Churn Rate

Companies like Comcast and Netflix and Verizon have monthly subscribers to their service. When a subscriber leaves, they say that the sub "churned" off the service.

Why "churn"? Because the process is often circular, with the marginal subscribers leaving for a few months, attracted to some discount promotion by a competitor...only to return when the original service offers the same discount. The rate of this "firing of the service" is the churn rate.

Like...Verizon, in a given area, might have a million subs. About 10,000 per month fire Verizon, either because they've left to go to AT&T or Sprint, or have become Amish, or, uh...dead. That churn rate then is 1 percent a month.

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Finance: What Does it Mean to Churn an A...14 Views

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Finance allah shmoop What does it mean to churn an

00:05

account All right Well back in colonial times before america

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was the good old u s a You know what

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That i po and seventeen seventy six colonists would churn

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cream into butter back then churning involved moving a plunger

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in a wood bucket over and over and over again

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Really good for the traps and lattes there Not exciting

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but well that's What happens when there's No better technology

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today churning is something illegal that stock brokers dio and

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remember normally brokers pay their own rent by getting paid

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a commission off of each trade they do for customers

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So churning in the financial sense here means that stockbrokers

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are making tons of trades they really don't need to

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be making in a client's account in order to generate

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mohr commission for themselves they're churning the account to generate

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dough for themselves Illegal very bad And sometimes it can

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be difficult to detect or stop You know think about

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little old ladies not really paying attention to our account

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or ah cardiologists who really has no idea how wall

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street works They have no idea of the brokers churning

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Or not Well if you fall prey to a broker

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who's involved in churning you'll end up overpaying them in

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commissions And you might even have to pay extra taxes

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because they realized gains from all those trades they didn't

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need to make But if that brokered does get caught 00:01:26.979 --> [endTime] yeah he's toast

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