Substack Aims to Expand Beyond Newsletters

Substack, seven years after its launch, has solidified its position as a leader in the independent news sector while pivoting towards a broader role as a central platform for creators across various media. The company’s recommendation network significantly boosts subscriptions, accounting for 50% of all subscriptions and 30% of paid ones. This model has proven beneficial for publishers, particularly during major news events, which have generated substantial subscription revenue.

Despite losing some high-profile creators due to its hands-off approach to content moderation, Substack continues to attract influential voices in journalism and media. Prominent channels such as Bari Weiss’s Free Press and Mehdi Hasan’s Zeteo have drawn significant attention, especially as top journalists migrate from established outlets like The Washington Post and The Guardian to Substack.

While Substack reported modest annual revenue of $9 million in 2022 and remains unprofitable, it has gained over a million paid subscribers in the past year, with news content still dominating its subscriber base. To avoid the pitfalls faced by competitors like Medium, Substack is transitioning from being primarily a journalism platform to a more versatile payment system for creators.

In its latest strategy, Substack is reaching out to a diverse range of creators—including influencers, video producers, and podcasters—to establish itself as a primary platform for monetization. Substack’s pitch highlights the inconsistencies creators often face with other revenue streams, like brand deals or ad revenues. By providing a platform that allows creators to retain ownership of their email lists, Substack seeks to offer a more stable and flexible monetization avenue.

This shift places Substack in direct competition with crowdfunding platforms like Patreon. Despite taking a slightly higher cut (10% vs. Patreon’s 8%), Substack’s structure is appealing, as it allows creators to easily transition to paid memberships without being locked into a single platform. The success of creators like Violet Witchel, who transitioned from Instagram to Substack and significantly increased her revenue, exemplifies the potential of this model.

Despite Substack's growth and influence, several challenges persist. The platform must convincingly attract creators beyond the realm of journalism, but it faces hurdles due to its limited features for video and audio content compared to more established platforms. This gap was highlighted by the podcast Search Engine, which, despite starting on Substack, eventually moved to a more creator-friendly membership platform. Additionally, some core newsletter writers express concern about the increasing volume of low-quality content on Substack as it expands beyond its original journalism-focused audience. This influx of lesser-quality posts could dilute the platform's appeal to subscribers who initially joined for high-quality writing.

Another concern for Substack is the potential for subscriber churn as creators weigh the long-term viability of paying a 10% revenue cut. While many Substackers are content for now, the question remains whether this arrangement will be sustainable as they grow their businesses.

Ultimately, Substack's strategy to position itself as a central hub for independent creators rather than solely a journalism platform could enhance its valuation and attract interest from payment processors like Stripe and Square. However, the company must navigate the risks associated with this broader focus while maintaining its appeal to writers and journalists who have made it a success. As Substack continues to evolve, its ability to balance these competing interests will be crucial to its future growth and stability in the creator economy.