I think models get released for all kinds of reasons. Sometimes the contracts are only for a year, just as a way for a studio to say, "We discovered this person" before sending them on their way. Sometimes it's a way to keep talent all to themselves so that they have their own stable of performers. That's just good branding. Sometimes the models realize they don't want to work for only one company and can do better on their own. Sometimes it's just time for companies and models to part ways. I don't think it boils down to one reason, of course.
There's nothing wrong with releasing models from exclusive contracts when they expire. It's when they release the "Lifetime exclusives" that things really look bad. Falcon is the only one that does that, though. None of the other studios do the "lifetime exclusive" thing. That's pretty dumb, if you ask me. There's no need for it. Why would any porn star in his right mind agree to work for only one company for the rest of his porn career? Really bad decision.
