What could the New Zealand media look like if it were reinvented?
This is probably poorly edited/written (it's late)
The New Zealand media is in a full-blown crisis. Last week, as it became clear that Covid-19 would deliver a crushing economic blow, the country’s largest magazine publisher abruptly shut down, killing hundreds of journalism jobs and laying waste to iconic titles The Listener, North & South, Metro, and Women’s Weekly, among others. There are fears that Stuff, the nation’s largest network of newspapers and news sites; NZME, owner of the New Zealand Herald; and Mediaworks, owner of major TV and radio news stations, will be next.
The government and business consultants are scrambling to prevent more media deaths, but the proposed cures don’t inspire confidence. The leading candidate involves a cocktail of public funding and dramatic consolidation, which would do nothing to alter the prevailing economics of doom and stands to be deadening in a myriad other ways.
In my opinion, the media in New Zealand doesn’t need saving. It needs reinvention. History may prove me to be an optimistic fool, but I believe that in this crisis lies an immense opportunity – and it’s not one that points to consolidation. In fact, I would go in the opposite direction. The media in New Zealand can get better by dramatically fracturing.
Away from ads
I’m a Kiwi journalist and also one of the founders of a startup called Substack, a subscription publishing platform. Two friends and I started Substack in 2017 with the goal of building an alternative ecosystem for media that doesn’t rely on advertising. The ad model for media is busted. The internet broke it, first by stripping newspapers of their classifieds business, then by building machines that made advertising much more targeted, efficient, and effective. Google and Facebook have the business that used to belong to the media. It doesn’t make sense to keep fighting them for it. The battle is already over. The Covid crisis has only made that more obvious.
With Substack, we decided to focus on subscriptions. Subscriptions align incentives between readers and writers. Instead of producing work that might appeal to a mass audience and can therefore be attractive to advertisers, writers are incentivized to serve their readers. If they reward their readers’ trust, they get rewarded financially. This model can produce meaningful financial results even if those readerships are relatively small. A thousand subscribers paying $100 a year supports a handsome living in most parts of the world.
One of the models for Substack was Stratechery, a subscription newsletter about the business models of technology companies, written by Ben Thompson. Thompson’s one-man operation (actually, I think he now employs an assistant) brings in low-millions of dollars a year. He publishes four posts a week: one article that’s free on the web; three articles, by email, just for his paying subscribers.
At the time we started Substack, Thompson had been telling anyone who’d listen that more people should try his model, since it worked so well for him. We wondered why more people didn’t. Eventually, we guessed that it was actually quite hard to be Ben Thompson. He was not only a good writer but he also had the entrepreneurial sense to come up with a business model for his work and the tech savvy to cobble together a disparate set of tools (WordPress, MailChimp, Memberful, Yellow Brim, Heroku…) to make his business possible. What might happen, we wondered, if we built a product that enabled any writer to do something similar, but with no business knowledge or tech skill required? Just type into a box, hit “publish,” and wait for the money to show up in your bank account.
Three years on, Substack has (so far) been successful. We consider these very early days, but there are thousands of writers making money on Substack. The top writers make hundreds of thousands of dollars a year. The first team publication on Substack, started by former editors of US politics outlets The Weekly Standard and National Review, got started late last year and has already crossed $1 million in revenue. There are now more than 100,000 paying subscribers to Substack publications. Some prominent investors believe the same story we do, and last June the Silicon Valley venture capital firm Andreessen Horowitz, in combination with Y Combinator, invested $15 million in our Series A funding round.
And yes, this can all make sense for New Zealand.
A new ecosystem
What we envisage is a constellation of niche publications based on direct relationships and payments between readers and writers. If you glance at the top paid publications leader board on substack.com, you’ll see that the topics covered aren’t necessarily the ones that would have excelled in the ad-driven world: US-China affairs, bankruptcy and restructuring, climate change, politics in women’s sports, progressive Christianity, and rock music critiques, to name a few. Individually, each publication may be smaller (as measured by revenue) than their ad-driven predecessors. But in aggregate, we think the ecosystem can be much more valuable.
