• Mon. Jun 17th, 2024

Substack writers are mad at Substack. The problem is money and who’s making it.


Mar 19, 2021
People sort mail into bins circa 1940.
Keystone-France/Gamma-Keystone via Getty Images

The newsletter startup’s new controversy, explained.

Jude Doyle has been publishing a Substack newsletter since 2018, not long after the startup launched. This week, the writer, described in their website bio as a “non-binary author, columnist, and all-around weirdo,” announced that they were leaving and setting up shop at Ghost, a nonprofit publishing platform.

The why Doyle left matters because it illustrates the tension Substack faces as it tries to be both a platform — where it simply sets up a place for anyone to write anything and steps away — and a publisher — where it makes choices about the kinds of writers it wants on Substack.

But the how is just as important because it illustrates a potential problem looming for the buzzy, Silicon Valley-backed company: In a very short time, Substack has supercharged the newsletter industry and helped make it newly attractive to a wide range of authors. But unlike other digital platforms, Substack doesn’t have any lock-in that will keep writers — popular or otherwise — from bolting to competitors.

And competitors — including ones from Facebook and Twitter — are definitely coming after Substack.

First the why: Doyle says they left Substack because they were upset that Substack was publishing — and in some cases offering money upfront to — authors they say are “people who actively hate trans people and women, argue ceaselessly against our civil rights, and in many cases, have a public history of directly, viciously abusing trans people and/or cis women in their industry.”

That list includes some of Substack’s most prominent and recent recruits: Former Intercept journalist Glenn Greenwald, my former Vox coworker Matt Yglesias, and Graham Linehan, a British TV writer who was kicked off Twitter last year for “repeated violations of [Twitter’s] rules against hateful conduct and platform manipulation.”

Substack’s main business model is straightforward. It lets newsletter writers sell subscriptions to their work, and it takes 10 percent of any revenue the writers generate (writers also have to fork over another 3 percent to Stripe, the digital payments company).

But in some cases, Substack has also shelled out one-off payments to help convince some writers to become Substack writers, and in some cases those deals are significant. Yglesias says that when it lured him to the platform last fall, Substack agreed to pay him $250,000 along with 15 percent of any subscription revenue he generates; after a year, Yglesias’s take will increase to 90 percent of his revenue, but he won’t get any additional payouts from Substack.

As Yglesias told me via Slack (he stopped working as a Vox writer last fall but still contributes to Vox’s Weeds podcast), the deal he took from Substack is actually costing him money, for now. Yglesias says he has around 9,800 paying subscribers, which might generate around $860,000 a year. Had he not taken the Substack payment, he would keep 90 percent of that, or $775,000, but under the current deal, where he’ll keep the $250,000 plus 15 percent of the gross subscription revenue, his take will be closer to $380,000.

Substack has been experimenting with this kind of offer for some time, but last week, it began officially describing them as “Substack Pro” deals.

The money that Substack and its writers are generating — and how that money is split up and distributed — is of intense interest to media makers and observers, for obvious reasons. But the general thrust isn’t any different from other digital media platforms we’ve seen over the last 15 years or so.

From YouTube to Facebook to Snapchat to TikTok, big tech companies have long been trying to figure out ways they can convince people and publishers to make content for them without having to hire them as full-time content creators. That often involves cash: YouTube set the template in 2007, when it set up a system that let some video makers keep 55 percent of any ad revenue their clips generated.

But YouTube has also shelled out advances for specific kinds of videos it wants from specific kinds of creators. A decade ago, for instance, it spent hundreds of millions trying to get celebrities like Madonna and Jay-Z to make stuff for the site. Facebook has done the same thing, which is why at one point the New York Times had a seven-person team dedicated to making Facebook Live videos. (Facebook’s Instagram, interestingly, has been quite slow to figure out how to share revenue with its creators.)

Like Substack, YouTube and the other big consumer tech sites fundamentally think of themselves as platforms: software set up to let users distribute their own content to as many people as possible, with as little friction as possible.

That stance usually generates criticism in cases where someone finds odious content on, say, YouTube, and then YouTube does or doesn’t explain why the clip is on the site, and then may or may not get around to taking it down. The current Substack controversy is a little different: Critics like Doyle say they’re upset that Substack is funding authors they don’t like — either directly via advance payments like the one Yglesias got, or just by letting them keep a share of subscription revenue they sell.

“Substack isn’t a self-publishing platform,” Doyle wrote earlier this month. “It curates its writers. It pays them, sometimes massively, and it makes choices as to who gets paid well and who doesn’t.”

