I always wonder when a company does this if it is completely altruistic or if something else is going on behind the scenes.
Maybe notifying customers gets them to reactivate, maybe if they resubscribe later they can charge more, maybe it’s better for financial reporting and projecting subscriber counts.
On the other hand it could just be a rare moment of a company doing right by the customer.
We do this at my company, and it is purely for altruistic reasons. If people aren't happily making good use of my service, I don't want their money. That's the entire calculus.
Netflix is vastly bigger, granted, so who knows what machinations are afoot for them. But it is certainly believable to me that a company could choose to do something explicitly anti-greedy.
Is your company private? If you're not heavily funded by investors you probably have more freedom to behave according to your morals than if it were otherwise. Public companies are always looking to meet shareholder expectations on the other hand.
Not saying they can't occasionally make altruistic decisions like this, just that more people's interests are being weighed.
That's not a requirement or anything. There's no law that says you have to maximize short-term revenue at the expense of customer happiness.
I think it's become common because the average public company CEO tenure has fallen by 50% over the same period that their compensation has gone up 10x. Now it's in their strong interest to juice the quarterly numbers and not worry about anything particularly long term, because that's going to be the problem of some other sucker. And similar incentives apply all down the executive hierarchy. The faster people move around, the easier it is to make bonus-related metrics go up even if it harms things a few years down the line.
Always might seem a bit strong, it is always according to shareholder capitalism. But many companies find that shared value creation [0] works better for them in the long term
I'm amazed how many SaaS users are zOmBiE uSeRs, this is from working on client SaaS apps. One had about 20% of the users paying and not even logging in for months or even a year.
Props to Netflix for unsubscribing users who don't use the service.
I think the wider point is that it's amazing how lax and careless so many people are with their personal finances. They think nothing of wasting hundreds (thousands?) of $$$ a year on unnecessary purchases, including things that they don't even use (like old software subscriptions.) Then they complain that they're broke.
When I hear sob stories about how #{big_number}% of people can't afford an unexpected $500 bill, I'd love to know how many of those people would easily have $500 in savings if they cancelled all their unused subscriptions and stopped buying a new smartphone every year.
Were those B2B SaaS? Subscriptions are a huge controlling challenge for businesses with more than a few employees. If they are easily available people will think that it's fine to keep them running, I they have to jump through hoops to get them they will try to avoid repeating the process.
Sure, businesses like to control spending, but this scenario seems backwards. If the hoops have been jumped through to get the subscription approved once, and one might need to use it again in future, why would one ever cancel it? Whereas, if subscription approvals were easy, one would be more likely to worry about spending the firm's money unnecessarily.
This is sort of like the fact that strict border controls encourage undocumented immigrants to stay once they've passed the border once.
> Many people give money to ensure that a service is available when they need it.
Netflix, as a service, takes ~10 minutes to set up. This might be the case for a software suite like CC, where you might need to download a massive amount of data, or other software where you pay annually or enter into some kind of contract, but Netflix is strictly monthly and easy to sign up for by design.
That is mostly, but not entirely true. If one's Netflix account is deactivated for more than 10 months, they lose their history, preferences and personalized results.
When I did have Netflix, the history/preference/personalized results were a detriment to my experience, as Netflix would intentionally make it harder to find what you wanted to watch and jumble things around constantly to make their content library seem bigger than it was.
Netflix also has use-cases where it's much more difficult to sign up. For example, someone who watches Netflix on a game console (Xbox, Switch, etc) might only occasionally watch it, and also have a much longer sign-up process (not only the flow, but also dealing with console keyboard, not having a password manager, etc). Ditto for people who use other hardware like Chromecasts and such and may not have a dedicated "computer" where it's quick to just sign up from when they find they've been downgraded.
I also run a business designed to be used in the moment when an author is struck with inspiration. It takes less than a minute to upgrade or downgrade (and some users choose to only upgrade for hours at a time each month with no penalty, aka a month of subscription time sometimes lasts a full year), but when I experimented with automatic downgrades to those who hadn't signed in all month I got complaints that they "weren't able to just log in and use the service they paid for".
Could just be a notice thing (improving messaging to more reliably let users know they've been downgraded), an option (letting users opt-in/out of automatic downgrading), or have other solutions (maybe refunding instead of downgrading?), but it does seem that at least some users like to feel like they're paying for something to be "at their fingertips" when they need it.
