Patreon Should Buy Substack to Save Creators

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Let me tell you a dirty little secret: Every media company you know is panicking. Traffic from social media is declining, consumers have subscription fatigue, and the advertising market is still sagging. As a result, layoffs are rampant. More than 500 journalists lost their jobs in January alone. 

You know who else is panicking? Creators, who have been told that creator economy startups like Patreon and Substack will help them escape the shackles of these media companies and run their own businesses. While social media and search engines may send them some traffic, they are subject to similar declines as larger media organizations, making it harder to grow. The real winners have been the platforms that aggregate user attention and turn content creators of all sizes into commodity suppliers—YouTube, X, TikTok, Instagram. 

The societal results of the evolution of our media ecosystem have been mixed. Mark Zuckerberg owns half of the island of Kauai, tech CEOs are buying yachts left and right, and our information ecosystem is broken. The current mix of distribution and incentive structures has yielded a polarized populace, short-form video addiction, and, at least for me, a measurable decrease in IQ. There are—of course—silver linings. This newsletter, for one! We wouldn’t exist without social media. Many other wonderful businesses and causes have come to being within the internet’s current paradigm.

Still, I think there is a better way. We need a new attention aggregator that increases creator earnings and incentivizes creators to produce thoughtful, long-form, sane content. There needs to be a creator economy startup that goes right for social media’s throat. 

And it needs to be a notch more ambitious than the current crop of creator economy startups, which exist as peripheral software suites in the media ecosystem. They manage consumer subscriptions (Patreon) or help creators sell newsletters (Substack), courses (Kajabi), or digital goods (Gumroad). These companies are like mice, satisfied with crumbs of a few hundred million of ARR while YouTube pulled in $31.5 billion last year in revenue. 

To produce a great outcome for investors, creators, and consumers, I propose a solution: a rollup. Patreon should start by raising a large amount of capital and purchasing Substack.

At its last funding round in 2021, Patreon was valued at $4 billion, while Substack was valued at $650 million in a 2023 community fundraising round. Combined, and accounting for the growth in the intervening years, it’s reasonable to assume a roughly $5 billion valuation for the combined entity. This NewCo would have enough creators, users, and credit card data to present as a legitimate challenger to smaller social media providers like Snap, X, or Pinterest. Most importantly, the combination would remove the weight of the historical product roadmap. It could be more ambitious in its vision, more direct in its goals. Both companies have made tentative moves toward competing with Facebook with their apps—this acquisition would give them the space and scale to go all in. 

Here’s how it would work.

The economics of a roll-up