Substack, Lift Your Price Controls

Let readers take risks

Good writing is valuable, yet a lot of writers underprice themselves. On Substack, we have a $5 monthly minimum to encourage writers to charge more than they think they’re worth.

• Substack

This is admittedly not a deep post. Substack allows its users to setup paid subscriptions to their publications, but sets two price floors of $5/month and $50/year. These are, I think, quite a bad thing. They are much too high.

The transaction fee charged by the various credit card companies is fixed at $0.30, with a 3% cut of the total added on. Substack itself takes a 10% cut. If users were allowed to charge $0.50/month, a more natural floor, their take home would be $0.14 for every subscriber.

Writers underpricing themselves is a nice story, but Substack must have a better reason to hike the price floor. It’s not the transaction fees, since Substack’s 10% cut comes out of the pre-fee total. Lowering the price floor would allow transaction fees to take a larger share of user revenue, but it would do nothing to Substack’s bottom line.

However, there is another mechanism at play. The $5 floor is expressing Substack’s pessimistic view of paid subscription elasticity. To drop to $2, they would want at least 2.5x the number of paid subscriptions, otherwise they would lose revenue. Because they haven’t allowed the drop, they must either be unsure or downright dour about the outcome.

As a consumer, this is pretty painful. $5/month is a big commitment for one writer’s output. At that price, you could get two Substackers or a subscription to the New Yorker or London Review of Books. There are a few writers I love here that I would consider that for. But for the third or fourth writer, my willingness to pay goes down. If the floor were lower, I’d add a few to my paid subscription roll. I’d take more fliers on new writers I find.

For reference, there’s a ton of price diversity on Substack already. It’s not as though your favourite writers are being propped up by the floor.

• Naomi Kanakia, Philosophy Bear, Jesse Singal and Glenn charge the floor (and are surely steals at the price).

• Amos Wollen, Henry Oliver, and Ruxandra Teslo charge $6/month.

• Cartoons Hate Her, Bentham’s Bulldog, and Erik Hoel charge $7/month.

• Matt Yglesias, Dan Williams, and Richard Y Chappell charge $8/month.

• Scott Alexander, Nate Silver, and Noah Smith charge $10/month.

The market bears significant upward price diversity; we should let it extend downward too.¹

1. I love Substack, I think it affords its writers immense freedom, eliminates barriers to publishing, and has a discovery system through Notes which feels natural and effective at identifying talent. It doesn’t do what Medium does and attempt to lock you in—instead it lets you take your subscriber list with you if you wish to go elsewhere. It’s got a good app, doesn’t show ads, and has an unparalleled diversity of perspective. More people can make decent money writing because Substack exists. But it could be even better.