The “Is this company a platform or a publisher or a tech company or a media company?” conversation is a long-running one that plenty of digital media companies end up participating in, willingly or not. It usually gets answered with some kind of shrug.

It’s unclear if Substack’s version of this story will work out any differently, though for right now it is generating a fair bit of negative attention: On Thursday, for example, writer Annalee Newitz told her Substack audience that the company is a “scam” and that she intends to leave. Other writers, including Elizabeth Spiers and my Vox colleague Emily VanDerWerff are voicing similar thoughts.

One sort-of solution Substack critics have suggested is having the company identify which authors are part of the Substack Pro program.

“It would allow other people on the platform to make an informed decision about whether they want to be on the platform,” Spiers told me via Twitter DM. “I think if you’re a progressive, you’d want to know if you’re publishing on a platform that is essentially subsidizing a Breitbart. And I’m sure conservatives would want to know if Substack was exclusively subsidizing leftists. … If they’re not embarrassed by who they’re publishing and see no problem with it, why won’t they make that list public?”

Like everyone else who doesn’t work at Substack, I don’t know how many authors are in its Pro program. But I would be surprised if they are consistently on one end of the ideological spectrum. A writer I know who was offered a Pro-like deal last year (but didn’t take it) is someone who is not a straight white guy and whose politics are very much left of center.

More to the point, Substack is aware that it now has a reputation as a platform for white guys who don’t want to or can’t work at traditional publications anymore, and the company is eager to point out when it has high-profile writers who don’t fit that mold. The company’s most successful author, as of late last year, is Heather Cox Richardson, a Boston College professor who generates a daily explainer that puts the news of the moment in historical context.

“It’s good for us to manage the perception [that Substack caters to conservative writers]. It would feel really bad for me if people who would be really great on Substack don’t feel like it’s a good place to be for them,” Substack CEO Chris Best told me in December.

Substack co-founder Hamish McKenzie says the company may offer more transparency for the Pro deals it signs in the future, but won’t commit to letting users know who has existing deals.

“We completely understand why some people think it would be wiser to make the list of people we do deals with public,” McKenzie told me via email. “We’re thinking of ways that might make the Pro deals more open in the future, but we also want to honor our existing commitments to the writers who signed Pro deals on the understanding that it is up to them whether or not they want to publicize their deals. Whatever the ultimate outcome might be here, we will always stick to the principle of the writer, not Substack, being in charge.”

Substack may need to work on its perception problem, but it certainly doesn’t need additional publicity in some parts of the world: Lots of people in tech and media are very aware of Substack and are trying to figure out how to compete with it.

To be clear: You don’t need to work with a company like Substack or Ghost to create and sell your own newsletter. Ben Thompson, the business and technology writer whose successful newsletter served as the inspiration for Substack, built his own infrastructure cobbling together several services; my former colleague Dan Frommer does the same thing for his New Consumer newsletter. And Jessica Lessin, the CEO of the Information, told me on the Recode Media podcast that she’d consider letting writers use the paid newsletter tech her company has built for free.

But since Substack — kickstarted with $17 million in venture money — seems to have proven that there’s a large group of people who want to write newsletters for a much larger group of readers, very big companies are now coming for the same market. Earlier this year, Twitter bought Revue, a Substack competitor, and is now starting to promote the service to potential writers:

And this week Facebook said it also plans to launch its paid newsletter product “in the coming months.”

In both cases, the potential advantages the big platforms have over Substack are obvious: Enormous reach, and an ability to compete viciously on pricing. Twitter says it will take 5 percent of authors’ revenue — half of the 10 percent Substack currently takes. And Facebook hasn’t said what it will charge, though its reps are nudging and winking and suggesting they may not take anything at all.

Meanwhile, Substack has deliberately made it easy for new competitors to take root, since it tells authors that they can take everything they’ve built on Substack — both their archives and their mailing list — and move it anywhere they want. Doyle, for instance, was able to get up and running on Ghost days after they wrote their first post criticizing Substack.

“I do think that the current Substack Discourse has sort of underweighted how big their business model challenge is here,” Yglesias told me when I asked him if he would stay on Substack after his first year on the platform. “In the long run, it seems like Substack is at serious risk of losing its biggest players.”

On the other hand, unless you’re running your own private newsletter business, it seems like anyone on any newsletter platform runs the risk of the same problem Doyle identified in their first blog post. If you’re on someone else’s platform, then other people will be there too — perhaps even making money — and you may hate them.

That’s fine, Doyle told me. In that case, they wrote: “I have the option to say ‘fuck it,’ leave, and encourage others to leave.”

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