The Painful Rise of Subscription Fatigue and the Decline of Journalism due to AI

Media is in a dangerous freefall. Is AI friend or foe?

Hey Everyone,

This Newsletter was formerly called Creator Economy Tips, now we are called Media Operations and Newsletter Economics.

“Media and Creator Economy news as well as tips on how to grow a Newsletter and a flywheel of value around your Newsletter. Curated stories and links to useful information.”

The Creator Economy hype word is old and had too much of a Web3 connotation. I have found myself drifting to reading about the decline of media as a whole which has coincided with an Ads slowdown and a Paid Subscription wall.

• The great subscription News reversal.

• A major Ads slowdown of the last three years.

The story of Casey Newton also sheds light on this, he was only up 200 Subs in all of 2023 inspite of getting 75,000 new readers from Substack Recommendations. Sorry to hear that man!

Substack needs to pivot, but it isn’t. Although it is helping big earners in finding Advertisers for them. Jesse Singal’s Blocked and Reported podcast, which is getting “support finding advertisers and coordinating ad buys” through Substack.

This reportedly allows them to read out ads provided by Substck during the show. This was first spotted on Substack Notes and people like Simon Owens, long before Axios by the way. Helping someone find Podcast Ads isn’t exactly Substack embracing Native Sponsors. Substack is an ideologically motivated startup.

For many publishers paid subscriptions hasn’t turned out very well with a lot of churn in the second half of 2023 and continuing worse in 2024. This is Substack’s entire business model. In contrast it has released many new reader experience features in early 2024 that combats this trend of paid subscription churn.

It’s not clear how much the Nazi dilemma made things worse, but it does give more data why people like Casey Newton wanted their 10%, if they weren’t really growing even after having such a massive list. Casey had hired another journalist, so needed to keep growing on his own terms. Although the Nazi rebellion of his own readers (several dozen paid subs churned) likely led directly to the decision.

AI is Destroying Journalism and Trust in Content

Casey talks about how he jumped into Substack at the right window of opportunity. Substack used their baseline conversation rates of political journalists as a proxy of how many conversions they thought Casey could get, which turned out to be drastically too high. Tech does not convert like Politics. Anyways the rest is history.

What’s clear in 2024 is how badly AI is impacting the future of Media and American journalism. And hardly anyone is telling the story. The web has broken so many of the models that used to work in Media, now it’s a deeply unprofitable business.

The Messenger is the best and worst example of this. Traffic and monetization opportunities are drying up. Building an audience is no longer working like it once did, consumer habits on mobile are continuing to change.

In January, 2024 Media executives and academic experts testified before the Senate Judiciary Subcommittee on Privacy, Technology, and the Law about how AI is contributing to the big tech-fueled decline of journalism.

Legacy Media is Bundingly to Stop Churn to BigTech Platforms

Recently it was announced that ESPN, Fox and Warner Bros. Discovery have decided to launch joint sports streaming platform this year. Legacy Media bundling just to take on BigTech? Not a good sign. What chance do they even have to survive in the horrible business of streaming? Again, not very profitable.

In the near future AI will mediate how we consume content in a more personalized way that will make all of these streaming apps and channels obsolete. Roku or someone like that should develop that.

If in the entire 2023 Casey Newton one of Substack’s top journalists was only up 200 paid subs, it bodes poorly for the subscription reversal of 2024. Even the American Press Institute seems to admit this trend.

“Many outlets have found that hard paywalls throttle traffic and ad revenue without capturing enough subscribers, so they are turning instead to flexible paywalls, membership programs and advertising.”

The Internet has Changed

Bluesky opens up to the public but it’s too late, the internet has moved on. YouTube reached 100 million paid subscriptions and Snapchat+ reached 7 million paid subscribers, that’s a full 2% of Snap’s entire daily active user base.

Snap to Return to Quasi Penny Stock Unprofitable Purgatory

The Verge jokes about being the “last news website”, it’s not actually so funny for the future of media that will corrupt American democracy even further. These journalists are relics of a byone era. Casey Newton’s entire business model hinges on a limitation of only doing 1-day long scoops, basically feeding liberal Silicon Valley rhetoric. A lot of journalists survive because they stoke the narratives elites actually wish they would. It’s not usually independent journalism or investigative depth, it’s covering a beat.

Consumers and readers are experiencing Subscription fatigue. News and media keep having to pivot, but less and less publications and organizations survive each time they have to pivot just to survive. Subsack has had a rough last few months for churn on its platform, I keep stumbling into people no longer on Substack, say it ain’t so Justin!

