Substack has changed revenue calcs, here's what you need to know

It's confusing af but I'm here to sort it out for you

Hey lovely reader,

It’s great to be back in your inboxes after a couple of weeks. Thank you for sharing your precious attention and time with me.

I’m writing today to explain what’s going on with revenue reporting in the Substack platform.

If you don’t operate direct subscriptions in your publication or only have a few paying subscribers, tune out now, this post is of no use to you, and I don’t want to waste your time.

If you have paid subscribers (more than a few), read on.

What’s changed?

Substack has changed how it calculates and reports gross annualized revenue (GAR) for publication owners.

What is GAR?

Gross annualised revenue (GAR) is the total amount of money you should get from your subscribers before Substack and Stripe fees, averaged across a 12-month period.

For example, if you currently have 10 paying subscribers, with each on an annual plan of $100, your gross annual revenue should be 10 x $100 = $1,000. If you gain another paying subscriber it will immediately increase to 11 x $100 = $1,100.

Does GAR always work exactly perfectly if you try to reconcile it with your bank account? Nope. There are intricacies with non-transparent Stripe fees, expiry dates, currency conversions and trial subscriptions that make it impossible to perfectly reconcile GAR and fees with actual money in the bank.

Will your bank account be exactly $1,100 less fees at the end of the year if you have 11 paying subscribers? Nope, because subscribers come and go and the way Substack turns each subscription payment into an annual equivalent is never going to be perfect.

My advice: don’t overthink it. Use your GAR as a guide to know whether your publication is tracking in the right direction, and expect to see a smaller amount in your bank account compared to what you see on your dashboard.

Why does this matter?

The revenue reported on your dashboard will now change differently when specific actions occur.

Yeah, but why does it really matter?

Honestly, I don’t think these changes will have a big impact on 98 percent of creators. But let’s unpack the changes so you can see for yourself.

How will things be different?

Substack has provided a dense page explaining the changes with a forest of '“if this, then that” scenarios for various types of subscription and expiry scenarios.

My paid publication just cracked $23K per year so I’ve got a fair bit of skin in the game, but I still struggled to process everything on that page.

Big picture

The new calculations shouldn’t affect the actual amount of money you receive.

The new calculations shouldn’t make the overall shape of your revenue chart look different over the long term.

The new calculations pretty much won’t change anything much unless:

• you frequently fiddle about with subscription levels for multiple paying subscribers, for example by giving them ‘comps’ (complimentary subscriptions), extensions, or refunds.

• your subscribers frequently swap between monthly and yearly plans, transfer their subscriptions to other people or cancel their subscriptions mid-period.

… in either scenario, the GAR on your dashboard will change differently to the way it would have changed before. But only by a small amount - perhaps by the value of one or two annual subscriptions, and likely only for a short period before reverting to the average annualized amount.

The details

If you or your subscribers do switch and swap subscription plans a lot, or if you issue heaps of refunds, you might want to dig into the details on Substack’s explainer page.

However, trying to understand the details will only be worth your time and effort if you also watch your GAR chart like a hawk and care if it flickers up or down a few hundred bucks in a slightly different way than it did before. Don’t say I didn’t warn you!

Anything else to know?

Nope, that’s it.

Signing off now, stay tuned for a fantastic post by a guest writer about trust later this week (can’t wait to share it with you).

Karen