How to Calculate CAC for Paywall Unlockers

Defining Your Customer in a Paywall Model

Before you can calculate CAC, you need a clear definition of what counts as a 'customer.' In micro-drama, this is less obvious than it seems. A viewer who watches three free episodes is not a customer. A viewer who hits the paywall and leaves is not a customer. A viewer who unlocks one paid episode but never returns is technically a customer, but their value is very different from a viewer who unlocks every paid episode in a series and then pays for your next series too.

For CAC calculation purposes, the most useful definition is: a customer is a viewer who makes their first paid unlock. This captures the moment of conversion and aligns CAC with the specific action your free content is designed to drive. You can then layer on additional definitions — a 'retained customer' who unlocks episodes across multiple sessions, or a 'cross-series customer' who pays for more than one series — for more sophisticated analysis. But start with first-unlock as your baseline definition.

The CAC Formula for Paywall Content

The basic CAC formula is simple: total acquisition costs divided by the number of new paying customers acquired in the same period. For a micro-drama studio, the challenge is defining 'total acquisition costs' correctly. In a paywall model, acquisition costs extend beyond marketing spend to include the cost of the free content that drives viewers toward the paywall.

Full-Cost CAC

Full-cost CAC includes every expense involved in acquiring a paying viewer: paid advertising, content marketing, social media promotion costs, the production cost of free episodes (since free content is your primary acquisition tool), and any platform fees associated with distribution of free content. This is the most conservative and most honest version of CAC. It is also the number that most studios avoid calculating because it is usually uncomfortably high.

Marketing-Only CAC

Marketing-only CAC includes only the direct marketing and promotional spend used to drive viewers to your content. This is easier to calculate and more directly comparable across campaigns, but it understates your true acquisition cost by excluding the production investment in free content. Marketing-only CAC is useful for comparing the efficiency of different campaigns and channels, but should not be used in isolation for overall business health assessment.

Blended vs Channel-Specific CAC

Blended CAC averages all acquisition costs across all channels. Channel-specific CAC isolates the cost for each traffic source — TikTok organic, TikTok paid, Instagram ads, YouTube discovery, cross-promotion from other series, and so on. Channel-specific CAC is far more actionable because it tells you where to increase or decrease investment. A studio might have a comfortable blended CAC of $3.00 that masks the fact that their TikTok paid ads have a CAC of $8.00 while their organic TikTok discovery has an effective CAC of $0.50.

Organic vs Paid Acquisition: Separating the Streams

One of the trickiest aspects of CAC calculation in micro-drama is separating organic from paid acquisition. Organic viewers — those who discover your series through platform algorithms, search, or word of mouth — have a near-zero marginal acquisition cost (though they do benefit from the sunk cost of content production). Paid viewers have a direct, measurable cost per click or cost per view.

The problem is that organic and paid acquisition interact. A paid campaign that drives 10,000 viewers to your series may also trigger the platform algorithm to recommend your content more broadly, generating an additional 5,000 organic viewers. Attributing those algorithm-boosted organic viewers is impossible with precision, but ignoring the interaction leads to systematic underestimation of paid campaign effectiveness.

• Track paid and organic viewer counts separately using UTM parameters or platform attribution tools where available.
• Calculate CAC separately for each stream. Your organic CAC should only include content production costs allocated to free episodes. Your paid CAC should include ad spend plus production costs.
• Monitor the organic lift from paid campaigns by comparing organic viewer growth during campaign periods versus baseline periods. This gives you a rough multiplier to apply to paid campaign ROI calculations.
• Aim to increase your organic-to-paid ratio over time. A studio that acquires 80% of its paying customers organically has fundamentally different economics than one that relies on paid acquisition for 80% of customers.

CAC:LTV Ratios — The Number That Determines Viability

CAC in isolation is meaningless. A CAC of $5.00 is excellent if your customer lifetime value is $25.00 and terrible if your LTV is $4.00. The CAC:LTV ratio is what determines whether your acquisition economics are sustainable. In the micro-drama space, where most customers interact through paywall unlocks, LTV calculation has its own nuances.

Calculating LTV for Paywall Customers

For a paywall-based micro-drama model, LTV has two components: within-series LTV (total spend on the series where the viewer first converted) and cross-series LTV (additional spend on other series in your catalog). Within-series LTV is relatively easy to calculate: average number of paid episodes unlocked multiplied by the price per episode unlock. Cross-series LTV requires tracking viewer identity across series and measuring repeat purchase rates.

For most studios, within-series LTV ranges from $2.00 to $8.00, depending on episode pricing and series length. Cross-series LTV can add 30-60% on top if you have a catalog of related content and your audience develops loyalty to your studio brand. Total LTV of $4.00 to $12.00 per acquired customer is a typical range for mid-size micro-drama studios.