‘Ghost Readers’ and Substack’s Cultural Narrowing

This means Substack becomes even more of a cultural playground and political counter-culture rebels hotbed. Not exactly content fit for mainstream appeal. It is what it is, that’s what you get for ideological frameworks over customer-centric decisions. But I’m the first to notice how much better Substack is getting at facilitating conversions at the bottom of the funnel. Everything from the bright new subscription banners, to post-conversion recommendations, DO make a difference overall. Even if, most of Substack readers are overwhelmed with Newsletter in their inbox fatigue. They have “subscribed” to too many Newsletters, surprise surprise. Most of which Gmail’s Promotions Tab algo is not even letting them see.

If Casey Newton thought churn was bad in 2023, he should see how it goes without Substack Boost on auto-pilot with his time on Ghost. He’s turning to lucrative Ad deals to improve his bottom lines.

Podcasting is on Life Support

The pivot to subscriptions and hard paywalls seems to have been temporary in media. Substack will need to do more than help Creators find Ads sponsors to fix all of this. According to Singal, Substack has been providing the podcasters with new ads to read on their show, and Singal has "full veto power" to say no, although he's never had to veto an ad yet.

If you haven’t noticed, Podcasting has also been in a slump and general decline. There’s no question in 2024, that Podcasting too is on life support. Oddly Podcasters are keeping quiet on the falling audience metrics. But it’s an open-secret. All of this stuff just got a lot harder post pandemic.

Partner with OpenAI or Die

Meanwhile media organizations like the NYT and Semafar are embracing AI in their own way in attempts to boost their bottom lines. The New York Times is hiring engineers and editors for a new team that will experiment with uses for generative AI but says journalists will still write, edit, and report the news. Zach Seward, the co-founder of Quartz, is joining the publication to figure out the best ways to use AI in the newsroom, according to a report from The Wall Street Journal. It’s all kind of dystopian really.

Semafor have entered into partnership with Microsoft and OpenAI. Media is under pressure to “partner with OpenAI” or die.

The move highlights the complex relationship between tech giants and a broader news industry that has seen its traditions and business models repeatedly disrupted by digital innovations over three decades — from the dawn of the web, to the advent of Craigslist and Facebook, and now the rapid rise of AI.

In the case of the NYT and OpenAI it’s really complicated.

“The team, led by the editorial director for A.I. initiatives, will also include colleagues with a mix of engineering, research, and design talent, acting as a kind of skunkworks team within the newsroom. Together, they will partner with other teams in the news, product, and technology groups to take the best ideas from prototype to production,”

However their own AI Lab at the NYT signals just how profound AI is for the existential future of these News organizations. Increasingly they have to lure readers with games, puzzles and gimmicks just to stick around.

The Subscription and Paywall Apocalypse

There’s a lot of evidence that the paid subscription model is widely under threat including:

• TechCrunch is shuttering its subscription service TC+, as it pushes to reorient its coverage around investors and amid layoffs.

• The Washington Post, which has lost roughly 500,000 subscribers since its Trump-era peak, is considering more dynamically priced subscriptions, its new CEO Will Lewis told Semafor.

• Time fully removed its digital paywall last year in favor of reaching a broader audience with more ad-supported content.

• Quartz dropped its paywall last year in favor of a membership model.

• The Atlantic shifted from a blanket paywall to a more dynamic approach early last year.

• Gannett, the U.S.' largest local newspaper company, began reducing the number of articles behind its paywall in late 2022 to boost the company's ad revenue.

• The Chicago Sun-Times dropped its paywall in favor of a membership program after being acquired by the Chicago Public Media Board of Directors in 2022.

Media’s Revolving Door

For all the layoffs of journalists and death of Media organizations, there’s also new ones popping up. 6AM City raised a Series A recently. This is a small win for local journalism apparently. The Greenville, SC-based local daily newsletter company wants to expand to new locations.

As for Semafor’s approach to AI, it sort of sounds vagely interesting. Semafor, the news site launched in 2022 by former BuzzFeed News editor Ben Smith and former Bloomberg Media Group CEO Justin Smith, said it will launch “a new, global multi-source breaking news feed called Signals” under the collaboration. The approach will use tools from Microsoft and OpenAI to help journalists “offer readers diverse, sophisticated perspectives and insights on the biggest stories in the world as they develop.”

BigTech and AI are definately foe of the media industry and future of it even being viable. LinkedIn acquired by Microsoft now have posts that are mostly ChatGPT generated by its members and Ads (often in the posts now) that aren’t even disclosed.

It’s pretty bad. And I agree with journalists that equate AI generated content with spam. In my area of AI Newsletters, I’d say 25% of the new ones I see coming to Substack are ChatGPT and AI generated.

The Financial Times reported that the funding for Signals is “substantial” for Semafor’s business, citing a person familiar with the matter. Microsoft declined to disclose the amount of funding it’s providing for any of the projects.

Companies like Microsoft, Amazon and Apple are getting more into the advertising business, and thus are gobbling up Media opportunities while the going it tough for journalism and real news.

