Show Notes: Hamish McKenzie – The Future Of Publishing

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Show Summary:

Hamish McKenzie is the co-founder of Substack, a platform for independent creators to build direct relationships with their audience. At a time when traditional media is struggling, quite a few Substack URLs are popping up around the internet.

Today we’re talking with Hamish why that is, the state of the media today, and what the future holds for publishing in a wider sense.

Show Notes:

  • [00:39] The epic origin story of Substack
  • [2:56] Moving away from online media based on advertising and towards a model of direct payments to writers
  • [3:26] How good edit notes have the power to create companies
  • [3:47] The difference between Patreon and Substack
  • [5:50] In 5-10 years will Substack be the standard model of publishing?
  • [6:48] What are the common characteristics of the people with publications on Substack that are succeeding?
  • [8:44] The midwest librarian niche
  • [10:22] Hamish discusses the top publication on Substack right now
  • [12:28] Does Substack actually offer support for writers?
  • [14:00] How does Substack stay focused on serving its community-at-large?
  • [16:39] Is there a reason that someone would come out of journalism school and choose the “traditional newspaper journalist" career path in the next 5-10 years?
  • [19:21] Do you see any potential for legacy brands to use Substack in the future? Like the NY Times, for example?

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Transcript:

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This transcript was produced in 10 minutes by AI robots in a dark cave, so there will be some errors. Have mercy on the robots.

Jimmy
Hamish McKenzie is the co-founder of Substack, a platform for independent creators to build direct relationships with their audience. At a time when traditional media is struggling quite a few Substack URLs are popping up around the internet. Today we’re talking with Hamish about why that is the state of the media today and what the future holds for publishing in a wider sense. Hamish, thanks for jumping on.

Hamish
Thanks, Jimmy.

Jimmy
Usually, we avoid the full on extended backstory. But in this case, I actually think it’s a really core part of the concept. So where did Substack come from originally?

Hamish
I guess and my co-founder Chris, was kind of the chief product guy and chief technology officer and one of the original co founders of a company called Kik, which is a messaging app that has hundreds of millions of users, had, actually, it’s not so hot anymore. And he had finished working for Kik, he basically stepped away after nine years there and was taking a year to figure out what to do. And I had just finished working on a book, which is about electric cars called Insane Mode. And one of the things that Chris was doing in his year off was writing more, getting back to writing for his blog, which he didn’t end up doing that much. But he had written this essay and sent it to me for feedback because I was the only journalist person he knew, and it was about how the failure of the business model that supports media and journalism had created all these terrible things in the world, because we live now in this attention economy, which is fueled by content that provokes outrage and divisiveness, and polarisation, all that sort of stuff. And his thing was, wow, this is all terrible, and it’s driving society apart. And my thing was well, and it’s also costing writers or their livelihoods and journalists are going out of jobs, and newspapers are shutting down. And in that essay, when he asked me for feedback, I was saying, all these things are true. And everyone in the media knows that these are the true things but what people don’t know is how to do something productive about it, how to, like fix these problems. So if you’re gonna write this essay, make sure you add a couple of paragraphs where you suggest some solutions like what could be better. And to Chris’s credit, he didn’t just think of that as like a throwaway thing you put in an essay to like make it more of a full rounded essay. But he started thinking about like, what could actually be done. And maybe we should build a company to do the thing that should be done. And the thing that should be done, we determined was replace the business model from being something that was based on online advertising, which can create all these negative incentives when you have platforms that dominate and create these weird behaviours, with something that is based on direct payments between readers and writers, and subscriptions in particular, because they provide this ongoing sustainable source of revenue, and are based on trust. And so we set out to build something that is based around subscriptions, which ended up being Substack.

Jimmy
So really, the entire company originally came from an edit note.

Hamish
Yeah, that’s basically it. Yeah. As many good things do right?

Jimmy
Right and well, lucky, he didn’t. He didn’t reject it.

Jimmy
And correct me if I’m wrong, but things like Patreon existed when Substack came out? (Hamish: Yes). What’s the core difference between something like Patreon, or just that area generally and what you guys have started doing?

