimately still be at the mercy of an even bigger platform.
Scarce Resources
The most fundamental platform is hardware—essentially, convincing people to switch phones! While iOS and Android systems are not compatible, many data transfer tools are now available. This represents a broad sense of decentralization, and it doesn't necessarily require investing in blockchain phones like those launched by Solana1 to count as decentralized. However, convincing iOS users to switch to Android isn't easy; a lighter approach is needed.
Recently, I’ve noticed some developers are opting for Progressive Web Applications (PWAs) to bypass Apple's App Store policies. These are websites that mimic the functionality of apps, such as the JoyID wallet, which works quite well (you need to open it on your phone). By adding the website to your home screen, the user experience feels just like opening an app. Since it's essentially still a website, it doesn't have to comply with the centralized restrictions of Apple's App Store. This way, it maintains the user experience without sacrificing creators' earnings.
In the past, people watched TV by choosing channels, and it was crucial for a TV drama to secure the "prime time" slot on popular networks. Channel resources were scarcer than content23. But now, with platforms everywhere, good content has become the scarce resource. The Apple tax was established in a context where distribution channels were limited. While it remains a stronghold, cracks are starting to appear in these channels.
Even though PWAs are not yet widely adopted, people will need to adjust. But if the benefit of switching is a 30% discount on subscription fees, there might be quite a few willing to give it a try.