This Week in Startups - E1115: Emergency Pod! Collapsing state of media corporations, thoughts on Casey Newton, Andrew Sullivan & Bari Weiss departures, top talent leaving for Substack & more

Episode Date: September 26, 2020

Check out the full Chris Best interview: https://rb.gy/tqafmo FOLLOW Jason: https://linktr.ee/calacanis Referenced in this episode: Platformer by Casey Newton: https://www.platformer.news The Weekly Dish by Andrew Sullivan: https://andrewsullivan.substack.com New York Times Article: https://www.nytimes.com/2020/09/23/business/media/substack-newsletters-journalists.html OneZero Casey Newton Interview: https://onezero.medium.com/casey-newton-on-leaving-the-verge-for-substack-and-the-future-of-tech-journalism-974a646375fa Bari Weiss Resignation Letter: https://www.bariweiss.com/resignation-letter

It's an emergency pod. It's an emergency pod. This Week in Startups, it turns out all journalists are quitting their jobs and starting newsletters. This is an emergency pod. The media sector is collapsing. We'll be right back to talk all about it here on This Week in Startups. This Week in Startups is brought to you by

I Quit, a new show on Discovery Go that tells the stories of 11 amazing entrepreneurs who followed their passion while being mentored by some of the world. world's best in business. New episodes air on Saturdays at 11 p.m. This show is brought to you by Shopify, the leading e-commerce platform. Hey, everybody. Welcome to an emergency pod. We're going to talk a little bit about the state of journalism today, which is having its struggles, obviously. And we are seeing some of the top journalists leave their top publications to do email, newsletters, podcasts, and to go out on their own and why are they leaving and what impact this will have on the space we're going to talk about today. You may remember back on episode 1016, that was our 1,016 episode.

God, I've been doing this for a long time. Substack co-founder and CEO Chris Best. And this was back in January of this year. I asked him, when would journalists be leaving major publications? Let's cut to the clip. At what point do you think this becomes so viable that Vox, BuzzFeed, New York Times, Wall Street Journal lose writers to this? Because I'm watching all these Vox writers and BuzzFeed writers starting stuff on your platform. Have any of those publications said Ixne on the newsletters on the side thing? We've had some pushback on that. Really?

What's interesting. Because it's been a long-stained names, but tell me the honest truth. It's been a longstanding thing that every reporter is allowed to have their Twitter. account. Sure. Right. So we're kind of like, well, by analogy, they should be allowed to have their own newsletter account too.

And they're like, well, that kind of makes sense. I guess it would be, you know, but the interest, but there are a couple of publications that have said you can't charge for it because, you know, if you're making money here, you've got this conflict, da-da-da. This was interestingly one of the things that Andresen like clued into during the substack investment. He's like, you guys are going to do to the legacy media publications what VCs did to big companies, which is go and find the people.

who are actually the ones creating all the value but are being underpaid for it. Yep. And pull them out and give them the value. It's so true. And I do think that that's something that we have the opportunity to do. Yeah, I think it's interesting. When I first heard about your thing, I was like, oh, that's an interesting thing. Let's go poach some of those riders.

Like I told my insight to him, I was like, yeah, you go look on substack. It's got to be a good rider. Let's go steal them. And I looked at it and I was like, you know what? It's not going to work because these people are doing this. Somebody had said to me, we should poach a couple of their top riders. And I was like, oh, let me take a look. So I signed up for a bunch of stuff and I was like, you don't understand.

These are people who don't want to work for anybody. And ideally, if we're doing our jobs, right, they're making as much money as they possibly could be from their current audience. All right. So there you have it, folks. I mean, it has come to pass. Congratulations to the Substack team, which is, for those of you who don't know, substack is a niche product that's gotten very popular over the last year or two. And what it does is it combines what Patriot.

does with what MailChimp does. So imagine you took MailChimp, you could sign up for my newsletter, and then you combined it with, you know, Stripe functionality to make a donation every month. And there was something called, I think, Tiny Letter. There's been some versions of this that have existed before, but, you know, timing is everything with startups. And they made a very simple,

and obviously you could do it with Patreon too, and people have. But Patreon's kind of a mess, and it's got 50 different features. This was just very utility built, utility built. sub-sac. You sign up, you pay five bucks a month, you get the newsletter. And we have seen now a really interesting thing happened, which is Andrew Sullivan, who is a famous, famous writer, happens to be gay and conservative. And I bring that up only because he was considered, you know, to be, I think, somebody who would be a great journalist to have at any publication. He was kind of sought after. People fought to have him at their companies. And then his contrarian essays