Healthy CAC:LTV Benchmarks

Reducing CAC Through Better Content

Most studios try to reduce CAC by optimizing ad campaigns — better targeting, improved creatives, lower bids. These are valid tactics, but they have diminishing returns and do not address the largest component of CAC in a content business: the cost of acquisition through content quality. The most effective way to reduce CAC for a micro-drama studio is to make your free content so compelling that more viewers convert organically and at higher rates.

1. Improve episode 1 hooks: If your first episode captures more viewers, your effective CAC drops because you generate more potential customers from the same traffic. A 10% improvement in episode 1 retention has a direct, multiplicative effect on your conversion funnel.
2. Optimize the pre-paywall narrative arc: The free episodes are your most expensive marketing asset. Every viewer who watches all free episodes but does not convert represents wasted acquisition spend. Review your pre-paywall content for pacing issues, weak cliffhangers, or misaligned audience expectations.
3. Strengthen the paywall conversion moment: The last free episode should deliver the strongest possible emotional hook. Studios that invest disproportionately in the pre-paywall episode consistently see higher conversion rates, which directly reduces CAC.
4. Build cross-series discovery: If existing customers discover and pay for your new series, those new-series customers have near-zero incremental CAC. Invest in cross-promotion, end-of-series recommendations, and catalog navigation.
5. Use data to iterate faster: Reelytics episode-level analytics let you identify exactly where in your free content viewers are dropping off. Fixing those specific drop-off points is more cost-effective than increasing ad spend.

Common CAC Calculation Mistakes

CAC is one of the most frequently miscalculated metrics in the micro-drama space. Here are the mistakes we see most often and how to avoid them.

• Excluding free content production costs: Your free episodes are your primary acquisition tool. Excluding their cost from CAC is like a SaaS company excluding the cost of its free trial from its acquisition cost calculation. Include at least a proportional share of free episode production costs in your full-cost CAC.
• Counting all viewers as potential customers: Not every viewer is a potential paywall unlocker. Some viewers watch one episode and leave, with zero purchase intent. Calculate CAC based on 'qualified' viewers — those who watched enough free episodes to reach the paywall — for a more accurate picture.
• Ignoring time periods: CAC should be calculated for consistent time periods. Comparing monthly CAC across different seasons without accounting for seasonal traffic variations leads to misleading trend analysis.
• Mixing new and returning customers: If a viewer who already paid for one series pays for another, they should not be counted as a new customer in your CAC calculation. Separate first-time converters from repeat purchasers.
• Forgetting platform fees: If you spend $5.00 to acquire a customer who generates $10.00 in gross revenue, but the platform takes 30%, your net revenue is $7.00 and your true CAC:LTV ratio is 1:1.4, not 1:2.

Putting It All Together: A Practical Example

Let us walk through a concrete example. Suppose you launch a 30-episode romance series on ReelShort. Episodes 1-7 are free, episodes 8-30 are paid at 20 coins each (approximately $0.40 per episode). Here is how you would calculate CAC.

Your production costs total $9,000 for the full series. The 7 free episodes cost approximately $2,100 (at $300 per episode). You spend $1,500 on paid advertising over the first month. Allocated studio overhead is $500 for this series. Total acquisition-related costs: $2,100 (free content) + $1,500 (advertising) + $500 (overhead) = $4,100.

Over the first three months, 50,000 viewers watch at least one free episode. Of those, 22,000 reach the paywall (episode 7). Of those, 1,760 make their first paid unlock (8% conversion rate). Your full-cost CAC is $4,100 divided by 1,760, which equals $2.33 per acquired customer. Your marketing-only CAC is $1,500 divided by 1,760, which equals $0.85 per customer.

If the average paying viewer unlocks 15 of the 23 paid episodes, your within-series LTV is 15 multiplied by $0.40, which equals $6.00 gross, or $4.20 net after a 30% platform fee. Your full-cost CAC:LTV ratio is $2.33 to $4.20, or approximately 1:1.8. That is marginal — you would want to either reduce CAC or improve LTV to reach the 1:3 target. Your marketing-only CAC:LTV ratio is $0.85 to $4.20, or approximately 1:5, which looks healthy but understates the true cost of acquisition.

Key Takeaways

• Define your 'customer' clearly — for paywall-based micro-drama, a customer is a viewer who makes their first paid unlock.
• Calculate full-cost CAC that includes free content production costs, not just marketing spend. Free episodes are your most expensive acquisition tool.
• Separate organic and paid acquisition costs. Channel-specific CAC is far more actionable than blended averages.
• The CAC:LTV ratio is more important than CAC alone. Target a 1:3 ratio as a healthy benchmark, and track payback period alongside the ratio.
• The most effective way to reduce CAC in a content business is to improve content quality — stronger hooks, better pre-paywall arcs, and more compelling conversion moments.
• Avoid common mistakes: do not exclude free content costs, do not mix new and returning customers, and always account for platform fees when calculating LTV.