Motley Fool Money Understanding Subscription Businesses, Value Investing's Bad Rap
Jan 31, 2022
Join Jason Moser, a senior analyst at Motley Fool, who dives into the fascinating world of subscription businesses, discussing their recurring revenue model and the challenges they face, such as subscriber churn. He shares insights on how streaming giants like Netflix and Disney+ are tackling these issues. Alongside Jim Gillies, another senior analyst, the conversation shifts to value investing, exploring its misunderstood reputation and potential growth in tech giants like Intel. They also weigh the merits of investing in stable versus speculative companies.
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Subscriber Churn Example
- The Wall Street Journal reported that streaming services lose about half of their new subscribers after a few months.
- Spikes in subscribers often follow the release of popular content, such as "Hamilton" for Disney+.
Churn in Streaming Services
- Churn, the rate at which subscribers leave a service, is becoming increasingly important for streaming companies.
- Smaller services are more vulnerable to churn, and the abundance of streaming options makes it easy for subscribers to switch.
Pricing Strategies to Reduce Churn
- To reduce churn, streaming services should consider widening the price gap between monthly and annual subscriptions.
- Offering discounts for annual subscriptions can incentivize users to commit and provide more predictable revenue.