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Media's New Engine: Can Substack Avoid Past Pitfalls?
16 Jan
Summary
- Substack is valued at $1.1 billion, raising $100 million.
- Creators keep 86% of subscription revenue, fostering independence.
- Media ad revenue dropped $80 billion, with AI posing further threats.
Substack, founded in 2017, is positioned as a new economic engine for culture, empowering independent writers and large news organizations to craft and sell newsletters via email and its app. The company recently raised $100 million from venture capital, valuing it at $1.1 billion. This funding highlights lofty expectations for the platform's growth and profitability within the struggling media landscape.
Creators on Substack retain editorial control and approximately 86% of subscription revenue, a model attracting prominent figures and major publishers like the Financial Times and Wall Street Journal. Despite these advantages, the broader media industry has seen a dramatic decline in ad revenue, exceeding $80 billion over the past two decades, with AI posing further existential threats. Publishers are cautiously exploring Substack as a potential revenue stream, with some using it as a 'gateway drug' to attract new readers.
Substack's substantial valuation and growth ambitions raise questions about its long-term sustainability. The platform's success will depend on its ability to avoid the mistakes of previous ventures like Medium, which faltered due to financial realities and quality control issues. As the media industry continues to contract, Substack's journey will be closely watched to see if it can indeed forge a new, viable business model or if it represents another 'fool's gold' for the news business.
