How newsletters are making big bucks from your inbox

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Every day, about 10 lengthy email newsletters drop into my inbox. First, there are the compilations from media organisations — neat round‑ups of articles on particular topics. Then the chatty, tech- and finance-focused newsletters from the likes of the Lex column that I write for, the FT's Due Diligence M&A team or Matt Levine at Bloomberg. Recently, I entered true fan territory by signing up to a paid-for newsletter from New York-based writer Cat Marnell.

Like everybody else, I was already drowning in unread emails before I started signing up for extra fodder. But newsletters tend to be the bright spots amid the demands, complaints and PR spam ("Charles I's beard hair is the perfect Christmas gift") that make up the rest of my correspondence. The list of journalists leaving media organisations to start their own newsletters makes me think I'll soon be paying for more.

This is bad news for inbox-zero aspirations but very good news for Substack, the San Francisco start-up luring big bylines. Substack is not the only newsletter company but it is the one attracting most attention.

Recent transfers include tech writer Casey Newton and activist-journalist Glenn Greenwald, who declared to his 1.5 million Twitter followers that journalists at The New York Times "hate and resent Substack" because it allows writers to avoid the paper's "monopolistic structures and discourse controls". A number of NYT journalists responded by pointing to their own Substack accounts.

Created in 2017 and backed by notable Silicon Valley venture capital firm Andreessen Horowitz, Substack makes its money by taking a 10 per cent cut of subscriptions. As of July 2020, around 100,000 people paid for at least one newsletter.

The weird thing about the email-newsletter revolution is not how big it has become but why it is happening now. How did something compiled by churches, clubs and far-flung families for hundreds of years suddenly become a hot, multimillion-dollar, VC-backed industry?

The answer seems to lie in the writers involved, for whom newsletters hold obvious appeal. Substack's commitment to carry no adverts frees journalists from the strictures of click-rates and search-engine optimisation.

They can write what they like without an editor pulling out a red pen — although they lack the protection of media legal teams. On a gloomier note, newsrooms are shrinking. By the middle of 2020 more than 11,000 US journalists had lost their jobs, according to data from "outplacement" company Challenger, Gray & Christmas, which provides job-search support to those facing redundancy.

Creating content for paying subscribers — a model already used by artists on platforms such as Patreon — is a natural alternative provided you can find an audience.

Newsletters are no match for newspapers. The ones I like best remind me more of blogs. The difference is that writers are now more aware that giving their words away for free makes little sense.

A growing number of newsletters are therefore tailored to fans who are willing to pay. The most popular can make a good income with a few thousand followers. In September, writer Anne Helen Petersen told The New York Times that she had about 23,000 subscribers to her Substack newsletter — more than 2,000 of whom were paying. She charges US$5 a month or US$50 per year. Take off Substack's fee and that translates to an annual income somewhere around US$100,000.

Of course, most newsletter writers will have a far smaller following. Daniel Ek, founder of audiostreaming service Spotify, explained in quarterly earnings this year that 43,000 artists account for 90 per cent of streams. The same imbalance is probably true of newsletters.

This is why companies such as Substack need to keep attracting writers who already have a big following. To find success they must also be prolific, have some expertise and discover a niche underserved by the media.

What happens next? Too many emails are a nuisance but well-crafted newsletters will continue to gain traction. The more attention they get, the more big names the format will attract. Big Tech may come sniffing. There are already rumours that Twitter is interested in making a bid for Substack. Celebrities may try to join in too. Like podcasts before them, newsletters are about to hit the mainstream.

Written by: Elaine Moore

© Financial Times