You streamed for 8 hours straight. Your hands hurt, your butt fell asleep, and your eyes are heavy and dry. But it was worth it because you made hundreds of dollars in Twitch donations.
But a little problem looms in the back of your mind: Will Twitch take a cut of your donations? Will they scrape a little cash off the top? Even though it was you who built your audience and entertained them so well that they wanted to pay you.
In this article, I want to answer that question: Does Twitch actually take a cut of hard-earned donations from Twitch streamers? Or does Twitch leave that source of income alone?
Does Twitch take a cut of the donations?
In this section, I explore the question of whether or not Twitch takes a cut of your donations.
Twitch does not take a cut of donations, as donations are paid through third-party payment platforms like PayPal and not through the Twitch platform itself.
First, I want to clarify that donations are not the same as giving bits or subscribing to a streamer. Donations generally use a third-party payment method set up by the streamer themselves. On the other hand, Bits and subscriptions use Twitch’s infrastructure to simplify and streamline the payment process.
The above should give you an idea of why Twitch does not take a cut of donations. They do not take a cut because streamers use a third-party payment method. For example, suppose I stream and place my PayPal email address on the streaming HUD for viewers to see. In that case, any viewer can copy my PayPal email address and use it to pay me directly.
This payment has nothing to do with Twitch; therefore, they could not take a cut even if they wanted to. Instead, PayPal takes a cut of your payment. But as you’ll see in the next section, PayPal’s share is much smaller than Twitch’s cut for larger payments.
However, you should remember that you are responsible for asking viewers to donate directly to you through PayPal. The viewer can charge that payment back from you within 30 days of the payment.
In contrast to PayPal, payments made through Twitch bits offer you high protection. This is because Twitch does not provide refunds for Twitch Bits that have been spent.
In this section, you learned that Twitch does not take cuts from donations because donations are made using third-party payment systems like PayPal. These third-party payment systems are set up by the streamer and are therefore the streamer’s responsibility.
In the next section, I’ll take a quick look at whether Twitch will ban 3rd party payment systems in the future.
Will Twitch ban donations via PayPal and other 3rd party payment methods?
As a company, it would be in Twitch’s best interest to ban third-party payments. And I am pretty sure that the managers at the top of Twitch have already considered this.
Using a third-party payment system denies Twitch their rightful share of the revenue from their platform. Twitch would go out of business if every streamer suddenly started accepting donations only through PayPal. Twitch has to take a cut of every transaction to be profitable. For this reason, I could see Twitch eventually banning third-party payment methods. This would force streamers to use Twitch’s Bit payment system.
Also, I could see Twitch eventually banning the use of third-party subscription systems. Third-party subscription systems like Patreon can be used by streamers instead of Twitch’s own subscription system. Streamers can push viewers towards Patreon instead of asking them to sign up through Twitch. This, again, means that Twitch does not receive any money from the subscription.
The problem is that Twitch sits between a rock and a hard place when it comes to third-party payments. If they ban third-party payment and subscription methods, streamers will migrate to competing platforms. But if they don’t ban 3rd party payment methods, they risk losing lots of money. So Twitch has to be very careful.
In this section, I discussed why Twitch may ban the use of third-party payment and subscription platforms in the future. However, Twitch should be careful because top streamers would likely leave and move to other streaming platforms.
Is PayPal taking money from Twitch donations?
Paypal charges two different fees for every transaction they process, regardless of its origin or purpose.
PayPal charges a one-time fee of $0.49 for each payment to your account plus an additional 2.89% fee per transaction. However, as the size of the donation increases, the fees become relatively small. For example, if you receive a donation of $1, PayPal will give you $0.48. They take a cut of $0.52. This is, for a small payment, a large cut of 52%. But the larger the payment, the smaller the overall cut.
For a donation of $1000 through PayPal, you would receive $970.61. That means, in this case, PayPal is cutting a cut of only 3%.
This is relatively inexpensive compared to other payment methods.
So in this section, you have learned that PayPal takes a small cut, relatively speaking, for each payment you receive.
In the next section, we will examine how much of a cut Twitch takes for Twitch bits.
Does Twitch take a cut of Twitch bits donations?
Twitch charges viewers extra money above a bit’s market value to buy Twitch bits.
Let us take a look at how this works.
A donated bit is worth $0.01 to a streamer. So if you want to donate $1 to a streamer, you’d need 100 bits. You would think you’d only need to pay Twitch $1 for these 100 bits. But that’s not the case. Twitch charges viewers an additional 30% when they buy Twitch bits. So 100 Twitch Bits cost $1.30.
When the Twitch viewer donates 100 bits to you, the streamer, gets $1, not the $1.30 the viewer paid for the bits. So Twitch takes a cut from the viewer side, not the streamer side.
