Ann: SKY TO SELL SPACETALK IN THE UK, page-42

Without a contract, the average app life might be 1.5 years? Some kids might go 3 years and others might want to upgrade to a mobile phone after one year or get a hand me down from a parent. Other kids might lose or break their watch within a year and discontinue with the app. If a contract is locked in for 3 years, MWR would get the same revenue from app fees charged at a 50% discount as they would get charging the normal rate if the average life of the app was only 1.5 years without a contract.
There is also the benefit of higher profits on the sale of the watch if volumes are higher because these monthly purchase plans are more affordable. It’s not just about the app fees.