The subscription math, in one place
Subscription economics come down to four inputs and a couple of ratios. Get them right and growth compounds; get them wrong and every new subscriber deepens the hole:
- Average lifetime = 1 ÷ monthly churn. At 5% monthly churn the average subscriber stays about 20 months; at 10% they stay 10. Churn is the master lever.
- LTV = price × gross margin × lifetime. The margin-adjusted figure is the honest one - it is what a subscriber is really worth after content and delivery costs.
- LTV : CAC ratio. Lifetime value divided by acquisition cost. Three to one or better is the target; below one you lose money on each signup.
- CAC payback. How many months of margin it takes to earn back what you spent acquiring a subscriber. Shorter is safer for cash flow.
The cohort survival curve shows the same story visually: what share of everyone who signed up this month is still subscribed 6, 12, and 24 months later. The steeper the drop, the more you pay to keep the top of the funnel full.
Rules of thumb
| Metric | Healthy | Watch | Problem |
|---|---|---|---|
| Monthly churn | < 5% | 5-8% | > 8% |
| LTV : CAC | ≥ 3 : 1 | 1-3 : 1 | < 1 : 1 |
| CAC payback | < 12 mo | 12-18 mo | > lifetime |
These are planning estimates using a constant-churn model. Real cohorts churn fastest in the first few months and then stabilize, so treat the curve as a guide, not a forecast.
Frequently Asked Questions
How do I calculate subscriber lifetime value?
LTV = monthly price × gross margin × average lifetime, where average lifetime = 1 ÷ monthly churn. At 5% churn a subscriber stays about 20 months; multiply that by the margin-adjusted monthly revenue for LTV.
What is a good LTV:CAC ratio for streaming?
Three to one or higher. Each subscriber should return at least three times acquisition cost. One-to-three is thin; below one you lose money on every signup.
What is a good monthly churn rate for SVOD?
Roughly 3-6% monthly is healthy. Broad-market services run higher, and churn spikes around price rises and after big content ends. Annual plans paid upfront reduce churn materially.
How much does churn affect LTV?
Enormously. Because lifetime = 1 ÷ churn, halving churn roughly doubles lifetime and LTV. Reducing churn is almost always the highest-leverage move.