"Churn and Return" is a Big Reason Why Video Analog Dollars Become Digital Dimes

“Churn and return” seems to be a key part of the reason video streaming business models have become more challenging. In a nutshell, the problem is that customers sign up on any particular service to watch a new hit series, then churn off once they have finished watching it. 

That, in turn, is related to the traditional difficulty of creating a hit series in the first place. No single streaming service has found a way to consistently produce new “must see” content on a repeatable basis. And if that is what drives subscriptions and retention, no single service is going to have predictable cash flows. 

The older model is the “catalog” approach, which relies on a deep, broad catalog of archived content to anchor customers and create some amount of loyalty (repeat buying). 

The exceptions are the video streamers that have some other business model. YouTube makes money from advertising, not subscriptions. Amazon Prime arguably makes money from e-commerce. Apple makes money selling devices. In all those three cases, there is some other business model that streaming helps support, but without the full requirement to throw off enough cash to be a significant and stand-alone revenue driver. 

Netflix is changing its revenue model to incorporate advertising revenue. Warner Brothers Discovery has to find a balance between subscriptions and advertising, as do the other smaller providers. 

The point is that the subscription-driven services have work to do, to compete with the “I have some other revenue model” providers.