There are two questions here, really. The first is why does Substack appeal to readers? To me, it doesn't. What appeals to me are the writers. If I care to read what they write, I'd read it on any platform. They happen to be on Substack, so I read them on Substack. The other question is why does it appeal to writers, in particular the more popular high-quality, high-prestige writers that are attracting readers?
I don't think that's a question to be asked of Hacker News readers in general, as presumably most of us aren't Substack writers, just readers.
To be honest, I don't like Substack as an application. Their commenting defaults are terrible. I'm not a fan of the push model of newsletters in general and prefer the pull model of going to the site whenever you feel like being updated on your own schedule. But I like the writers, so I go there anyway.