TMT (Tech, Media & Telecom)
A streaming service is considering a 15% price increase. Walk me through the churn math that determines whether it pays off.
Model answer
Revenue effect = (1 + price change) x (1 - incremental churn) versus the status quo. A 15% price rise breaks even if it causes roughly 13% of subscribers to leave, because 1.15 x 0.87 = 1.0005,…
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