Quantify Subscription Churn Impact

Business Context

StreamFlow is a B2C video subscription company with monthly and annual plans. In the last quarter, senior leadership saw churn rise and wants a clear explanation of the financial impact, not just the percentage-point change.

Metric Scenario

At the start of Q2, StreamFlow had 500,000 paying subscribers. Monthly plan price is $20 and annual plan price is $200. Subscriber mix is 80% monthly and 20% annual. Monthly churn increased from 3.0% to 4.2%, while annual churn increased from 12% to 15% on an annualized basis. New subscriber acquisition remained flat at 45,000 per month. Average gross margin is 70%, and blended CAC is $60 per new subscriber. Finance asks whether the churn increase is a short-term revenue issue or a material LTV and growth problem.

Requirements

1. Define subscription churn and explain how you would present it to senior leadership in financial terms.
2. Quantify the revenue and gross profit impact of the churn increase over the next 12 months using the data above.
3. Decompose the impact by plan type, existing subscriber base, and lost future cash flows.
4. Identify which supporting metrics you would show alongside churn to avoid misleading conclusions.
5. Recommend the most important follow-up analyses if leadership wants to prioritize retention investments.

Data Available