Substack's biggest competitor isn't who you think it is
It's no longer just a newsletter platform, and it's steadily encroaching on Patreon's turf.
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Substack's biggest competitor isn't who you think it is
There’s a famous quote from Netflix CEO Reed Hastings that he made in 2013: “The goal is to become HBO faster than HBO can become us.”
At the time, Netflix was just starting to grow its library of original programming, and Hastings was speaking to the urgency he felt to build up a sizable content moat before HBO finally got its act together and entered the TV streaming market. Given that HBO had the backing of WarnerMedia, one of the world’s largest conglomerates, Netflix needed all the head start it could get if it wanted to win the coming streaming wars. Flash forward to present day, and it’s clear that Hastings’s bet paid off.
I was reminded of that Hastings quote today when reading about Substack’s latest moves in hosting paid podcasts. Here’s a summary from The Verge:
The company announced this morning that three Patreon-hit podcasts are jumping ship to join Substack: The Fifth Column, which has more than 4,100 subscribers paying a minimum of $5 per month; American Prestige, which has more than 2,200 subscribers at a minimum of $3 per month; and Tangentially Speaking, which has around 300 subscribers at a minimum of $1 per month.
This isn’t Substack’s first foray into podcasting; it’s been building out audio tools for years, making it easy to host both free and paid podcasts. It’s also offered large cash advances to multiple Patreon-hosted podcasts to lure those podcasters onto its platform.
When tech journalists write about Substack competitors, they usually namecheck other newsletter platforms like Revue, Ghost, and Mailchimp, but I think Substack’s founders actually have their eyes on a much bigger fish. To paraphrase Reed Hastings, Substack is trying to become Patreon before Patreon can become Substack.
It’s not hard to see why. Founded in 2013 by musician Jack Conte, Patreon was arguably the first major platform to recognize the coming explosion in creator economics, and it pioneered an entirely new way for those creators to establish a direct relationship with their fans. Over the next eight years, it generated over $3.5 billion for YouTubers, podcasters, comic artists, musicians, and even writers, and it’s now considered the gold standard for creator monetization, collecting over $1 billion a year in fan payments.
Despite Patreon’s head start, Substack has already made several strong encroachments into its territory. Let’s start with podcasting, which is one of Patreon’s biggest creator categories. With Substack, you can begin hosting a new podcast for free on its platform, whereas Patreon only offers podcasts as part of a paid membership, meaning that a podcaster first needs to grow a following with another hosting platform before pushing their paid subscribers onto Patreon. That’s a lot of friction that Substack eliminates from the equation.
Patreon also locks creators into its ecosystem, making it very difficult to leave with their paid subscribers. Substack, on the other hand, uses a Stripe integration that makes it much easier to take your paid subscribers with you if you one day want to leave Substack entirely.
Those aren’t the only reasons that some podcasters are choosing Substack over Patreon. When preparing to write this article, I spoke briefly to Jesse Singal, who co-hosts a popular podcast called Blocked and Reported. Blocked and Reported originally facilitated paid memberships through Patreon and was generating well into the six figures on the platform. But then last year it abruptly moved its operations onto Substack.
Over Twitter DMs, Singal told me that the biggest reason for the switch was because Substack offered Blocked and Reported a cash advance, but he also namechecked other features that made the move enticing. “Substack is also a lot smoother in terms of basic functionality,” he told me. “We couldn't even give away free subscriptions on Patreon — we couldn't even give full admin access to [co-host Katie Herzog] without paying more! There were some really surprisingly basic limitations to Patreon that aren't an issue with Substack.”
Building a holistic creator ecosystem
Podcasts aren’t Substack’s only salvo against Patreon. You’ve also probably noticed that Substack has placed heavy emphasis on luring comic book creators onto its platform, signing star writers and artists from Marvel and DC with six figure cash advances. It just so happens that webcomic artists are another huge constituency within Patreon’s user base.
In fact, if you look at Substack’s service and product rollouts over the past few years, it’s clear that the company is trying to create offerings that extend far beyond just newsletter writers. It started by launching a legal defense fund that can shield creators from frivolous lawsuits. It also debuted a healthcare plan that makes it easier for creators to receive health insurance coverage.
Then there’s the launch of its mobile app. While many people took the cynical view that it was trying to lock users into its own platform, I saw it as a way to escape the limits of the email inbox, which prevents you from embedding other media like podcasts and video. The app essentially allows Substack to offer content distribution to creators that specialize in artforms other than the written word.
So how has Patreon responded to Substack’s encroachment? As far as I can tell, it hasn’t.
One easy way for Patreon to strengthen its value proposition would be to improve its email newsletter functionality. For years, it’s offered creators the ability to directly email patrons, but as far as I can tell, it hasn’t really updated its features at all.
For instance, Patreon only allows a creator to send emails to paid members, which means that any writer would need to build an audience elsewhere and then migrate them over to Patreon for monetization. David Potsiadlo, a YouTuber who has thousands of subscribers on Patreon, put it to me this way: “I was at a backyard hangout with my neighbor. He brought up some journalist who is on Substack, and within 15 seconds I was able to pull him up on Google, immediately subscribe to his Substack, choose the free option, and then put my phone away and resume our conversation. That sort of frictionless user acquisition just doesn’t exist on Patreon, and I wish it did.”
Patreon also doesn’t offer much in the way of newsletter audience stats. “It does tell you post ‘views’ but doesn’t provide open rate or any kind of robust [click through rate] tracking, “ said Potsiadlo. “In general, their analytics have always sucked IMO.”
And those sorts of things are going to matter more and more as the Creator Economy matures. When your YouTube channel or podcast or newsletter becomes a full-time business, then you need access to the same measurement tools that are leveraged by any traditional media company. Substack seems to recognize this and is therefore replicating the toolsets used by most mainstream publishers.
Just as HBO got too hung up on servicing the big cable companies that it waited too long to counter Netflix’s rise, I don’t think Patreon’s leaders recognize Substack’s ambitions to be much more than a newsletter platform. Email was just the low-hanging fruit: now Substack is going after every other content medium.
Less than 30 days until Creator Economy Expo
Less than 30 days until Creator Economy Expo (May 2-4) in Phoenix - the must-attend event for content entrepreneurs. Save $200 and register here. (LINK)
I’ve already booked my hotel and plane tickets for this event, so I’m definitely going. Reach out if you are too and we can get together for drinks/food.
Imagine being a freshman in college and you're assigned a class project that leads to 800,000 newsletter subscribers, eight figures in revenue, and a $25 million valuation.
LinkedIn keeps launching new tools for creators, but I haven't seen a single announcement about how creators can actually make money on its platform. [Engadget]
Koji's one of the fastest-growing startups within the Creator Economy space. Definitely worth keeping an eye on. [Tubefilter] As a reminder, I profiled its founder and CEO. He was super interesting. [Link]
Another example of why "creator funds" aren't a great method for paying creators. It's hard for them to generate reliable income. [Insider] From the article: “He calculated that originally he earned about $1 for every 1,000 views. Now he's earning $1 for about 10,000 views.”
"[LinkedIn] editors produce a morning digest of professional news for members called The Daily Rundown, which the platform claimed is 'one of the world’s largest business publications' as it reaches 159 million people each day.” [Press Gazette]
Blue Wire is seeking out sports social media influencers and then recruiting them to launch podcasts within its network. [Morning Brew]
His Substack newsletter holds scholarly organizations accountable.
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