Hamish
A couple of core differences that Patreon is kind of a something for creators generally. So it could be a podcast or graphic novelist or a blogger or video maker. And the DNA of it is that you sort of throw in a couple of bucks to support this person’s work generally. And it’s a tool that they plug into whatever setup they’ve got for their distribution of content elsewhere, like it might be a YouTube channel or a podcast or a website. And Substack is more specifically targeted at writers. We’re trying to solve problems not just for creators, generally, but for writers we feel like is has been an undervalued and underserved class by the internet. And it’s an integrated system. So you don’t like plug-in this tool that collects money for you. And try and hope that people will jump from your thing over to that tool. And sort of deal with all the business that’s implied by that but you publish and collect money and clicked signups to your publication and all in the same place. So we can go and do the science and the math on that to make sure that that whole conversion system is as efficient as possible, so that someone who’s a reader can easily become Someone who’s a sign up to your mailing list can easily become someone who’s paying you money.

Jimmy
So just decreasing the distance between the two.

Hamish
Yeah, lowering barriers, reducing friction, all that sort of engineering talk they like to do in Silicon Valley.

Jimmy
Of course, synergy. I heard the synergy somewhere in there.

Hamish
Where there’s quite a few synergies in our products. Yeah, a lot of mind melding between writers and, and products.

Jimmy
Right, right. And this Direct Publishing model is obviously growing generally, the industry is growing in five years, let’s say 10 years. Do you see it becoming the standard model? Or do you see an industry where it coexists alongside traditional publishing?

Hamish
I think it’s gonna be a huge part of the ultimate ecosystem for media. I’m not sure if it will be the dominant model. And I think there’s a chance that it will be but The models are not going to go away, and in fact they’re going to be necessary. So there’ll be some philanthropic, supported institutions, there’ll be some magazines owned by billionaires. There’ll be some publicly funded organisations that will serve some different purposes and what Substack serving but subsidy and models like Substack, there will be a really important part of the ecosystem and potentially the dominant part.

Jimmy
And going back to the the writers themselves what, I’m sure you have seen successes you’ve seen blowouts, flameouts, slow, long slow deaths, of people or publications on Substack, what what are the common characteristics of the people or publications that that succeed that are succeeding that have done well, that have grown an audience and and potentially grown an income stream?

Hamish
Usually they’re highly differentiated. And so people will follow them wherever they go. And that will be based on their voice and kind of sheer force of nature. But you can be differentiated without having that cult of personality by owning an area of authority, and serving that area really well, to an extent that is just not possible in the sort of dominant media economy. So, for instance, one of the top publications on Substack is serving a really small audience, but really well and knowledgeably and it’s about, it’s called Petition, it’s an anonymous publication, it’s about bankruptcy and restructuring and turnarounds of, of businesses. And it’s the sort of stuff that’s really hard for newspapers or even the likes of Bloomberg or The Wall Street Journal to cover well, because the people who tend to cover those beats are not necessarily well schooled in those beats, they have to learn them. And often, they’re, you know, out of journalism school with English degrees, spent a couple years on the beats getting to know just as they’re getting to know it, they get shifted on to the next beat. So kind of specialist information publications. But it could be like that information, the definition of information in that sense can be quite broad. It doesn’t have to just be business useful stuff. It might be passion, based stuff as well. So for instance, Daniel Lavery, one of the cofounders of the Toast, writes this really offbeat humour about kind of weird culture and literary things that are and like riffs on Bible passages, and they’ll appeal a lot like most of us read a lot of his readers are like librarians and and in the Midwest of the United States, but they’re not served well by like existing media structures. And so having that, like level of focus and passion being served can work well.

Jimmy
Yes. It really is about going deep instead of broad generally.

Hamish
Yeah. Yeah.

Jimmy
Yeah. The old Midwest librarian niche is a classic one.

Hamish
It’s a big one. Yeah. Yeah. Hard audience to serve, but once you win you win them for life.

Jimmy
Yeah, yeah. And my sense is, if I could predict a little, my sense is that as we get more and more independent publishing, curation starts to become an issue because we have this firehose of content pumping out through platforms like Substack and then because we need curation we end up swinging back towards brands - now whether that’s the New York Times or a new equivalent, have you seen any of that sort of bundling or masthead branding start to come in to help people with curating what they want to consume?

