In a letter to investors Thursday, released along with second-quarter earnings, the company acknowledged the move has caused a “slight hit” to its revenue. The math, though, can still work out over the long term due to one basic concept: satisfaction.
“A very small percentage of our members have not watched anything for the last two years and although we make it easy for people to cancel their subscriptions with just a few clicks, they have not taken advantage of that ability,” the letter explained. “So we decided to stop billing them and will do so for members meeting the same criteria going forward.”
As with all other ex-subscribers, jumping back onboard can be done relatively easily, the company noted.
“While this change resulted in a slight hit to revenue, we believe that pro-consumer policies like this are the right thing to do and that the long term benefits will outweigh the short term costs. In a world where consumers have many subscriptions, auto-pause on billing after an extended period of non-use should be how leading services operate.”
Netflix has grown in large part due to customers’ rejection of the status quo, from Blockbuster DVD rentals through to the modern era of streaming. In the pay-TV context, that has meant a cumbersome process set up by providers that confronts customers looking to cancel service. To be fair, the gauntlet has gotten less severe than in 2014, when a recording of a Comcast customer service call went viral, showing a representative’s dogged resistance to a customer looking to end his service. Still, it’s a jungle out there and Netflix has always taken pride in “delighting” customers, now even on their way out the door.
“I think of it as, when someone churns, it’s always temporary,” founder and co-CEO Reed Hastings said during an earnings interview posted to YouTube on Thursday. “They’re gonna come back. It’s just a matter of timing as our service gets better, as maybe their income increases, as the internet gets faster. We love people to get a taste of Netflix. We hope they stay for 50 years.”
Netflix added 10 million subscribers in the quarter, reaching almost 193 million worldwide.