I Am Turning off Paid Subscriptions
Why I'm moving my paid content to Gumroad.
When I started offering paid subscriptions on Substack, I was blissfully unaware of some of the common issues on this site.
Most people are… because Substack does an awful job of documenting what running a paid newsletter is like on the backend… it wouldn’t surprise me if that was intentional.
At least from my experience, there are two primary issues:
Churn.
Sales taxes.
For those interested, I will elaborate. If you’re not, then feel free to skip around the next two sections.
1. Churn
Subscriber churn is a fact of life for a subscription business, but the stats can be shocking on Substack.
Sacra, a private markets research platform, estimates the average churn on Substack was around 50-60% of a newsletter’s revenue on an annual basis (in 2022):
Given so many people are starting to develop subscription fatigue, that average might be even higher today…
So, to make the same amount of money you were making a year ago— you need to increase your paid subscribers by over half your existing sub count.
Churn rates can vary, but everyone posting on this platform reports a similar situation.
People don’t view these informational newsletters like they would a SaaS product.
Many subscribers will pay for 1-2 months and leave. Some might come back later to consume the latest content, others don’t.
Don’t get me wrong—the high churn rates on my newsletter are my own fault. I naively thought that only discussing the stocks I was personally buying was a viable strategy for a subscription-based investing newsletter… it’s not.
Especially when I run a highly concentrated portfolio.
I figured if I offer news coverage in these industries and stock lists and kept adding on other additional content, then maybe that could counterbalance things out. No. That just diluted the service since I wasn’t focusing on the core product.
It turns out that people are subscribed to an investing newsletter primarily for stock picks. Other services are nice but not enough to merit a subscription on their own…
Truly a shocking revelation, I know.
But after reading about the experiences of others, I realized that even if I did dramatically increase the number of investment reports I put out, that wouldn’t change the fact that subscriber churn is significant on this website.
2. Sales Taxes
This is a topic that Substack hardly addresses at all.
The only way most people would figure out that Substack doesn’t handle sales tax collection or remittance for you is by specifically searching that out.
Other platforms provide detailed instructions about this, Substack doesn’t. The only information they have on the subject is one page about integrating with Stripe Tax.
Substack was the first platform I tried to monetize on, and I didn’t research any of the other options, so I was unaware of this issue.
A common theme you will see on the Substack subreddit is a variety of disgruntled writers talking about how they had no idea this was a thing.
I didn’t know either— until tax season came around and I realized that I never received any warning from Substack or Stripe about registering to collect sales taxes on behalf of several countries. Something I hadn’t been doing for over six months.
It’s safe to say I wasn’t pleased when I figured all of this out.
Registering with foreign governments to collect a tiny amount of sales or VAT taxes became an unsurprisingly burdensome administrative nightmare.
Plenty of countries will require you to register with their tax authorities just for making a single sale of a digital product or subscription to one of their citizens.
It’s worth noting that Stripe acquired Lemon Squeezy last year, which is similar to Gumroad and offers an MoR solution themselves. The specified purpose of said acquisition was to eventually have Stripe offer an MoR solution. So, it’s coming, but who knows how long it will take for them to develop it— and if Substack will even integrate it once it’s ready…
The Solution - Gumroad
If you haven’t heard of Gumroad before, it’s an incredibly popular option for online content creators looking to sell digital products. Which is exactly what I plan to do.
Instead of offering a subscription service like most of the newsletters on Substack, I’m going to sell each of my investment reports individually on Gumroad. Each report will be sold on its own in PDF format.
This will allow you to pick and choose which investment reports you want to buy instead of purchasing a monthly or yearly, broad subscription.
If I need to take a break for some reason, or if I don’t have a great stock idea in a particular month… then I don’t have to post anything. Subscribers won’t be annoyed that they paid for a month and didn’t receive enough value (totally fair).
Additionally, Gumroad is a Merchant of Record (MoR) now, meaning they handle all of the global tax registration and collection for me. So, I can focus on researching stocks instead of dealing with bureaucratic BS whenever I sell a subscription in a new country.
In summary, Gumroad offers more options for you— and less headaches for me.
Substack
I will continue to post free content on Substack. Any news trends or industry analysis will still be posted on here.
The Green Markets series will also be making a comeback. Instead of being posted daily, it will be sent out weekly, where I only focus on news that could impact businesses across an industry. Not just individual company news.
Existing and previous paid subscribers should receive a second email discussing refunds.
I plan on providing a link to my Gumroad page when I have some products on there. I’m still in the process of transferring things over.
As sub fatigue guy, looking forward to seeing gumroad products.
Do you know that in US you got different sales tax regulations in each state and on top of that there can be local regulations on country/municipality levels. It’s crazy NOT to use MoR.