AI is the Wolf of Media

In an opinion column for The Washington Post, ex-Googler Jim Albrecht — who until 2023 was the senior director for the search giant and major AI player's news ecosystem products division — argues that AI is the real "wolf" that threatens the business of journalism.

For all the nonsense on Substack Notes, at least I know that it is mostly human. AI is going to twist Capitalism and Democracy into unrecognizable forms fairly quickly. What BigTech has done and will continue to do to media and news consumptions is part of that story. Meta abandoning News after it forced them on, shows the ruthlessness of the American Ad based internet.

They someone let Microsoft acquire Activision and now the future of Gaming is owned by BigTech as well for the most part. Platforms with the youth like Roblox need to do more and more dangerous things to kids just to retain them in these gamified echo-bubbles. Now Roblox is using AI for in real-time translation. AI is going to be big part of retention and conversion of customers in all kinds of media and consumer platforms.

The Mr. Beast and Tucker Carlson Era

There is a lot happening in media, the Creator Economy and the internet that isn’t being covered properly because it’s now happening so fast. Tucker Carlson getting to interview Vladimir Putin to get the Twitter/X app more downloads is a case in point. Carlson said earlier on X he wanted to do the interview because "Americans have a right to know all they can about a war they are implicated in". Media might become unrecognizable in 2024 even as people churn from “social media”.

When kids in Japan dream of being YouTube Creators when they grow up, we have a problem. YouTube is full of the most sensationalistic content and sentiment pinching algorithms on the planet, outside of perhaps Dystopian TikTok, that now thinks TikTok Shop needs to be forced everywhere.

Meanwhile GenZ who grew up online and on their phones have morbid aspects to their mental health and human relationships and a totally different future in an increasingly digital world. Not a healthy kind of digital however.

Layoffs and the End of Journalism

Not even Billionaires can save the death of Media. Layoffs at Amazon Twitch basically gives it little hope of thriving. The Future of Esports was completely decimated in recent layoffs. Jacob Wolf now works at beehiiv? Okay.

I’ve been talking about the media and subscription apocalypse for a long time, there are no easy answers for the future but diversification. Many Creators and in particular writers on Substack don’t have any intention of diversifying. Instead they will elicit more sentimental content aligned to the echo bubble of Substack Notes. But I’m not sure that will qualify as media content.

The Creator Economy startups are in even worse shape than the churning Media organizations. Many of them built on Web3 dreams and blockchain vaporware. If you are built on a16z PR you might not have a sustainable business model.

In 2024 we are seeing that many journalists don’t have a future doing journalism. In its recently-leveled lawsuit against OpenAI, The New York Times doesn't just argue that OpenAI has violated its copyrighted work. It argues that OpenAI has used the NYT's journalism to build a competing product. BigTech’s power is out of control and the Netflix era is going to destroy legacy capable bigwigs.

Failures of Pet Trends of Venture Capital

Like the phrase “crypto”, the “creator economy” is now taboo, it’s a failed project. It’s a term synonymous with bleeding money and young people gamified into wanting to be a YouTube idol, when the reality is burn-out, tears and broken dreams.

In 2024, it’s not clear if Substack is an Oasis or a radical Echo-bubble. Medium says it’s reaching profitability soon. Substack these days looks too much like Medium with its hoard of cultural subjective content. AI-generated content is proliferating on Medium and Substack, and it’s not clear how they can or will fight to squeeze companies like OpenAI for adequate compensation for using content published on the platform to train large language models.

Medium definately has been spam level quality for at least the last five years. Substack just did some things better than Medium did, namely paid subscriptions and giving writers for more control over their work. However it’s unclear the total addressable market of Substack or the number of actual readers it has, and it’s not many even after six years of organic growth and product engineering efficiency. Six years of luring celebrities most of us do not care about.

Subsack Metrics though look Good for the last three months

Substack needed to pivot probably about two years ago, but it might be that their ideological foundations prevent them from acting like a normal startup. So they have been doubling down on what they know best, driving paid subscriptions and creating a vibrant ecosystem for their writers now even with DMs. A large percentage of my paid subscribers are now actually other writers. This is definately not the intended target audience I was hoping to reach.

Now if only Substack would make me an AI category in the leaderboards, I might actually come to have an ability to feed my family with this gig. There’s been an onslaught of AI Newsletters since the advent of ChatGPT, but they share a “Technology” category with other topics such as product, software engineering, data engineering, entrepreneurship, startups and dozens of other categories.

If you aren’t a cultural or political writer on Substack, you are in an awkward minority. Especially if you aren’t an engineer. Substack’s mainstay audience and readers are mostly writers in the cultural and political spheres unlikely to be interested in your business, technology or AI content.