led to a lot of tension and criticism from liberal readers. And of course, the editors he was working with at New York Magazine, which then New York Magazine merged with Vox. And so, Sullivan left because the Overton window, if you know what the Overton window is, it's sort of like what, Overton window is what discussions are viable to talk about in society. And Andrew Sullivan suddenly in this very narrow-minded time for publications, especially ones like Vox, which are very woke and, you know, very sensitive and like sort of all the way on the left. And then you have ones that are all the way on the right, whether it's like Ben Shapiro or

at Delhi Wire or Breitbart. You've got these sort of little pockets where you can't have a journalist who thinks differently than the other folks or the other folks might feel unsafe. Like literally that's the word people use. I feel unsafe having someone like Andrew Sullivan write for my publication. And he was basically, I think, according to the sources, booted out of New York magazine and Vox. And he just moved his newsletter, the weekly dish, over to SubSack for five bucks a month,

50 bucks a year. and I'm sure he's got thousands and thousands of subscribers already. And, you know, this is the type of person. I would guess that he would get paid low hundreds of thousands of dollars as a columnist for other publications. And he has now left the building. He's doing that. In addition, Bari Weiss announced her departure from the New York Times on her personal

website on July 14th, which happened to be the same day as Andrew Sullivan. She says she was leaving because she was being bullied by her colleagues in an illiberal environment and a hostile work environment where coworkers had insulted her and call for removal on Twitter and the inter-office communication app Slack. So she was getting run out of town at the New York Times and I think she's like super liberal. And her quote was, I do not understand how you have allowed this kind of behavior to go on inside your company in full view of the papers and TireSaf and the podcast. public. She hasn't announced plans what she's doing, but I mean, I think she could do a newsletter as well. And then this week, very high profile contributor to the Verge, which is part of Vox, which is a very left-leaning cohort of publications run by my friend Jim Bankoff. Jim Bankoff bought Engadgett, Autoblog, joystick, all those blogs from me at AOL. Then he took the team,

my team, from Engadgett, and he liberated that. team and brought them in my playbook from Weblogs Inc over and created Vox and then did so much more. So I'm not taking super credit for it, but he does give me credit for the playbook. And I thank him for that. But man, what a tough business to have to run when their top contributor, or one of their top contributors, Casey Newton, left the Verge, which is a Vox publication after seven years and has started his own substack newsletter called Platforma. and he's going to do $10 a month, $100 a year. And I guess he's got a mystery tier for $1,000 a year.

I don't know what that is. And they asked Casey recently why he was leaving. And he said substack approached him with an awful last year, which he declined. Then the pandemic hit, and he had a change of heart. I sort of realized that I could do a ton of my job from inside my house. I could do all this digital reporting and could maybe even work on some new and different things because I had all this extra time on my hands. And so I think what's happening now is,

I don't know this, I haven't confirmed it, but I believe Substack is offering people maybe a minimum payment or maybe advancing them, which would be very smart on their part. If, you know, Casey was making probably 150K as a top columnist, I would think, at a publication like The Verge, I would think that would be the upper end of the pay scale there,

maybe 200K. but let's just say it's $150K, if substack came to him and said, hey, we'll guarantee you $75,000 or will advance you $75,000 a year, maybe it's worth it for him to leave and take a shot at being independent at $100. He has to get to

only $1,500 paid subscribers at $100 each would be $150K. And to not have to answer to anybody and to own the business, I think that what we're going to see is these top columnists are going to leave just like the top folks on CNET or G4 TV or any news organization left to do podcasts.

So somebody like Leo Lipport who did This Week in Tech or Kevin Rose went. He was on G4 TV back in the day. Then he did Dignation, kind of a precursor to podcasting. And then he has his own podcast now. The top talent can now be independent, whether it's through Patreon substack or doing their own podcast. and those folks are not going to want to work somewhere. Now, what does that do to The Verge and to Fox? Well, I think that it just gives room for the next generation to take Casey's spot.

And so I don't think it's existential for those big publications, to be totally honest. I think that they will very easily be able to replace him and move somebody up and maybe his 150K salary gets split by the two next people at 75K. So in a way, this will act like a pressure cooker. Some of those high-end journalists might leave. But I don't think there's going to be an ability for all of them to leave. And I'll explain why when we get back. Hey, everybody, I want to tell you about this new show. I've been watching on the Discovery Channel.