Hamish
Yeah, I think we’re in that like very, very, very early days of that. But there’s a direction it could well head in. Substack is arguably doing the unbundling of the media at the moment, reducing it or condensing it to its to the atomic relationships with so it’s just writer and reader and start building an ecosystem from scratch from that basic building blocks. But we are seeing people start to experiment with us and in some cases go into full-fledged business with this. So for example, the top publication on Substack in terms of revenue at the moment is something called the Dispatch, which looks like a publication in that it’s got one name in the masthead, but it’s actually a network of newsletters and podcasts, most of which are built around a singular personality like Jonah Goldberg or David French, but in some cases also a specialty like foreign affairs and so that is one version of what a bundle kind of can look like. Another version is, there’s a couple of guys Nathan Baschez, and Dan Schipper who have business strategy publications that are independent, but they work together, and they keep these under the auspices of one company. And they decided recently, just kind of in a hacky way off of those two publications as a bundle. So instead of paying 50 bucks for each of them, you could get them both for 70 bucks, something like that. And there’s gonna be a lot of that in the future. And I’m really excited for that world to emerge because there’s new empires to be built with a lot of structures that are a lot leaner, like you don’t have to set up a back office. You don’t have to have a sales team. You really only have to focus on producing great work and work that resonates with people who have it as pay for it. And if you have an organisation that sits as the backbone for that, then they can share resources like, you know, what’s the best way to acquire subscribers through Facebook, for example? Or can we have access to a photography database where we can all like get good images for our posts. And that’s where I think there’s going to be a lot of innovation to come and a lot of activity and this is where Substack can continue to bloom from this thing where people have their own islands of readerships to something that looks more like an ecosystem and more like an economy.

Jimmy
And how much do you see yourself… do you guys see yourselves… as as a utility versus an editorial sort of assistant, you know, is it just providing the pipes and the infrastructure for people to be able to publish or do you see actual support coming from Substack as well, over time?

Hamish
Yeah, we already do a lot of support. It’s not like, we’re not just a pure white label pipe saying like, we want people to see the Substack brand and just understand, okay, this is a Subsack thing. And I think that speaks to Substack being not only a publishing platform, but a publishing model like this, he kind of a way of doing things in the Substack world that we know works. And we can bring the intelligence to bear from watching all the publishers operating within Substack on the system at large. So we can help people by giving advice in providing resources and guides and that sort of stuff, to do the right things, to do the things that maximises their chances of success. And there’s other stuff that we could keep going deeper into them in the future that we haven’t fully explored yet, but it might be things like, helping them optimise their pricing, for example, or helping them get access to high quality editorial services with editors. we’re accustomed to working within the Substack model. So there’s lots of opportunity there.

Jimmy
And how do you avoid being pulled in by the centre of gravity of the whales? So, you know, the ones, I, you know, there’s probably going to be 80/20, right? There’s going to be some small percentage of the publishers that bring in the vast majority of your revenue, how do you avoid that support and attention being pulled towards that, and actually stay focused on the wider community?

Hamish
There’s always going to be, I think, some aspect of our business where we’re paying a lot of attention to high value publishers, which will mean that like, we just give them a lot of one on one support. But everything we do in Substack that’s unscalable or less scalable way that we do in service of releasing those tools and that intelligence and that support to the masses. And so for instance, we have a partnerships team at the moment. It’s led by a woman who focuses on woman who came from Instagram, and used to be in book publishing work focuses on establishing and building and nurturing these relationship with high profile writers. And then we have a writer success team is led by another woman who did something similar with a developer community GitHub, who is focused on building out resources for writers who, you know, might be able to bootstrap themselves to success and could really use the intelligence that’s unleashed in those documents, but don’t necessarily have the ability to get the hands on support from our team. So it’s finding the balance between those two things, but seeing those as two two groups that are important.

Jimmy
Two separate delivery modes.

