Metrics used by broadcast and streaming organisations.
Customer Lifetime Value (CLV)
Customer lifetime value lets you know the expected revenue from each subscriber.
| CLV Methodology |
|---|
| So let’s assume you have 5,000 paying subscribers = 5,000 |
| Add the combined amount your subscribers pay your business monthly known as monthly Recurring Revenue (MRR) MRR = 200,000 |
| Now work out the average revenue your business makes each month per subscriber (ARPS) = 40 |
| Now we need the Gross margin (profit) as a percentage of each pound or dollar you earn each month = 80 |
| Finally we need the churn (the percentage of subscribers who leave each month) = 5 |
CALCULATION IS:
| CLV Calculation |
|---|
| ARPS (£) 40 X Gross margin (%) 80 / Churn rate (%) 5 = £640 |
| So customer lifetime value CLV is £640 in this example |
In this example we work out the Customer Acquisition Cost (CAC) OR Marketing Acquisition Cost (MAC)
CAC is the cost to obtain new subscribers. It is calculated by dividing the marketing spend by the amount of new subscribers.
| Customer Acquisition Cost (CAC) = marketing spend / new subscribers acquired |
| CAC = 5,000,000 (marketing spend) / 115,000 (new customers) = £43.47 |
Average Revenue per subscriber
The calculation is: total Streaming Revenue divided by the Number of subscribers |
| Total Streaming Revenue 40,000,000 / Number of subscribers 800,000 = £50 |
Gross Profit per subscriber (GPM)
| The calculation is revenue minus the cost of revenue = Gross Profits. |
| GPM is 40,000,000 (revenue) – 25,000,000 (cost of revenue) = 15,000,000 |
| 15,000,000 as a percentage of 40,000,000 = 37.5% |
| So annual gross profit per subscriber is average revenue per subscriber X GPM (£50 x 37.5 = £18.75) |
Marketing Retention Cost (MRC)
| The cost to maintain and keep the subscriber |
| 10 per cent of marketing costs of 5 million = 500,000 / 800,000 ( subscribers ) = 62.5p |
Retention Rate (RR) = Percent of customers continuing to subscribe
| Rate = 1 – Churn Rate. We assume an 11% Churn rate so means the Retention Rate is 89%. |
Customer Lifetime (LT)
| LT = 1 / (1- Retention Rate) |
| 1 / (1 – 89) |