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You'll love it. It's a great, great show. It's an emergency podcast. The media industry is collapsing on itself, and journalists are leaving to start their own newsletters. Yes, that's right. Journalists are leaving. But I don't think that this can become a situation where,

the top half of journalists leave to start their own newsletters because there will be subscription burnout. People can get five newsletters, people can get 10 newsletters, but that's probably the upper band of this. And so I don't think you will see the next 25 writers leave Vox or The Verge or Engadget or wherever it is to start their own newsletters. Because simply put, I don't think everybody can get to 2,000 paid subscribers for five bucks a month or a thousand for five bucks a month,

whatever it takes to cover that. But you could get to, you know, hundreds, and it could be part of a salary. And I think that that becomes super viral. So to sort of wrap this up in a bow, journalists, journalism has always been a hard business. I've run publications for a long time. It's now become really hard to run an ad-based business

because Google and Facebook get better advertising. results than a website like Vox or, you know, Vice or BuzzFeed. And those publications have a lot of overhead. If you think about how many salaries they have, a company like Vox or Vice or BuzzFeed, they're probably, the journalists are probably 50% of the budget or two-thirds of the budget, but there's going to be a large portion of the budget, which is overhead, office space, operations and management. And what happens here is you're taking out a whole layer of management and cost and offices,

et cetera. And that lowers the cost massively, which that means you don't need to be as profitable. You don't need to make as much money for the company to hit break even. And I think viewers are going to like this. The one problem you're going to see is somebody like Andrew Sullivan or somebody like Barry Wise or somebody like Casey Newton, they might be bummed like Howard Stern was when he went to satellite radio, Howard Stern's audience went from tens of millions a day to low millions a day.

So Casey, if he gets to 2,000 paid subscribers, is going to go from two or three hundred thousand people, I'm guessing, reading every Vox article to maybe 1% of that. So your influence is going to plummet, which is one of the reasons why I made this podcast free was because I wanted everybody to hear it and we went ad-based. So it's maybe some people are annoyed by, you know, having to hear me read two or three ads. Hopefully I do them in a fun way. And they're interesting and targeted. But I do think I wanted to be more relevant.

And so when we tested with this podcast doing Patreon, I realized in order for Patreon to work, I would need to make the overwhelming majority of my content paid. You have to be, I would say, 75 plus percent behind a paywall in order to get people to pay and probably ideally 90 percent behind a paywall. So in order to make this week in startups work, I'd have to take the 140 episodes a year and make 120 of them, 130 of them, like behind the paywall. By the way, Tim Ferriss did this last year. He said, I'm going to get rid of advertising.

I'm moving to paid. And then he quickly flipped it because if, you're at scale and you're making, I don't know what he charges per ad, but I'm going to guess $15,000, $25,000 in ad easily, you know, it's very hard to make that up with consumers paying. And who wants to limit their audience size? All these great artists want to do. So this is where I think Casey Newton or Andrew Sullivan will be less influential in the public sphere because they're only being read by one or two percent as many people.

And if they try to reverse that and they put content out, every time they put content out freely, then people have their fix of Andrew Sullivan or Casey or whoever it is, and they don't feel the need to pay. Just like if I made half the episodes of this week in startups paid, you'd be like, well, I only listened to half of them anyway. So, you know, you produce too many. I'll just listen to the ones that are free, which is the challenge in this whole free versus paid. And I think, you know, these legacy media companies, they've been in trouble since Craigslist got rid of classified ads, since print went away. and now it's just going to get harder and harder.

And we've already seen the layoffs of Vox, BuzzFeed. Everybody's been laying off, vice laid off a bunch of people. And I think a lot of the journalists at these organizations want to do advocacy journalism. So I think that media corporations will ban substack. So if you want to write for Vox or you want to write for advice, they're going to say you can't have a substack. You have to get approval for that, just like you can't do a podcast. podcast. And that will lead to even more people may be considering leaving. And it's going to be very interesting to watch. If you want to create a publication or news, I suggest you only do that

if you're doing it for the passion of it. It's just a terrible, horrible business to be in the media business. And it is going to get harder and harder. And the idea that, you know, this industry is going to be sustainable, I think is questionable. I think local news, et cetera, it's all going to go to niche publications, one or two people writing them. And that's okay. That might be better for society than these big ad-driven companies, which essentially have a hard time remaining objective given the advertiser side. And so good luck to Casey. Good luck to substack. Wish them the best. I'm doing something slightly different at Insight.com. I'm hiring analysts to analyze business news. And I think they want to have a full-time job. And I don't know.

