Paid newsletters aren't sustainable
I disagree, and here's why
TL;DR: I love Substack, but a friend of mine is skeptical. He ranted about subscription fatigue and sustainability concerns for writers outside the top one percent. I reached out to Claude and tried to steelman his argument. While I still disagree, I do believe the "winner-takes-all" dynamic is the most significant challenge for writers, and it could sink Substack. — Daniel
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The Argument
I’ve been having a lot of fun on Substack lately. Notes has transformed the user experience, and it feels like a respite from traditional social media platforms.
Taking a piece of subscription revenue allows Substack to avoid the perils of the attention economy. They have no advertisers to cater to, and they don't need you to live in their app 24/7 to make money.
You can't buy a blue check; you have to earn an orange one the hard way.
They’re playing a completely different game, and I respect that.
But my friend, let’s call him Justin, doesn't believe the hype.
"It's Spotify all over again," he said, shooting down my enthusiasm. He’s not interested in supporting a platform where a chosen subset of writers at the top make a ton of money while everyone else drowns.
He also sees a world full of consumers struggling with subscription fatigue, annoyed that every little thing on the internet is behind a paywall.
He questioned whether writers outside the top one percent can earn a living from paid subscriptions. I had rebuttals, but I also shared some of his doubts.
Steel Man v Straw Man
The best way to counter someone is to understand their argument better than they do themselves. The term "steelmanning" was apparently coined by philosopher Eli Dourado. I struggled to find solid sources to confirm Dourado came up with this, but I figured I would include a note in case you want to dive deeper into the origin.
The word relates to the more well-known concept of a “straw man” argument, an intentional misrepresentation of someone’s position to make it easier to undermine.
Traditional debate tactics focus on winning by undermining an opponent’s argument, but steelmanning forces you to understand and strengthen their position before attempting to squash it.
Claude, Act as a Debate Champion
Leveraging AI to learn and gain a deeper understanding of a subject is a skill that will only become more valuable. The first thing I did was try to find an essay that touched on some of the challenges of paid subscriptions, something Justin would probably reference in an argument against me.
I forgot I bookmarked a piece from Michael Simmons.
This was perfect.
Some key points from Mike:
The supply of paid subscription content is exploding. There are tens of thousands of paid newsletters (on Substack alone), and that’s growing fast.
Limited attention and money. Individuals have only so much money to pay for those newsletters and only so many hours to read them.
Fierce competition. The result is a Hunger Games-style competition for money and attention.
Here was my initial prompt in Claude:
DH: Act as a debate champion. I want to steelman an argument.Claude:
Understood. As a debate champion, I can help you steelman an argument. Steel manning is the practice of presenting the strongest possible version of an opposing viewpoint before attempting to counter it. This approach demonstrates intellectual honesty and helps create a more robust debate.
What specific argument or position would you like me to steel man? Once you provide that, I'll construct the most compelling version of that argument, incorporating the strongest evidence and reasoning in its favor.I then added the argument and supporting reasons from Mike’s essay.
DH:
Argument:
Paid newsletters on Substack aren't sustainable. The rich will only get richer.
Reasons:
1. There are too many newsletters on Substack, just like there are too many artists on Spotify.
2. The average consumer doesn't want to pay for more subscriptions.
3. The quality bar is only getting higher and it requires more time to grow and stand out.Claude responded with long-winded answers.
I won't copypasta but here are the 7 main points:
The "Winner-Takes-All" Effect
Subscription Fatigue and Economic Pressures
Rising Quality Standards and Time Investment
Algorithm and Visibility Challenges
Limited Monetization Options
Platform Dependency and Risk
Competitive Pressure from Free Alternatives
I then asked Claude to write a sentence summary for each point.
DH: Write a sentence summary for each of the 7 points listed above.Claude:
Certainly. Here's a sentence summary for each of the 7 points:
1. Oversaturation and Winner-Takes-All: The newsletter market on Substack is becoming overcrowded, leading to a situation where only a small percentage of creators capture the majority of subscribers and revenue.
