Subscription Shock: The #1 Mental Model To Understand The Future Of Paid Subscriptions

As a thought leader with a paid newsletter, I think about this chart every single day…

IP Credit: Derivation of Mark Schaefer’s Content Shock, Image Credit: Camille Ulmer & I

This chart expresses a very simple and fundamental idea that few paid subscription creators actually consider:

1. Exploding paid subscription content supply. There are tens of thousands of paid newsletters (on Substack alone). And that’s growing fast.

2. Limited attention and money. There is only so much money that individuals have to pay for those newsletters and only so many hours to read them.

3. Fierce competition. The result is a Hunger Games-style competition for money and attention.

The Implications Of This Simple Chart Are Profound

The chart has a few core implications that every creator needs to sear into their brain:

• Growth Rate: At first, readers subscribe to many publications. But as they build up a base of people they subscribe to, they get more discerning.
  

• Churn: Once readers realize how much they’re spending and that they’re not actually reading what they are paying for, they unsubscribe from lots of publications.

• Survival Of The Favorite: People stay subscribed to a handful of their favorite newsletters. As a result, their favorite newsletters continue to grow while good enough newsletters falter. Said differently, the rich get richer and the poor get poorer.
  

• The Quality Bar Raises: As more newsletters join the ecosystem and people improve their offerings, the bar for becoming or staying someone’s favorite rises. Therefore, to keep gaining subscribers, creators need to improve faster than the best.

Bottom Line: Austin Rief, co-founder of the Morning Brew newsletter, which sold for $75 million, beautifully summarizes the situation in this one-minute video:

Source: Why Every Creator Should Have a Newsletter with Austin Rief on Greg Isenberg Podcast

And, in case you think Subscription Shock is just about the future, then think again. It’s already starting to happen…

The Harbingers Of Subscription Shock Are Already Appearing In The Comment Threads

For example, below are a few comments I recently saw in a comment thread. In it, creators are trying to understand a troubling decline in their paid subscriber numbers:

As far as my own financial patterning, I have just stopped subscribing to substacks simply because I had my fill, am reading lots of things, and I am getting the most of what I need right now by skimming summaries and titles - that are free. I've unsubscribed from 3, and only pay for 2 currently. It is my own budgeting. I realize this isn't great for writers, but I wonder if others are doing the same.
—Kelly

I think people right now are tightening their financial belts. I also think people are ground down mentally, physically and emotionally. I think it's just "sensory overload," as the evil is just too great, too enormous on a quantum level, for people to just basque in it daily. People are disconnecting everywhere.
—Jean-Baptiste Guillory

I get excited about a writer, then as more is unearthed as time goes by, I change my mind and unsubscribe~ even from "free" accounts. I'm working at not falling down rabbit holes these days. In short, I'm limiting my exposure even to materials I know and trust to be accurate and true.
—Shari Schreiber MA

Together these comments paint the same picture. Getting new subscribers is just half the battle. If you don’t keep improving your quality, more people will unsubscribe than subscribe.

Another fascinating thread asks Substack readers what causes them to pay for newsletters, and there is a clear theme. The key is quality they can’t get anywhere else. Below is a sample of the most-liked comments on that thread:

Quality and community. I’ve been reading through the other responses and agree good quality is important. You’re not going to pay for poor writing. However for me community is up there and even equal to quality. I have unsubscribed from people who never respond in the comments, who never build a sense of togetherness or who have community that seems disparate. If I wanted just quality I’d buy a book or listen to a podcast. I come to substack for the connection and exchange. That’s what makes it unique.
—Anna Rose

Quality is high. If the author is also genuine and relatable, and the community is engaged: sign me up.
—Mary Roblyn

Quality - Because there’s a richness in the work that I either support (i.e. if the content isn’t behind a paywall) or want more of, if it is behind a paywall.
—Sarina Zoe

On a more personal level…

I’ve Felt Both Humbled And Excited By Subscription Shock

I started my Substack in July 2023.

During my initial months on Substack, I had no one unsubscribe, and every post brought in roughly 10 new paid subscribers.

I saw that if I just kept going at the same pace, I would reach 1,000+ paid subscribers (or $100,000/year) within a year.