Really the only valid reason to do this is that the goodwill will help them make more money in the future. Strictly losing money with no upside in the future is in violation of the "duty of loyalty" that all corporate officers have toward shareholders.
This. If someone is paying for your service and not using it, perhaps they have an inaccurate idea of what your service (and their payments) actually entail. If that's the case, then you have a customer who's going to come to you eventually to figure out what the hell they've been paying you for all this time, and/or in need of a particularly expensive crash training course (because it's coming out of nowhere). Better to drop them and then onboard them again as new customers (which, functionally, they would be) if they decide to come back.
There ARE industries that survive on the, "One loud sign-up multiple silent payment extractions," model; everyone hates them and they have to ju~st skirt regulations to get by ("I'm sorry, we didn't receive your cancellation, please fax it with proof of necessity, last month's payment is still due.").
If I sign up for a gym membership and then don’t show up for months on end, I don’t feel like I’ve been swindled — I knew that’s how it works when I signed up. I’m not confused about what a gym membership is for or why I’m paying for it. I might still never cancel because I don’t want to admit how lazy I am, so each instance of me considering the wasted money ends with me thinking, “I really should get to the gym more. Maybe next week.”
This same dynamic plays out with any service that sells you long-term self-improvement but is burdensome to use. Exercise tracking apps, diet tracking apps, health-conscious meal kits, subscription lessons for music or foreign languages, etc. There are shadier examples for sure, but it’s not always cut-and-dry evil.
On the flip side I think it’s probably cheaper to cut ties with an inactive user than deal with small claims lawsuits, chargebacks and other hassles from people who forget they are subscribed.
Honestly I could see this being an honesty test class action at some point.
On the other hand, you can also do it nicely even in self-improvement space. Beeminder comes to mind; they let you set your productivity goals and costs of not meeting them, and they only ever charge you if you fail, and accept that you've failed - charge is automatic, but if you tell them there were extenuating circumstances, they'll give you that money back.
The standard, from In Re Walt Disney, is that business decisions aren’t reviewable unless “the exchange was so one-sided that no business person of ordinary, sound judgment could conclude that the corporation has received adequate consideration".
In, Shlensky v. Wrigley, the Chicago Cubs’ were sued for refusing to install lighting for nighttime games: their president believed baseball was best as “a daytime sport." This is absurdly nebulous (and kind of bizarre), but the Cubs nevertheless won.
That decision was based on Davis v. Louisville Gas and Electric Co, which says “the directors are chosen to pass upon such questions and their judgment unless shown to be tainted with fraud is accepted as final. The judgment the directors of the corporation enjoys the benefit of a presumption that it was formed in good faith, and was designed to promote the best interests of the corporation they serve.”
It is probably true that this policy earns Netflix some intangible goodwill. It might plausibly make them more money. However, even if it didn't, it would still be within its rights to implement such a policy.
Long term, both being, and being seen as the kind of company that doesn't needlessly abuse their customers, is in the best financial interests of a company.
US courts have ruled that company management have "wide latitude" in how they manage the company.
(The reason is that the courts don't want to get involved in the minutae of running private companies. They'd rather you just update your company bylaws.)
However, shareholders, or most famously private equity (PE) companies, may pressure mgmt. to adopt certain policies and goals, and use their voting shares to encourage or even enforce that.
Amazon did this for me back in 2005 when they introduced Prime. I used the free trial for an order (to get it in two days), but then didn't order anything else and forgot to cancel.
They sent me an email that they weren't going to charge me because I hadn't used it, but I was free to sign up in the future if I decided I wanted it.
It was so refreshing, it made me a lifelong customer.
Amazon definitely doesn't do this now. Amazon sometimes offers me a free Prime trial and they make it fairly clear that if you don't cancel before the conclusion of the trial, they'll automatically subscribe you to Prime and charge you. I'll sometimes take the trial but I always mark my calendar to cancel before the renewal.
Personally, I consider this to be a dark pattern and it makes me reluctant to sign up for any trial or even subscription services in general. I'm glad that Amazon is upfront about it but would prefer that they didn't do this at all.
I'm pretty sure they let you disable auto-renew immediately after signing up.
What's sketchy is that Amazon's Audible deletes all your unused book credits if you unsubscribe. If you don't know what to buy with those credits and you want to unsubscribe, you face the decision to keep buying credits, or lose the credits you already paid for.