2. Subscription Fatigue and Economic Pressures: Consumers, faced with numerous subscription options and economic uncertainties, are less likely to pay for newsletters, viewing them as non-essential expenses.
3. Rising Quality Standards and Time Investment: The increasing quality expectations for newsletter content require significant time and resources, making it challenging for many creators to sustain their efforts without guaranteed returns.
4. Algorithm and Visibility Challenges: Substack's discovery mechanisms may favor established newsletters, creating a visibility barrier for new and talented but unknown writers.
5. Limited Monetization Options: Substack's reliance on subscription-based revenue limits creators' ability to diversify their income streams, potentially hindering long-term sustainability.
6. Platform Dependency and Risk: Writers building their audience on Substack become vulnerable to platform changes, potentially jeopardizing their newsletter's viability.
7. Competitive Pressure from Free Alternatives: The abundance of free, high-quality content online creates strong competition for paid newsletters, making it harder to justify subscription costs to potential readers.The Biggest Challenge for Substack
Consumers certainly experience subscription fatigue, which is the second biggest challenge. I’m personally tired of subscribing to services just to watch one thing.
However, I don’t mind supporting writers financially every month. Sometimes giving the writer money is more of a sign of support than a pure value exchange.
I believe the Winner-Takes-All dynamic is the biggest challenge for Subtack not just because it’s harder than ever for great content to stand out but they also need a lot of writers to charge and make money directly on the platform.
Content discovery is a huge problem on Substack, and many writers are wondering if they should even paywall their work.
When you’re struggling to get any attention, gating your content won’t help.
But, Substack needs writers to use paywalls.
Meanwhile, the rich are getting richer.
Today, the creator economy is diverse, vibrant, and growing. However, across many of the creator economy platforms, a similar pattern emerges. A very small portion of the content creators capture the lion's share of the revenue. Far more than 80% of the revenues are created by far fewer than 20% of the creators. In short, the Pareto principle, or 80/20 rule, does not apply. The creator economy is “winner takes most. — Citigroup
Read that again.
… the Pareto principle, or 80/20 rule, does not apply.
It’s far worse, and Substack is not immune to this reality.
Ok, back to this line from earlier…
The "winner-takes-all" dynamic is the most significant challenge for writers, and it could sink Substack.
How could this sink Substack? Well, let’s look at their business model.
They take 10% of all subscription revenue. That’s their only revenue stream.
The diversification of contributors to that revenue stream is critical for the company to sustain itself long-term.
Currently, Substack operates more like a manager of a bunch of A-list celebrities than a traditional tech company.
What happens when a few celebs fire the manager?
If their income becomes concentrated among a few established figures and media companies, the platform becomes vulnerable to significant financial impacts if any of them decide to leave, which some big publications already have.
Substack shouldn’t focus solely on "whales."
They would certainly be better off ensuring everybody eats and a broader base of writers can monetize their work. This would create a more resilient ecosystem, and it aligns with the platform's foundational purpose of empowering independent creators.
Fin
In less than five minutes, this exercise got the axons in my brain firing. I’ve barely even scratched the surface and could go back and forth with Claude for hours.
I had new ideas and questions to consider.
This topic could easily expand into endless short-form content.
The same conversation with ChatGPT would yield a second opinion.
What if I had different LLMs debate each other?
Engaging in a steelman argument is an incredible way to learn, and it was hard to do on your own just a few years ago. Tools like Claude unlock some of the best debate champions on any subject, for free.
This was a fun and creative exercise for my brain that generated a ton of momentum. If you’re a creator or founder, this is invaluable especially when you hit a wall and aren’t quite sure what to do next.
— Daniel
I appreciate your feedback. If you enjoyed this piece, drop a like or comment below. You can also send a note to daniel@hunter.vc, would love to hear from you.