Substack has been in the news lately as many journalists have left full-time positions to start their own newsletter on the platform. The most recent high profile transition being that of The Verge’s longtime Silicon Valley editor and creator of The Interface newsletter, Casey Newton.
“Figure out more sustainable, replicable models”
“I’ve been a journalist for 18 years now,” Newton said in an interview with journalist Sarah Jeong. “The entire time, I’ve been nervous about what’s going on in the ad market. First I saw the web come along and disrupt the print newspapers I was working for. Then the platforms came along and disrupted the digital properties I was working for. Along the way, thousands of really talented journalists lost their jobs.”
The time was right to go solo, he added, because of the changing relationship between readers and media outlets. “You might follow a publication,” he told NYTimes’ Marc Tracy, “but it’s more likely you care about an individual reporter or writer or YouTuber or podcaster. People are increasingly willing to pay to support those people.”
I always wondered if there were alternative business models we could explore, and if they were successful, could we help figure out more sustainable, replicable models for journalists to snap their fingers and create their own jobs?Casey Newton, Silicon Valley Editor, The Verge
“Mini media empire”
And that’s what Substack aspires to achieve. Writers can launch a free or a paid subscription newsletter on the platform. It takes care of the technology, freeing them to focus on the writing. Journalists are not charged for newsletter creation. Substack earns by taking a 10% commision on subscription revenues, 3% goes to Stripe, which handles payments; and the writer receives the remaining 87%.
The company was founded by developers Chris Best and Jairaj Sethi, and journalist Hamish McKenzie in 2017. McKenzie told The Washington Post that they were, “put off by the social media algorithms that controlled news distribution, they wanted a platform that would allow each client to build a “mini media empire” around their mailing lists.”
China expert Bill Bishop and the liberal political writer Judd Legum are among the most successful individual writers on the platform. They are earning well into six figures annually through the newsletters they send to their subscribers, reports Ben Smith from The Times.
Journalist Luke O’Neil, who has written for Esquire and The Guardian among other top publications, told Digiday that he is expecting to gross more than $100,000 annually for his newsletter Hell World.
I just need a few thousand people, and it’s a good model. The one where you really need everyone is the ad model where you’ve got to constantly fight for more and more clicks. Because you start every day out basically at zero.Judd Legum, Journalist and Author of the newsletter, Popular Information
“Revolutionary change to the business model”
At present Substack has more than 250,000 paying subscribers across its network, and its top 10 publishers bring in $7M collectively in annualized revenue, Co-founder Hamish McKenzie told Axios.
What’s more, the platform is also quietly emerging as a promising new business model for the more traditional publishers. The most popular paid offering on the platform is The Dispatch, a conservative politics and news site which was launched last October.
It’s an umbrella brand for six different email newsletters, and three podcasts published on Substack’s platform and represents the entry of the “first real news organization” on Substack, according to NiemanLab’s Hanaa’ Tameez. The Dispatch has garnered 100,000 subscribers. Almost 18,000 of these are paid and the publication is close to pulling in $2M in first-year revenue.
Chris Best. Founder and CEO at Substack Inc. said that Substack’s reliance on email — rather than social media or search engines — promoted a one-on-one relationship between writers and readers, something that should be prized at a time of online noise.
The audience connecting directly with you and paying directly is a revolutionary change to the business model.Chris Best, CEO, Substack
“Email is the only feed you’re already checking”
“I think we live in a world where the default content discovery action is scrolling with your thumb,” said Newton. “Email is the only feed you’re already checking that I can insert myself into for free. So it has been a very popular spot for people who want to do media, because you can do really in-depth, high-quality content in a feed that people are already checking.”
“To say more obvious things: I can reach you directly,” he added. “I don’t have to chase you on Twitter. I don’t have to chase you on Facebook. I don’t have to hope that my story appears below the Google search box.”
Moreover, it’s easier to convince newsletter subscribers to pay. In 2017, the New York Times reported that readers who signed up for the paper’s free newsletters were twice as likely to become subscribers.
The thing about newsletters is that you have control over the relationship with your audience. If you’re building entirely around Google or Facebook or Twitter, at the end of the day, they have control over who sees what. With email, you have a little more control in the relationship.Dan Oshinsky, Founder, Inbox Collective, a newsletter consultancy
“This whole trend is part of a larger shift away from our reliance on excessive amounts of display advertising, overwhelming the reader and making the whole experience unpleasant,” adds Douglas McCabe, CEO of Enders Analysis, a media research company.
“With publishers increasingly wary of platforms, email traffic has been an increasingly important route to content,” says Nic Newman, Senior Research Associate at Oxford University’s Reuters Institute for the Study of Journalism. “But with a greater focus on paid models, they are also one of the most effective ways of identifying and converting new digital subscribers.”
“Opportunity for the media business to reassert value”
Many publishers have been exploring opportunities on Substack. “Managers hoping to capture all the upside of newsletters without the risks, have begun testing out ways to give their reporters newsletters that they control,” writes Max Willens, Platforms Reporter, Digiday.
“Substack is having conversations with numerous media companies about how they can use his company’s product to build newsletters for their reporters or organizations; in late May, for example, four Wall Street Journal staffers debuted a collaborative newsletter on Substack, called Elevate with clear WSJ branding.”
“Substack represents a radically different alternative, in which the “media company” is a service and the journalists are in charge,” writes Smith.
“We could look at this trend as yet another existential moment for media companies that have been disrupted by platforms across all business pillars,” says Jarrod Dicker, CEO of Po.et. “Or we could see this as an opportunity to lean into something we as an industry have always been good at and build a new business around it.”
This is an opportunity for the media business to reassert value on top of the current revenue streams by fulfilling a need for creators who should be focused on what they do best: create. The solution is building the platform for talent, pairing both brand reputation and individual reputation, and connecting it all together.Jarrod Dicker, CEO of Po.et
“An entirely new well of business”
Dicker writes (quoting NYT’s Smith) that media’s next business model is “monetizing the individual”. He recommends media companies to take cues from the record industry where “artists and labels work together in order to grow both their businesses and reputation in parallel”.
“Emphasis on the talent (artist) only drives more value and more revenue for the label (brand),” he comments. “The label pays for a song to be produced so they can partially own the song. There is equity in their investment of that artist. Record labels are having record years because they own the publishing rights to songs. People hear a song, the label gets paid.
“It’s a formula that on top of existing revenue opportunities (advertising, subscriptions, events) opens up an entirely new well of business.”
“Such a shift will funnel more talent to publications with sustainable business models that align quality journalism and revenue,” adds Jessica E. Lessin, Founder and Editor-In-Chief, The Information. “Those publications will better retain that talent in our industry by creating a culture where they reward top performers for their impact.
“As an industry, we could maximize not just the number of individual writers, but also the number of sustainable newsrooms that employ thousands of reporters for centuries to come.”Jessica E. Lessin, Founder and Editor-In-Chief, The Information