if they want to be independent and try to spend three or four years building up to getting a full-time salary. But I do think for people who are already at the top of the stack, why not take $100,000 from substack in advance or whatever they're paying in advance? If somebody knows, I would love to hear it. You can DM me on Twitter or just email me, J-Sync Alcanus. I'm curious what substack is doing to get people. And I think they're giving people, I think they're just going to just give people 5K a month, you know, as like a base pay until they hit 10K or whatever. subscribers. I think it's a very smart move on substacks part. So continue to success from them. I do think it's a challenge business. If they're taking 10% of the revenue or 15% of the

revenue, it's kind of a hard business because like Patreon has been a hard business. You're getting a small percentage. And then if you take too much, whoever's on the top of the stack, if somebody were at millions of dollars in revenue like Stratory, another email newsletter, you'll leave any of these paid platforms. So that is the challenge. You saw Sam Harris left Patreon. He does it on his own or I left Angel list to do the syndicate. Whenever you become the top of the stack, you no longer want to pay this huge Vig to the platform. So I think that's going to be substack's next order is I think substack is going to lose the top people who then just use, you know, any of these open platforms to reduce the 10% they pay to subsack, right? They'll get rid of

that vague because it does become meaningful. Like if you do hit a million dollars in subs, would you give $100,000 to substack for giving you payments and an email list? Of course you wouldn't. That would be just stupid, right? If you hit a million dollars in revenue, you're going to leave substack immediately and recapture

that 100K and just pay you know, for Stripe and you'll have somebody roll it for you and roll it up and make you an email newsletter with MailChimp and that. So the other question is, is it going to be burnout on consumers subscribing to many newsletters? I don't think you have to worry about this so much because, again, you're just trying to hit

2,000 paid subscribers. $2,000 paid subscribers at $100 a year, $50 a year, it's $100K to $200K. It's enough to people lights on for one person. It's a great salary. They can work from anywhere. It's amazing freedom. So I do think that, yeah, it's not going to matter. for consumers.

And maybe they'll bundle them together. Maybe you'll see people say like, hey, you know, you can buy a subscription to Andrew Sullivan and these five other, you know, independent critical thinkers and the intellectual dark web where you could buy five woke writers, you know, writing about social justice for 20 bucks a month. And then instead of them getting $10 a month, they get $4 and they chop it up, it's possible that people might bundle stuff.

But I do think it's a challenge. business or if I didn't, I would pivot inside to do this, but I do think being a platform is going to be super challenging. And I don't know how sustainable it will be for substack. They do have $10 million from Andreessen Horat, so I wish them the best. But I do think it's going to be hard to make a living off of that 10%. When you use substack to power your newsletter, just to confirm this, they take 10% of your earnings, which is nothing when you're making, you know, whatever, $3,000 a month. You're not going to even think about giving them $300. but when you get to $10,000 a month,

you are going to think about giving them $1,000. And there is a website already called Ghost. And Ghost is a powerful independent alternative to substack with zero transaction fees. So if you go to Ghost, you can pay $29 a month. So I don't know why Casey would go to substack when they could just use Ghost for $29 a month. And they take 0%. So they're going to make it without taking a percentage of your earnings. And that makes much more sense.

So if you were to look at the $10 a month and you had 5,000 members, your annual reoccurring revenue, you get the idea of how costly it is to use substacks. So if you want to save money, go to ghost.org. I'm not an investor in ghost.org, but they do seem to have a better product if you were at scale. So the end game for Vox, the New York Times, Washington Post. I do think the top publications survive, and they survive with smaller teams. And for the Voxes, the BuzzFeeds, and the Vice, those three publications, they were valued at billions of dollars. They make hundreds of millions of dollars.

So they're real businesses. But they're not going to grow at venture scale. It's just not possible. So when you hit a certain level as a media company, it kind of the revenue tops out and you start growing slowly. So what I expect is that Fox will merge with BuzzFeed or Vice, and you put those three or four brands together, you put someone like Jim Bankoff in charge of the merge companies. He's a really good operator. Shout out Jim Bankoff. Thanks for making me rich for the first time. And no, seriously, he did. He made me dangerous. I got my first 10 million next to Bankoff and AOL. Shout out AOL. I think you put Jim Bankoff in charge of Vox, New York Magazine.

combination plus either of those two, then you could take that company public spacket and you'd have a publicly traded media company with resources to buy other newsletters. And you know what they'll do? When Vox becomes public and they own BuzzFeed, it's VosFeed, Vox, whatever, they can go very easily and just buy Casey out again. So when Casey hits, you know, 3,000 paid subs, they can go to them and just say, hey, move your newsletter over here. It's your email list. So they can leave. So that is the big challenge for a company like Substack is there's no lock-in. You can leave at any time. So I'm not sure I would want to be in that business of Sub-Sac.

I mean, I do wish them well. But I do think it's going to be an interesting thing to watch. And I do think the best folks are going to go with a platform like Ghost. Orrug or just rolling their own for a subscription. So this has been an emergency podcast. Thank you for tuning in to this emergency podcast. If you think we need to do an emergency pod, just act Jason and say, I need an emergency pod. And tell me what subject you need on.

We'll see you all next time. Bye-bye.