I'm legitimately excited about the Substack revolution. I think it's a really great opportunity for high-quality writers to get directly in your mailbox. It's really a win-win for writers and readers - find who you like, support them directly, and celebrate the democratization of information.
The only problem, that democratization comes with a cost. Customers may love a writer on Substack, but they might also love 10 Substack writers. Are even the most die-hards really willing to shell out $1000 a year for a small-ish collection of voices. I honestly, truly hope so, but it's sort of a utopian version of the price of content.
I won't go to deep into the microeconomics of separate vs bundled prices (not least of all because I'm a macro guy, not micro). There are plenty of economics textbooks that will do a much better job than I can.
The concept of non-bundled pricing is simple - profits are maximized at the price/output level where margin revenue equals marginal cost.
But this is where the problems seeps in. I think Matt's newsletter, Slow Boring (https://www.slowboring.com/) would be a pretty good value of $80 for a year. I enjoy his writing and analysis, and would love to support an individual writer.
Presumably for Matt, that optimal price for an individual subscription is (presumably) $80 a year. Price lower than that and more people will subscribe - but his total revenue (price x quantity) would be lower than the optimal level. Price too high, and your revenue per user will be higher, but you won't sell enough subscriptions to maximize your revenue.
But I also really like Casey Newton. He charges $100 a year for his newsletter, Platformer (https://www.platformer.news/). But Casey is also pricing to optimize for his individual subscriptions.
The problem is that consumers value Matt and Casey's work differently. Some readers are willing to pay for Casey, but not Matt. Or more likely, they're not willing to pay $80 for Matt's newsletter.
Now we're talking $180 a year for two writers I like. Just for reference, that's about the price of the New York Times, which is $17 a month, or $204 a year.
A lot of consumers aren't willing to part with $180 a year for two writers (I, for example, already subscribe to a number of other newspapers*, so I have more content that I can handle).
But let's say I would pay $80 for Matt, but I'd pass on the $100 subscription for Casey. I would, however, pay $20 for Casey - which is better than $0 he'd get from me. That's a $100 bundle. If Matt and Casey split my $100, Matt might be making less, but Casey is making more. If there are more consumers willing to make a similar choice, they'll capture more revenue in total than they would if they're pricing individually.
The creator economy is a tricky one
The problem here is that I really, really want to support individual creators. I'm a writer myself, and I love the idea that if one day my company went under and I was unemployed, I could build a base of readers online and make a living off of it. That's the dream for any creative.
But I would be up against a steep wall. Why? Because first, a very small number of creators get the huge bulk of views. Whether its Substack, YouTube, Twitter, or any other platform, nearly all the riches go to the very top.
Second, it would be a lot easier for me (let alone for someone much more famous than myself) to just hitch my horse to a bigger wagon. I'm not going to do much as an individual like Matt or Casey, but joining a larger pool of writers and taking a narrow slice of the bigger pie? That's has a much bigger probability of success.
Bundling seems like the end-all for Substack. Attract a collection of talented writers where individually, they may not appeal to all, but collectively they offer something very compelling to a broader set of consumers. That is, you ultimately recreate something like Vox, or The Weeds, or The Atlantic. **
I know that's what those pioneering Substackers are exactly trying to get away from, but it's probably the outcome with the highest probability of long-term success.
* In case you were wondering: NYT, The Economist, LA Times, Chicago Tribune, on-and-off with the Washington Post, plus I get several other papers through work.
** Interestingly enough, Substack is beta testing a reader product. Could it be akin to a paid version of Google Reader and the start of exactly what I'm describing?