Fortunately, there are a couple of workarounds. There's the option to pause your subscription for 3 months, or you can buy a book, cancel the subscription, then return the book to recapture the credit once you find a book you actually want to read.
last i checked, they let me cancel prime effective immediately, not allowing me to continue my year that i purchased. There isn't an option to stop auto renewal.
I was in a similar situation except I didn't use it even for a single order. They kept charging me after the free trial period. After a while I realized this, and cancelled. I reached out to them requesting a refund, at least partial since I haven't used it even once. But they did not refund any.
Their Prime subscription was a pain to cancel in Belgium. I found it on the German site, even though I always use English and there for the English site.
They also use dark patterns for it, unsubscribing is very confusing.
Agreed on the dark pattern and difficulty of cancelling. Today I cancelled my Prime subscription and had to first the cancel button, then I had to click "Cancel my subscription" button three times, which I had to find it along with ambiguous, same color "Keep my subscription and pay" buttons.
On a related note -- Audible free trial seems.. offered cyclically?
I seem to sign up every year or so, spend my credits, and cancel. They keep offering it though, and now I'm considering buying (as I enjoy the medium, turns out), so I suppose it worked.
Prime does that for me too, recently it has changed from free to one-week-for-£1 now though. The great thing is if you forget to cancel at the end of the trial and they charge you, they will refund you if you haven't placed any orders in that billing period.
Shame that corporate responsibility is out the window now then.
You can't do anything on the Amazon store without being goaded into signing up for Prime and having to triple check what you are clicking on during checkout to make sure you don't sign up by mistake.
My wife already has a Netflix subscription despite Amazon's attempts to hook her on Prime (I'll take credit for stopping that). After this this news it seems it was definitely the correct choice.
Early days of EC2 were chock full of stories like this - Of kids / engineers running up their CC bill because they screwed up in some way they didn't anticipate and Amazon CS would bail them out.
I don't think this was a cynical marketing ploy designed from the top down either, it was a very natural thing for the company to be customer obsessed and trying to do right by them.
At the request of an EC2 support staff, I left some machines running to help them debug an issue where machines became unreachable within minutes of being created. I was erroneously charged for this. Throughout the years Amazon has variously said that they could not refund me because they had no records from this time period or offered me AWS credits. I expect to the situation to never be resolved.
> I don't think this was a cynical marketing ploy designed from the top down either, it was a very natural thing for the company to be customer obsessed and trying to do right by them.
It's trying to do right by the legal and finance departments, not by the customers. Going after someone for anything less than a mid to high five figure AWS bill is never worth it because the legal costs are astronomical, the defendant probably can't pay in the end, and the cost of defending will drain the customer of any more resources that could have been spent on the cloud.
It's the cost of doing business. The choice is between trying to bleed a rock or a safe bet that LTV will be higher than the marginal cost.
Just one theory:
If I go to a restaurant I expect they'll give me to-go box if I ask for it; If I accidentally buy they wrong size shirt from a high-street retailer, I expect to be able to return it. If a business doesn't meet these generally-agreed on "consumer expectations" they may be complained about viciously.
If Netflix can successfully normalize "only charge me if I use the service" into a basic consumer expectation for subscription businesses it might cost Netflix a little, but it might cost their competitors a lot more.
Interesting argument, I am curios though why this would hurt other streaming services more than netflix? Is this based on an assumption like "netflix has more content so less people will not watch anything for a few months than on [other platform]" or something like that?
Netflix competes with cable TV which has famously infuriating billing practices. they also compete with any “digital entertainment” you might choose to spend money on instead of Netflix: Xbox live, Spotify etc
At some point the cost-benefit calculus has to flip. Users on the extreme right-tail of the months-paid-but-unused distribution are a negligible amount of revenue but very likely to complain when they noticed they’ve paid for years of unused service. If the company refunds these users as a matter of policy, it creates uncertainty in the accounting and negates the value of them being allowed to keep paying. If no such policy exists, it creates a reputation risk: “YoungPersonApp bilks $2000 from grandma with Alzheimer’s”
“Doing the right thing” and “managing reputation risk” are often indistinguishable. The details of Machiavellian self-interest can be difficult to codify, so a semi-sincere effort to do the right thing can be safer.
This is the essence of Dale Carnegie's argument why we should just do the right thing. It's always a hedge against losing reputation and that is always more valuable than the marginal benefits gained from the wrong thing.
