Happy Monday War & Peaceniks!
Did you know: None of the major subscription streaming services report their cancellation rates – aka Churn – as part of their quarterly or yearly earnings reports.
Churn is the metric of retention for subscription services, which measures the number of subscribers a service loses every month. So, when I dug into the respective earnings reports for all the public companies that operate streaming subscription services, I was surprised to find that Netflix does not detail (and barely mentions) their Churn in their earnings reports, nor do their biggest competitors Disney+ and Amazon. Spotify refers to Churn just briefly in their reports but gives no cancellation metrics. AT&T (the current corporate parent of Warner Media) does report on Churn for their mobile users, but when reporting on HBOMax, Churn is never mentioned.
So, why does this matter?
Churn is one of, if not the most important lever in a subscription platform business model. Other than Average Revenue Per User (ARPU) and Lifetime Value (LTV), there is no other metric that affects the return on investment of content, marketing, and overhead costs as much as the rate that a service loses its paying customers. New subscriber acquisitions matter very little, UNLESS the new subscribers acquired stick around.
That’s why Subscriber Acquisition Cost (SAC) is far less important than the quality of each subscriber you acquire. If you pay very little to attract a new subscriber, but that subscriber has a much lower Lifetime Value (LTV) than subs who cost more to acquire, you have wasted your money, time, and energy – three things most businesses in growth mode cannot afford to squander. A subscription service’s value is determined by the Lifetime Value of their subs, and LTV is determined almost entirely by their rate of Churn.
Yet none of the publicly owned subscription services report on Churn when they report their results to their shareholders, and almost none issue data on the LTV of their subscribers.
Why tho?
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