Glossary · Metrics

What is ARR?

Annual recurring revenue

ARR (annual recurring revenue) is the subscription income a service would earn over a year if its current subscribers and prices stayed as they are. It is monthly recurring revenue multiplied by 12.

How to calculate ARR

Take the recurring subscription revenue for the current month, with annual plans counted at one twelfth of their price, and multiply by 12. A service with $40,000 of MRR has $480,000 of ARR.

What ARR excludes

For a service that earns mainly from ads or transactions, ARR describes only a small part of the business.

  • Rentals, purchases and pay-per-view
  • Advertising
  • Coin packs and other one-time in-app purchases
  • Setup or service fees

ARR vs annual revenue

ARR is a snapshot of the present run rate, not a total of what was earned in the past twelve months and not a forecast. It assumes nobody joins or leaves. Because monthly subscribers can cancel at any time, a consumer service's ARR is less certain than that of a business with annual contracts.

It is most useful for comparing size between periods and for conversations with investors, who commonly think in ARR.

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FAQ

ARR, answered.

More definitions in the streaming glossary.

Planning a streaming service?
What does ARR stand for?

ARR stands for annual recurring revenue.

Should a streaming service report MRR or ARR?

MRR for running the business month to month, since most subscribers pay monthly. ARR is the same number scaled up and is used mainly for external comparison.

Do annual plans count fully toward ARR?

Yes. An annual plan contributes its full yearly price to ARR and one twelfth of it to MRR.

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