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.
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.
I'm pretty sure that's just the absurd HN take on the "duty of loyalty", not an actual fact.
Also, if you absolutely need a pessimistic reason, I imagine it would avoid headaches with customers complaining (regardless of who's right).
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.").
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.
Honestly I could see this being an honesty test class action at some point.
see the references in this post:
(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.
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.
Props to Netflix for unsubscribing users who don't use the service.
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.
[Edited]
With economic gap between poor and richer, it is quite easy for one segment not to worry about subscriptions and for another to not have money.
Anecdotally, programmers and other well paid people I know areally waaay more likely to buy subscriptions then people I know who don't have money.
The people who buy new phone every year are also incredibly rate among those I know - not even rich people do it.
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.
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.
That seems like the right way to go.
Not saying they can't occasionally make altruistic decisions like this, just that more people's interests are being weighed.
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.
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.
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.
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.
Then I realized it and thought to myself — nevermind, I have the credits, I'll eventually use them up.
Nope. There is a credit cap and after you reach it they'll happily charge you without providing any service.
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.
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.
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.
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.
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.
By putting a policy in place like this they're internally much more incentivised to ensure they are putting out consistently good content.
“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.
(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.
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 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.
The move is also brilliant in two ways: 1. More Netflixsters will realize now and start watching again. 2. Netflix is getting a lot of free publicity.
The Combined value of these two is worth far more to Netflix than whatever pennies in revenue they’ll lose.
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.
I bet you're right.
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.
It could be canny business sense.
It could be both.
in a similar vein, Ikea umbrellas are discounted when it rains.
Arguably, doing right by the customer is selfish because it looks out for you business in the long term.