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“We are witnessing the emergence of a new media economy”: Newsletters are opening new avenues of growth for publishers

Journalism is witnessing the rise of a new business model. Some journalists who launched their own newsletters in recent years have found that they can generate significant revenues through subscriptions. 

“Revolutionary change to the business model”

Many of them, working through the newsletter platform Substack, are reporting incomes on par with what they earned in their day jobs. China expert Bill Bishop and the liberal political writer Judd Legum are among the most successful journalists on the platform. 

They are earning well into six figures annually through the newsletters they send to their subscribers, reports NYTimes’ Media Columnist, Ben Smith. Journalist Luke O’Neil, who has written for Esquire and The Guardian among other top publications, told Digiday’s Steven Perlberg, 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

“The audience connecting directly with you and paying directly is a revolutionary change to the business model,” says Substack CEO, Chris Best. 

Substack was founded by developers Chris Best and Jairaj Sethi, and journalist Hamish McKenzie in 2017. McKenzie told The Washington Post’s Jacob Bogage 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.”

Here’s how Substack works: 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. Substack does not charge for newsletter creation, it makes money by taking a 10% cut of the subscription revenue.

“We’re coming in with an opportunity-focused mindset,” McKenzie told Perlberg. “During the first 20-30 years of the internet, in terms of information distribution and media, the innovation has mostly come around an ad-supported model. There’s a whole 20-30 years of innovation to come that more fully innovates around a subscription model.”

I’m wary of selling false hope to journalists who have been burned many times over by grand promises from technology companies. It is true that this new model won’t immediately work for everyone. But there are early signs that we are witnessing the emergence of a new media economy.

Hamish McKenzie, Co-founder, Substack

“The top writers on Substack are making hundreds of thousands of dollars a year,” McKenzie wrote in a blog post. “And there’s a rapidly growing middle class, with writers and podcasters netting incomes that range from pocket money to high five figures. There are now well over 100,000 paying subscribers to Substack publications.”

“A hunger out there”

Initially this trend was mainly noted among journalists, but the launch of The Dispatch, a conservative politics and news site, last October, represents the entry of the “first real news organization” on Substack, comments NiemanLab’s Hanaa’ Tameez. It serves as an umbrella brand for six different email newsletters, and three podcasts published on Substack’s platform.

The startup had added nearly 10,000 paying subscribers (on top of 60,000 non-paying) and was reportedly approaching $1.4M in revenue in March. 

“That direct reliance on readers — The Dispatch doesn’t have ads or rent out its mailing lists to scam PACs or snake-oil salesmen — makes it stand out among political media,” adds Tameez.

Substack CEO Chris Best told TechCrunch’s Anthony Ha that The Dispatch’s success so far shows that there’s “a hunger out there.” 

He added, “Are readers willing to pay for something that helps them make sense of the world and adds value to their lives? I think the answer is unequivocally yes.”

Editor and CEO Stephen Hayes said, “We’re not trying to monetize eyeballs. What Substack was doing fit pretty much exactly with what we wanted to build — a company with an editorial-first philosophy.”

“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.

“McKenzie said 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.”

Some other full-fledged news organizations built on Substack include, Asia Sentinel, Let’s Go Warriors and Write for California

“One of the most important tools available to publishers”

Going beyond Substack, the industry is witnessing a resurgence in newsletters. This year’s ​Reuters Institute Digital News Report​ notes a sharp increase in the production of email newsletters in recent years, both by ‘legacy’ print and newer digital media publishers. It adds that they are popular with avid news consumers (access news frequently throughout the day), as well as those who check news updates at set times daily.

Email helps build habit and loyalty, the report states, and is often a “critical weapon in reducing churn.” 

It (email) does remain one of the most important tools available to publishers for building habit and attracting the type of customers that can help with monetisation (subscription or advertising).

Reuters Institute Digital News Report, ​2020

Mailchimp, which also offers non-editorial newsletter hosting, reported a 45% increase in new publisher accounts in 2019, according to Bogage. He adds that sign-ups are roughly 11% higher compared to 2019 up this year and  “account registrations have soared during the pandemic: They spiked 49% in March, compared with the year-ago period, and 68% in February.”

“The shift toward newsletters is part of a broader change,” wrote Mike Isaac for NYTimes. 

“The newsletter is not a new phenomenon,” he added. “But there is a growing interest among those who are disenchanted with social media in what the writer Craig Mod has called “the world’s oldest networked publishing platform.” For us, the inbox is becoming a more attractive medium than the news feed.”

“A social media platform that publishers themselves can truly own”

Some newsletter success stories include The Skimm, a daily newsletter started by two former NBC producers, which has grown from “dozens of readers to millions.” Publishers like Axios, Vox, BuzzFeed, CNN — “have latched on to the trend as they seek a deeper bond with readers,” commented Isaac.

Newsletters today are in many ways the newspapers of yesterday; the inbox is the new doorstep. In recent years we’ve seen a huge explosion of newsletters in the news industry, and the intimacy in particular of written-through newsletters, with dedicated authors and sometimes niche audiences, has definitely pushed The New Yorker’s newsletters into new territory too.

Jessie Li, Newsletter Editor, The New Yorker 

“Newsletters are like a social media platform that publishers themselves can truly own as a consistent source of readership and engagement—and encouraging responses can be a way to show readers that you care about them and listen to their feedback,” adds Li.

Another inspiring example of newsletter success is Morning Brew, a daily newsletter designed for young business professionals. The publisher relies on ads for revenue, and according to Digiday’s Kayleigh Barber, it grew it’s online audience, as well as profits ($3M in 2018 to $13M in 2019), with the help of a single email newsletter. The number of daily newsletter subscribers increased by more than 1M during the same period.

Morning Brew had 1.8M subscribers in February 2020 and crossed the 2M mark in April. While the daily newsletter makes up for lion’s share of the overall revenue (89%), the publisher is adding more offerings as it transitions into a full-fledged media company. These include the newsletters Retail Brew (100k subscribers), Emerging Tech Brew (160k), and The Turnout (60k), plus a podcast, Business Casual (nearly 3M downloads in seven months). 

In the long run, the founders intend to move away from advertising and sponsorship. Alex Lieberman, CEO, Morning Brief, told Colin Morrison from Flashes and Flames that they are examining ways of “charging our consumers directly to own a relationship with them.” 

“Public ambassadors for brands shaping the news agenda every day”

“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.”  

“Neither email newsletters nor podcasts are going to be the savior of journalism, but they do offer ways in which publishers can build direct connections and ongoing relationships with digital audiences,” he adds. 

“While a website home page can often be overwhelming and clinical, the hosts and anchors of these products can help guide people through an increasingly complex world, showcasing the full range of talent in a newsroom in the process. Editorial curators are no longer junior staffers but increasingly important public ambassadors for brands shaping the news agenda every day.”

What’s old is new again. After obsessing over reaching massive audiences to make a living off minuscule online ad rates (which sometimes only pay pennies per thousand readers), individual writers and publications are returning to newsletters to make money directly from their audiences. And it doesn’t hurt that newsletters go directly to people’s inboxes, freeing them from social media’s algorithmic whims.

Alex Kantrowitz, BuzzFeed News Reporter