Exciting!

I have two other programs, Mental Model Club and Seminal (year-long, high-ticket thought leadership program) which bring in hundreds of thousands of dollars per year, and I loved the idea of staying in touch with people throughout the year and adding on a whole other stream of revenue.

Then, all of a sudden, my growth plateaued for several months. Churn increased even though I wasn’t doing anything differently. I remember the disappointment I felt the first time when I saw my paid subscriber count decrease rather than increase.

For the next three months, I added a grand total of 45 subscribers:

It felt demoralizing to work just as hard in the previous three months and get just 1/6 of the growth.

To make things worse, I had no idea why things had slowed down.

I felt like I was doing something wrong even though nothing had changed. Now, when I extrapolated into the future, things looked bleak. I could end up working 30 hours per week to stay consistent on the newsletter and earn just $40,000 per year from it.

Then, in the first few months of the year, my subscribers jumped up again when I hit a vein of posts that resonated. Followed again by a plateau.

This is how my overall journey with paid subscribers has looked since I joined Substack:

It’s one thing to talk about Subscription Shock, but it’s another to experience the emotional roller coaster. Subscription Shock isn’t a notice you get in the mail telling with an explanation. Rather, Subscription Shock is a plateau or decline accompanied by the confusion of not understanding why it’s happening or what to do about it.

I introduce the Subscription Shock model, the comments, and my personal experience not to dissuade you from creating a paid newsletter. Rather, I share them with you because there is a huge opportunity to create paid subscriptions, but capturing that opportunity requires sober eyes and a smart strategy.

I am proud of adding $60,000 to my yearly income on a new platform by doing something that I love doing. At the same time, I’m bummed that I haven’t figured out how to continue to grow rapidly.

But, I’m not resting on my laurels…

How I Think About Subscription Shock Today

The idea of paying for content subscriptions is a relatively new idea in the world. It’s only in the past five years that this has become normalized.

Thus, there isn’t a lot of advanced knowledge on how to succeed financially while also having a creation process that is joyful.

This is opposed to other fields like the tech startup ecosystem, which has a proven methodology that includes concepts like lean startup, product-market fit, customer interviews, minimum viable products, and so on.

Paid content subscriptions to individual newsletter creators are a unique category that needs a unique methodology:

• It's different than CONTENT CREATION. What causes someone to engage with an article is different than what causes them to pay for access. For example, my posts that have brought in the most paying subscribers have not gotten the most engagement.
  

• It's different than PRODUCT DEVELOPMENT. What causes someone to pay for a product made by a company is different than what causes someone to pay for a personal newsletter. When people pay for a newsletter, they aren’t just paying for a solution to a problem. They’re also paying to support someone. They’re also paying to support a certain type of media in the world. They’re also paying because they appreciate someone’s POV on life.
  

• It's different from ART. What causes a creator to authentically produce content from their heart and soul doesn’t necessarily match what people will pay for. While tech companies are started to ultimately go public or be acquired, most personal paid newsletters are proudly lifestyle businesses.

While understanding the principles of soul-market fit, virality-market fit, and product-market fit is important for paid subscriptions, they are not enough.

That’s why I am humbling myself and going on a fact-finding mission to understand the dynamics of how Substack and paid subscriptions work. For example…

• Tom Kuegler
  and I collaborated to create Substack Campfire 🪵🔥 ⛺, a Notes-writing challenge, which is doing very well.
  

• I’m collaborating with

  Alina Okun
  to interview Substack creators with more than 1,000 paid subscribers to understand the patterns of why people pay and stay on Substack Newsletters.
  

• And, I’m reaching out to top paid newsletter creators on Substack and paying for consulting.

In the end, Subscription Shock begs a simple question for us all…

The Big Question: How do we become hundreds or thousands of people’s favorite newsletter?

If your strategy doesn’t have an answer to this question, then you don’t really have a strategy.

Stay tuned for more posts on this topic from me in the future as I experiment.

My hope for now is that by introducing the concept of Subscription Shock, we can collectively talk about it and figure it out together. As one of my favorite saying goes…

“A problem well-understood is a problem half-solved.”
—Charles Kettering (former head of innovation at GM)