So the streamer is not giving Twitch a cut of their money.
However, it does not quite work that way. If I want to donate $1000 worth of bits this year, I pay Twitch $1300 for the right to do so. That’s an extra $300 I could have donated to a streamer I love. So the streamers lose out because Twitch charges viewers so much for the transaction. Twitch is indirectly taking 30% of viewers’ cash away from streamers.
In this section, you learned that Twitch charges a 30% markup on the market value for Twitch bits when viewers buy them. And when bits are donated, streamers receive the face value of the bit.
In the next section, we will look at how much of a share Twitch take in subscriptions.
Does Twitch take a cut of subscriber payments?
Twitch takes a hefty 50% cut of subscriptions. So if a streamer pays $5 for a subscription to your channel, you’ll only get $2.50.
A loss of $2.50 does not sound like that much. But when you crunch the numbers, the cut Twitch receives can be huge. For example, if you earn a total of $10,000 from subscriptions, you’ll only receive $5,000. That 50% share hides a grim truth: you could lose thousands, if not tens of thousands of dollars to Twitch because their share cut is so high.
However, if you use a third-party donation company like Patreon, that percentage can be lowered to around 9 to 12%. That’s dramatically lower than what Twitch slices off. For example, if you received $10,000 from your Patreon subscribers, you would still receive $8800 at the higher 12% donation rate. That’s $3800 more than what you would receive on Twitch.
I honestly believe that Twitch should rethink its pricing model. Because compared to its competitors, Twitch charges a huge amount of money for subscriptions. I’d even go as far as saying Twitch is ripping off subscribers.
Looking at the other side of the argument, I understand that Twitch offers a fantastic service. And you could argue that Twitch deserves that 50% share. After all, the likelihood of you becoming a famous streamer without Twitch is pretty much nil. Or at least that used to be the case before Youtube and Facebook slid a coin into the streaming arcade machine and entered the game.
My final thought on this topic is that Twitch needs to reduce its subscription cut. I think they could still be extremely profitable, if not more so if they reduced the amount they deduct from subscriptions to 25%.
In the section, you will learn that Twitch retains a 50% share of your total subscription revenue. If you earn $10,000 from subscribers, Twitch takes $5000 of that $10,000.
In the next section, I’ll look at how you can best get donations on Twitch.
What is the best way to receive donations for Twitch streaming?
If my Twitch channel had many subscribers, I would move as many as possible to third-party subscription and payment platforms.
Twitch would probably hate me for this, but the facts speak for themselves. Twitch collects a large percentage of the money for donations and subscriptions compared to its competitors. Too large.
They charge a 30% markup on the price of bits, which indirectly takes money out of streamers’ pockets. In contrast, using a third-party payment system like PayPal only charges about 3%. Let us put this in perspective for a moment. Twitch takes 10 times more money from its users than PayPal. If I wanted to accept donations, I would beg my viewers to donate through PayPal.
But what about subscriptions? Well, as you know, Twitch takes a huge 50% cut of all subscriptions. So if someone subscribes to you with the $5 tier, you only get $2.50. That’s also much higher than other subscription platforms, unfortunately. Patron charges a fee of about 12% for all of its subscriptions.
For example, if someone subscribes to you on Twitch for $10 a month, you would only see $5. However, if the same person subscribes to you on Patreon for $10, you would get $8.80 after subtracting Patreon’s share. That’s a huge difference for any business.
If you are new to Twitch and have very few followers, stick with Twitch payment methods for now. Do not make your income streams too complicated at the beginning of your Twitch career. You will do much better if you focus on frequent and consistent streaming.
If you already have a few followers, it might be worth pushing them towards Patreon. Tell them to join Patreon, and explain that they’ll pay less per month than on Twitch, but you’ll still earn the same or more.
If they are fans, they will jump at the chance to support you and save some money simultaneously. They might even pay for a higher subscription level on Patreon because they know you’ll get more of that money.
As for donations, you could take donations through PayPal from day one. It’s straightforward to set up because all you need is your PayPal email address, and show it when you stream. You can also explain to people why you prefer donations via PayPal.
Take a look at this video to find out how to set up PayPal payments on Twitch streams.
Summary.
In this article, you have learned:
- That Twitch can not take a cut of payments made on third-party payment systems.
- It would make good business sense for Twitch to ban third-party payment methods in the future because they do not make money from them.
- PayPal takes a small share of payments made using its system. However, this amounts to only about 3%.
- Twitch charges viewers a 30% markup on the market value of the bits. So If a viewer wants to buy $100 worth of bits, they have to pay $130.
- Twitch takes a 50% cut of all subscriptions.
- It might be better to use a third-party subscription like Patreon, which does not charge more than 12% per subscription and offers many ways to add value to your fans.