I’m trying something new this week with an email dialogue I had with Workweek CEO Adam Ryan. In addition, media schadenfreude, subscription nomads and a heroic podcast with a short seller. First, a message from The Rebooting supporter Zephr.
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Media on media schadenfreude
The knock on media is it loves to build people and companies up and then viciously tear them down. This is a fair charge, only I would point out that this treatment is just as bad for media businesses. Think of Vice. The messy conclusion of Vice’s run as a standalone company has ignited plenty of schadenfreude. Business Insider has a classic autopsy story, recounting with the benefit of hindsight the classic tale of hubris, greed and private equity.
Vice was always more sizzle than steak. It reminded me of a middle-aged person’s conception of youth media. Even at peak hype, Vice attracted fewer millennials than The New York Times. The idea that a cable channel was going to be the path of youth media was a tell. Turns out nobody watched.
Unsurprisingly, some of the antics of Vice co-founder Shane Smith are again being discussed, along with the single source assertion he took $100 million off the table in Vice’s funding rounds. Makes sense if you have the dough to buy a $23 million house. To his credit, he and his now ex-wife sold the house for nearly $50 million. The excess of the Vice days – the $300,000 dinner, handing out $1 million in cash at holiday parties, the Bonnie and Clyde bravado – are of a time and a place that no longer exists.
Even new media ventures tend to have brief honeymoons. Quibi was for all intents and purposes declared DOA at launch and lasted just six months before being taken out back. It legacy was bringing to culture “The Golden Arm.” That said, it lasted longer than CNN+.
New news ventures tend to get a rude reception as well. Semafor managed to ruffle feathers by advertising a lot on Twitter during what seemed like an excruciatingly long launch period. Now it’s the turn of The Messenger, the most ambitious new news publication —at least judging by the $50 million in funding and plans to hire 175 journalists — to launch recently. The New York Post gave the cloak of anonymity for “insiders” to unload on the premise, particularly the forecasts to do $100 million in ad revenue in the first year from a standing start.
For the time being, the prevailing winds of media have shifted from the big and flashy to the smaller and sturdier.
‘A Ponzi scheme of newsletter subs’
Adam Ryan is the CEO of Workweek, a B2B media company based around creators. Adam used to be the president of The Hustle and writes the Perpetual newsletter that covers the media business from the lens of an operator. Adam and I have similar views of the media business, although we view things from different perspectives because I come from the content side and Adam from business. I thought it would be fun to have a back and forth discussion on where Substack goes next. Part 2 will run on Thursday. Be sure to check out Perpetual.
BM: I'm going to use press release talk and say at the outset that I'm thrilled to be kicking off this series with you. The reason I wanted to start with you is because I feel like we see things similarly but from very different vantage points because I'm from the content side and you're from the operator side, although we both know they overlap.
I want to talk about Substack as a platform. I feel like Substack is slowly revealing its ambitions to leave its origins as an email tool behind in this quest to become "an economic engine of culture." Mario Gabriele at The Generalist had a great writeup on the Substack model. He left Substack in 2021, now he's back, mostly because Substack has made a lot of progress in building out growth tools that individuals need to grow and monetize.
I'm always torn on Substack because while I am publishing this on the platform, I value autonomy and have lived through too many cycles of platforms screwing over publishers. Maybe this time it's different? I have a feeling you're going to tell me to wake up, considering your assessment of Subtack’s recommendation feature was: “Whoever built this feature is either a total moron or hoping everyone else is a moron.” That’s not good, right?
AR: Thanks for the opportunity, Brian. Love that we can explore this format.
Substack has put a lot of effort towards growth lately. The math equation is simple, if they can help drive more than 10% of your revenue, then the 10% fee is basically a marketing expense not a tech expense. Paying $100,000 for a CRM when you make $1 million annual recurring revenue makes zero sense. Their recommendations feature started making that equation come to life. They are helping newsletters and creators grow at unbelievable rates as solo operators.
I was always impressed with the conversion rate of free to paid at 8-10%. As someone who launched a subscription business, I couldn't wrap my head around that success rate. It was 100%+ better than what I had previously seen.
Their strategy was to put little to no resources in driving new subscribers to the ecosystem; they're depending on creators driving in net-new subs and then helping other creators by those net-new subs. If the top of the funnel dried up, they had no real growth support. They set up essentially a Ponzi scheme of newsletter subs.
As they got subscribers to subscribe to more newsletters, the conversation rate has dropped. From what I've heard from larger creators, it's closer to 4-5% now.
The other issue is that Substack is incredibly top heavy in who brings in net-new subscribers. I believe maybe 25 people bring in 40%-plus of net-new subs. This poses a massive risk to the ecosystem.
Their best move is to create an ecosystem with community. Then it starts to make it easy for a creator who is using various tools for courses, community, digital events, job boards to use one platform.
Subscribe to Perpetual to get Adam’s bird’s eye view of the evolution of the media business.
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Subscriptions have continue to be a bright spot for many publishers. INMA sees more room for expansion for subscription programs. That’s going to require publishers get as good at keeping customers as they’ve become at getting subscribers. The proliferation of paywalls has given rise to subscription nomads, who bounce in and out of subscription programs. The streaming sector has long dealt with these digital nomads, since many services are driven by hits still. Plenty of people will sign up again for HBO Max ahead of the last season of “Succession,” only to cancel once it concludes. The behavior suggests that many media companies are kidding themselves that their subscribers are engaged in a long-term relationship — and that the next phase of subscriptions will be more complex, with ad hoc bundles, fractional subscriptions and, who knows, maybe micropayments will rear their head again.
Chat never monetizes. That was a truism I heard many, many years ago, and it’s mostly held true. Twitter’s ad quality is perceived as far lower these days – in my experience, this checks out – and its fate is likely in direct-response style ads in the manner of content-recommendation ad networks. Twitter lacks strong intent signals, and it’s like to never be seen as a must-buy for brand advertisers.
This Forward Guidance podcast episode with short seller Marc Cohodes, who sniffed out FTX, SVB and Signature is not only informative but profanely and deeply hilarious. This man needs a talk show. A few gems:
- On short selling: “I go after people and companies I think the would would be better if they’re not around.”
- On CNBC: “The cartoon network.”
- On VCs: “If not for low rates, these guys would be selling soft serve at the Dairy Queen.”
- On Jamie Dimon: “This guy is a motherf—r. He’s a serious-ass man. He knows risk. He’s broken the law many times, but he knows risk.”
- On Signature Bank’s CEO: “I said this motherf—r deserves my attention, and he got it. Now the bank is seized.”
- On investor Cathie Wood: “This dumbass can’t count to three if she was given one and two.”
Thanks for reading. Send me your feedback by hitting reply to the email.
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