The Substack model works because it’s not based on scale; it’s based on trust. Subscriptions align the incentives between platform, writer, and reader. Substack, the platform, only makes money when writers make money, and writers only make money when their readers are happy. We’ve found that more than enough readers are happy to pay writers they trust. If it can work for politics in women’s sports, it can work for informed analysis of New Zealand rugby, intelligent coverage of New Zealand politics, and even regional news.
Substack publications are, like Stratechery, a hybrid of web and email. Each post can be published simultaneously online and into subscribers’ inboxes. The web versions can travel widely, being shared on social media to drive new readers (and ultimately subscribers) to the publication. The email posts get pushed out to subscribers, who don’t have to remember to check a website to see the newest thing. At the same time, email remains a (more or less) neutral platform, meaning it’s less subject to the capriciousness of a news feed’s algorithm tweaks or any one company’s business decisions. It also helps that there’s an email icon on almost everyone’s mobile phone home screen. For a publisher, that’s gold – it means you don’t need to convince a reader to download your app.
New Zealand is a small market, but it’s more than big enough to support a wealth of Substack-style publications. Ben Thompson’s subscriber base, for instance, numbers in the tens of thousands. By comparison, Stuff.co.nz, claims a monthly readership close to 2 million people. The recently deceased Listener, a high-brow magazine, had a circulation of 45,000. Even the Central Otago News, my tiny hometown newspaper, gets delivered to 16,000 homes. We commonly find that 10% of email signups (a rough proxy for circulation) will convert into paying subscribers for good Substack publications. These circulation numbers imply enough subscribers to support publications staffed with quality writers. Remember, under this model, there’s no need to pay for a tech platform, sales teams, back office, or heavy design work. You just focus on the writing.
Go hard and go early
Of course, as a founder of Substack, I am absurdly biased. But I am also deeply invested in the wellbeing of New Zealand media. As a teenager, I wrote reviews of the basketball competition for the C.O. News. At Otago University, I edited the student magazine, Critic. I got my big start in journalism thanks to The Listener. And throughout my life in New Zealand, I was an avid reader of a wide range of newspapers, magazines, and blogs. If the media were to fail in New Zealand, I would feel it on a very personal level. But it would also be a disaster for democracy. In the age of Trump, such things feel trite to say, but they remain as true as ever. We can’t rely on social media to keep us well informed.
I also think New Zealand is uniquely well placed to reinvent its media ecosystem. This crisis, even though it has brought great pain, has presented a chance to start all over again. The country doesn’t have to fall back on an ad-based model for journalism that no longer makes sense. It doesn’t have to accept that consolidation – a reduction of options for both readers and writers – is the only way forward. It has been proven now that a focused subscription model can work for niche communities. The next step is to take that approach and then build alliances among a new generation of publishers and writers so that a rich new media economy can emerge. Unbundle, and then rebundle. For starters, sign me up for whatever publication Jane Clifton and Diana Wichtel start, and for whoever starts a New Zealand sports publication that approaches the level of depth and quality seen in the NBA coverage in the US. Then sign me up for whoever they each recommend.
New Zealand needs to address its media crisis with the same clear eyes with which it has assessed the Covid-19 crisis. Kiwis have shown a readiness to embrace what needs to be done for the public wellbeing, even if the measures required are radical. This has been true not only of the country’s response to the virus, in fact, but also in the innovation of the social welfare system, state housing, and universal suffrage. New Zealanders have the mettle to do these big things.
A level-headed look at the facts of the media business will show that it makes no sense to muddle on with a variation of the status quo. But it’s a good time to try something new. A lot of talented journalists are suddenly out of work. Startup costs are low and there may be help available from the government. In the short term, the economy will be in bad shape, but from there it will be a story of recovery, with the fortunes of a new media generation rising with it.
If you care deeply about the media in New Zealand and are interested in discussing these ideas, please let me know. Write to me at hamish at substack dot com, find me on Twitter, or leave a comment on this post.