It's probably worse for them if customers cancel, because customers are unlikely to resubscribe to netflix having cancelled versus trying a competitor streaming service. Better psychologically to have an inactive account than to lose an account.
(Also netflix would have to report all those unsubscribes to shareholders, but this way no one cancels and they're framing it positively as consumer-friendly).
So if netflix incentives people to people keep their accounts, they remove the friction from what would otherwise be a high-friction resubscribe.
As long as netflix believes they can get people to come back for an occasional exclusive content hit-show, then they can reactivate the payments for a while.
They likely have to use the number of customers who are inactive and probable to request a refund, then use that estimate to calculate the size of a liability account which must be held on the balance sheet.
As it grows, that hits the pnl anyway so from an earnings perspective it doesn’t matter too much. Couple that with the cost of customer service calls etc. + the inactive customer count + the goodwill and the decision seems rational
My guess is that a big part of the reason is that Netflix realizes people are switching between streaming services all the time - this quarter they're paying for Netflix, next quarter they're paying for HBO Go, etc. So they don't want to be remembered as the service that's hard to cancel, otherwise people may be reluctant to come back to them.
It’s softer than a full cancellation, I bet. Cancellations were probably going the wrong way and this lets people “go inactive” without cancelling—coming back is just opening Netflix and starting a video, rather than re-subscribing. They want you not to have a reason to unsubscribe.
Does anyone else find it unfortunate that this entire topic is devoted to the fact that we find that a company being ethical about their business practice is so out of the ordinary, and we're spending a lot of energy guessing what nefarious motivation might lie behind it?
Yeah, HN's classic cynicism is in full effect here. The truth is that companies are made of people and very often the people just want to make a good thing that's nice and works well.
My favourite is Gusto. Why is Gusto so good? I only use it twice a year or so, the guy buying it isn't the guy using it, and the principal value in their business is integrations not UX. Well, Gusto is good because they want to be good. I'm happy with that explanation.
It sounds like the most relevant thing to discuss too, and guessing that is always a good exercise too keep yourself on your toes. Large institutions mask often mask their intentions in ways very difficult to figure out, so maybe a thousand people can put it together. It sounds like misplaced effort only as long as nothing comes out.
Making money is the reason why a for-profit business exists. Keep charging customers because they neglect to cancel is unpleasant, but can hardly be qualify as unethical.
I'm guessing that "if you stop watching, we stop billing" helps a lot in getting users to sign up for a trial with their credit card. Not sure if it's been tested, but it does seem like a reassurance that might go a long way.
Pure altruism can be a great business and life strategy. How does someone feel when they realize they’ve spend thousands of dollars on a Netflix account they don’t use? It’s not in Netflix’s interest to have people out there hating Netflix.
Ever see a person who was just really great to everyone and the world seems to have rewarded them for it? That doesn’t always happen but sometimes it does.
For example, often you hear angry customer who is like "can you refund me, I didn't use it this month, you can check your records"
Then request is passed on to some other employee who confirms that they really didn't use their account.
After that you issue refund.
In most cases, you end up issuing refund either way while in some cases customer forgets but he doesn't forget he got charged. So it counts towards negative experience even if a customer didn't complain about it.
If your company is here for long term then every negative experience matters.
This is an excellent question! I wouldn't be surprised if notifying someone that their subscription is cancelled due to inactivity would cause them to suddenly value their subscription.
I read once that for Netflix, these users were not seen as "easy money" but as a genuine problem, because that's revenue they can't count on to last.
Their action both removes a problem on their side and is good for customers. Win-win. So probably not entirely altruistic (nothing is), but at least partly.
This is a great opportunity to thank Unbounce (https://unbounce.com/) - Years ago I was helping set up patient recruitment for a clinical research lab and forgot to cancel the sub after it was over. I got on chat about a week after the cycle ended and had that one billing cycle refunded. It was only $40 or something but the impression has lasted years probably in relation to all the horror stories I’m reading here.
I believe it's a good step to take as a company. They have the resources to do so. They will be ahead of other companies in that regard. Also, if it becomes a law that companies should _not_ charge inactive customers, Netflix will be ready.
Maybe notifying customers gets them to reactivate, maybe if they resubscribe later they can charge more, maybe it’s better for financial reporting and projecting subscriber counts.
On the other hand it could just be a rare moment of a company doing right by the customer.