Hamish
I kind of think I kind of think of it as like, Y Combinator. So we went through Y Combinator. So stack is hugely useful, like this. There’s a really Exclusive selective group where you go in and you become part of the programme and you go there in the Mountain View and go to the dinners in head office hours and like, a lot of FaceTime with yc partners. And then there’s another thing that tries to scale that for all the companies that can’t, for whatever reason, do that in YC. And they call it Startup School. And it’s all like digital based and lots of webinars and videos and courses that you can that you can progress through without having to, you know, you can kind of progress through on your own time, and without having to be physically there in person with people. And so I can see Substack evolve in a similar way, we have a high touch in person thing that helps writers who are going for it to go for the big time, and they can go through that. And they were an ask and get hands off digital support and advice.

Jimmy
And going back to the decision point for aspiring journalists, people who maybe just came out of broadcasting school, anything like that. And if we’re saying that traditional media sticking around what/why…

Hamish
Some of traditional media sticking around but it’s going to be decimated.

Jimmy
Okay. So, yeah, maybe that cuts into the question a little bit, but I’m wondering why they would choose the independent path over the traditional path or vice versa. Maybe there’s still a path for people. Maybe that’s a better way of asking it. Is there a reason that someone would come out of journalism school, let’s say, and choose the traditional model and that be the right decision in the next 5/10 years?

Hamish
Well, there’s gonna be a lot fewer jobs in those, what we think of as traditional publications. Substack as it exists now appeals a lot to the entrepreneurial types who, have a motive for building and see opportunity and think they can go out and do it and they’re self-starters in any discipline, then they don’t need the support of newsroom for example, but as it currently stands, like if you have so the person who thrives and then in the newsroom environment and and really seek that out. Then you have your only way of doing that and Substack is to like be part of a publication like The Dispatch which is setting up and establishing a newsroom that stuff will come Substack but otherwise, it’s only there in this traditional setups.

Jimmy
Yeah, does it because there’s a huge part of journalism and being a journalist in a previous life, you know, this there’s a lot of value placed on mentoring. Right? So you come up you mentor you improve your craft over time. Have you started to see those relationships or that dynamic come out in the direct publishing area? Or is that still-- are you still basically on your own at this point?

Hamish
To me, it’s a matter of time. There is an evolving ecosystem. And pieces of the Infrastructure I just going to be filled in as opportunity grows. So some of the top publishers and Substack at the moment in terms and how much money they make already in the position to hire other writers to work with them, or to hire artists to work with them. Or, you know, other people might see it from the other perspective where they’re like, we’re the experts at helping you grow your audience or helping you improve your writing or like, get you the editing support you need. And so if you do a revenue split with us, we’ll turn you into a Substack superstar or something and you see exactly the same thing playing out in YouTube, for example. And so I think that’s going to take time to develop and maybe you know, maybe Substack doesn’t get into that position, but things are looking kind of good. And I think it’s inevitable that it will develop.

Jimmy
Yeah, thanks for going kind of good. And do you see any potential for legacy brands to just use Substack as a platform in their own way, whether it’s New York Times or whoever, is this some reason that they might switch over from their own custom, I assume custom built solution subscription, everything is it just at one point, they say, oh, man, this is too hard to maintain, let’s use the this utility over here?

Hamish
We’ll definitely see experiments. And I’m a little bit skeptical about their chances in the current level, like their interest in the current setup. Given that maybe it just makes more sense to enter in their own technology stack around this kind of model. But I think as Substack’s network power develops, and as communities evolve in Substack, and as they become more and more reasons, for people just to build on Substack to get benefits, like, well, everyone has a reader profile on Subtack or everyone has a credit card already in the system and Substack says like one click away from subscribing, when they have a Substack app where they go to do a reading, like, you know, none of these things that confirmed as being on a roadmap but there are like these always ways that Substack could develop. And I think at that point, then there may be more compelling reasons for existing media brands to be on it. Just like they’re on Instagram and YouTube, etc today.

Jimmy
It’s gonna be a very interesting few years.

Hamish
Thanks, Jimmy.
Jimmy
We’ll be posting the audio and show notes from this conversation at minaalradio.com/hamish slash Hamish that’s H-a-m-i-s-h if you’re not from New Zealand. Get in touch you can leave a voicemail or send us a message on WhatsApp or Signal at +1534466013.