About Netflix’s new policy on inactive-account cancellation

You ‘subscribe’ to a milk delivery service. They deliver 2 packets of milk every day. One morning, the delivery guy saw that the previous day’s 2 packs are still there in the bag. He rings the bell. No one answers. He leaves without delivering that day’s milk. Ditto the 3rd day.

Would you be charged for Day 2 and Day 3? Not really, since the milk was not delivered owing to the observant delivery guy.

You ‘subscribe’ to a newspaper vendor. He is to deliver one newspaper every morning. One day, the delivery guy notices the previous day’s newspaper still outside the door. He doesn’t deliver that day’s paper. And you may not be charged from that day onwards, till you start picking up your paper.

Or, they could continue piling newspapers every day and charge you for all those too, at the month-end. You could argue with him saying that his delivery guy should have noticed the papers not being picked up and stopped the delivery temporarily.

Now, let’s take this thought to online subscriptions.

LinkedIn has a ‘Try Premium Free for 1 Month’ offer all the time. To try the premium version, they ask you to enter your credit card details. You need to remember to cancel the premium subscription after the first month, or LinkedIn would continue charging your card month after month, regardless of you making use of premium features (which they could easily observe). This is using ‘opt-out’ communication and process – till you choose to opt-out of the premium membership, you would be charged, after the first free month.

Netflix recently announced that they’d check if a subscriber has not watched anything on their platform for 12 months. If they haven’t, for one full year, Netflix would send them an email asking them if they want to continue the subscription (meaning, “Do you want us to continue charging your card month after month?”). If you do not respond, Netflix takes that as a sign of your not being interested in the service and stop charging you! So, Netflix uses opt-in communication and process (that is, “Please tell us that you are in and we will not stop the service”) and not responding is taken as a sign of ending the contract between you and the platform.

Now, this is the right thing to do, business-wise and PR-wise too. It showcases Netflix as an ethical company, doing the right thing by its paying customers.

However, when I got down to thinking about it, I was surprised that this is not more prevalent. Almost every online subscription service has this line in their terms: “We do not offer refunds or credits for unused subscription periods”. This, even if they can, as digital platforms, easily figure if a person has been using the service or not.

There are quite a few nuances here, of course.

A daily-use service like an online newspaper would, ideally, be used every day. If a subscriber doesn’t use it for one day, the platform doesn’t need to assume anything, but if the lack of usage extends to 40 days? The system could have various checks for track usage and could red-flag specific periods of non-usage and evoke various actions. A prolonged period of non-usage could fire a communication to the subscriber seeking an affirmative action from them to continue charging their card, as Netflix announced recently.

So, is not doing that (what Netflix has announced) unethical?

That’s one argument, but it could also be argued as not-illegal. After all, the customer and the platform entered into a contract when the customer first signed up by sharing card details. And it is incumbent on the customer to voluntarily end the contract if they are not interested anymore. How is the service/platform supposed to know the customer’s intent as regards the continuation of services?

Aha, now we come to the nuance!

The platform, however, makes a lot of assumptions on behalf of the customer for many other things. Netflix, for instance, checks what we are watching and makes contextual recommendations. They even send us emails to complete a show that we dropped midway regardless of why we stopped watching the show. Their only signal is that X stopped watching Show Y at the 45th minute, so let us remind them to finish it! Most online platforms make assumptions based on usage – to show us ads (“because you saw that post on Facebook, we think this product may interest you”), cross-sell products and so on. We agreed to let them do all that when we signed up, incidentally.

But, even if they have the power to check usage, find non-usage for a prolonged period of time, most online platforms do not bother to give us a choice to rethink the contract. Because it would mean a loss of revenue for the platform.

Most subscription-based businesses are based on the premise that they can charge customers’ cards for a long’ish period of time and that customers do not consciously remember to cancel services, unlike subscription with cash payments where a human has to collect cash from your home and you have a choice every month to cancel the service!

Besides, such decisions also affect business planning. Imagine a gym that refunds your money for the days you didn’t show up, for whatever reason! It cannot, or may not, because it needs to plan to buy equipment based on the potential of the number of people signing up with a monthly or yearly fee. If it starts charging people per session/day, they may need to work on the user acquisition differently.

So, in essence, what Netflix announced is a very good thing. The right thing to do. But, this move is the ‘right’ thing only because no other platform/service is doing it, even though this seems totally obvious when you think about it. Netflix is the first one to openly talk about it and do it.

It could have also been for a shorter period instead of 12 months; for instance, they could seek our confirmation to continue charging if there is a 3 or 6 months period of non-usage. But, it is a start. A very good start at that.


Cover photo courtesy: We Are Netflix handle on Twitter.

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