Substack Thoughts

By | Friday, August 13, 2021 Leave a Comment
Substack logo
Over on Twitter, Mark D. White asked me what I thought about the various comics folks moving over to Substack as a platform. I did a quick answer over there, but I figured I'd try to expand on things a bit for today's post.

To catch folks up if they're unaware, Substack is a platform for creators to send digital newsletters (i.e. email). The primary difference between Substack and a "regular" distribution list is that they've got the ability to do both free and paid newsletters. Why would would anyone PAY for a newsletter? Well, Substack caters primarily to writers and journalists -- people whose value is in their ability to write -- so you're paying for (in theory) quality content and not just marketing fluff just pointing you to someplace you can buy their work in print. Earlier this year, they expanded to include comics content as well, and have signed some creators like Jonathan Hickman, Scott Snyder, and Molly Ostertag.

Conceptually, this doesn't strike me as much different than Webtoons. It's a different platform, of course (email vs. a dedicated app) but both companies offer comics in both free and paid versions, and have tried to encourage readership by drawing in some recognized talent, which they lured in by paying them in addition to whatever they made through the comics they create.

Comics via email are nothing new. And, as far as I'm concerned, they'd still be considered "webcomics" as long as what's created for/through Substack is intended for that outlet (as opposed to a print comic that was simply repurposed for Substack). The only real "innovation" (if that's the right word) is that they're monetizing the email format which was, by and large, not monetizable before. (Not in any practical capacity at scale, at any rate.)

What strikes me as the most significant difference between Substack and Webtoons is how they're being funded. Webtoons was founded and is backed by Naver Corporation. While you may not recognize their name, they are a huge corporation in South Korea and has a variety of business ventures, including a very successful search engine, messaging app, streaming video platfom, and online payment service among others. The company went public several years ago and, as such, has to disclose their financial information at least annually; last year, they did ₩5.3 trillion in revenue (about $4.5 trillion US).

By contrast, Substack is a privately held company who, as far as I can tell, has not disclosed any of their investors, nor any of their operating expenses. They claimed to have 100,000 paying subscribers in August of last year and while they're claiming 500,000 subscribers now, the "paying" descriptor is noticeably absent. If we assume a $5/month subscription, that equates to about $6 million annually as of last year, but since they only take a 10% cut of subscription fees, that only amounts to $600,000 in income for them. Even if you assume they have been able to double their paying subscribers in the past year, that still only amounts to $1.2 million. I find it hard to see how the company is profitable right now; just a handful of employees and basic maintenance costs would eat a million dollars up pretty quickly.

To be fair, most companies are NOT profitable for the first few years they're in business. Any return on investment that might be anticipated is generally several years out. But even without seeing any details, it looks to me as if Substack is still burning through their investment money: paying creators on top of the subscription fees, purchasing other start-ups, etc. While I'm admittedly not able to see their core financials, this looks to me very much like a "build a superficially great-looking business that we can sell for a ton of money before it implodes" business model.

So setting aside whatever work these comics creators do or how good it is, and setting aside questionable moral decisions like affording a platform to horrible people like Matthew Yglesias, I don't see how Substack can remain sustainable. Not long-term anyway. As soon as Substack loses whatever investors they have, they'll be forced to close up shop. While Webtoons may not be profitable either (Naver's public documents lump Webtoon's financials in with various other platforms so I can't confirm this, but last I heard Webtoons was being largely subsidized by the parent company) the overall corporate approach could make a business argument for Webtoons being a loss leader for other arms of their business. Substack, as far as I'm aware, does not have any synergies they can claim along these lines. Once the investor cash dries up, they do not have a financial means to continue.

So ultimately, I think Substack is barely a blip on the radar. Regardless of what comics come out of it and/or how good they are, they'll be largely forgotten as a publisher. The creators making money off them now? They're evidently able to retain ownership of their respective IPs, so more power to them. As long as their contracts were creator-friendly and they're getting paid, I can't find fault in what they're doing individually. But Substack as a platform will only last as long as the investors continue to prop it up, and the creators will have to take their toys elsewhere, hopefully having built enough of an audience that will be willing to come along with them!
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