The Real Reason You’re Paying for So Many Subscriptions

It’s one of the hidden forces behind the subscription economy: Americans are spending billions on stuff they forget to cancel

By Ben Cohen of The WSJ. Excerpts:

"The consulting firm West Monroe surveyed thousands of Americans in 2021, asking them to guess how much they spent each month on subscriptions. Their average response was $62. When they were given more time to guess again, they increased their estimate to $96. They were still way off. The correct answer was $273.

But now Americans are paying more attention to their growing pile of subscriptions and canceling the ones they no longer need, don’t want or can’t afford."

"If you pay for Netflix and Disney+ every month, but cancel other services and subscribe again when they release new seasons of your favorite shows, you’re not alone. Americans are getting more strategic about how they manage their streaming portfolios. In fact, nearly 25% of U.S. subscribers to streamers like Apple TV+, Disney+, Hulu, Max, Netflix and Peacock have canceled at least three services in the past two years"

"Neale Mahoney is a soccer fan who bought a Peacock subscription at the beginning of an English Premier League season intending to cancel at the end of the season in May. But when the next season began in August, the Stanford University economist remembered that he’d forgotten to cancel. Which is how he learned that the only thing more painful than paying to watch Arsenal is paying to not watch Arsenal.

His co-authors at Stanford and Texas A&M University had their own cases of subscription regret. Liran Einav’s teenage daughter thought she had paid $5 for a test-prep service before getting her driver’s permit. She had actually paid for a $5 monthly subscription. Ben Klopack signed up for a free trial of Peacock and realized he was still being charged six months later without ever having watched Peacock."

"Sometimes you intentionally subscribe and forget to cancel. Sometimes you forget to cancel because you unintentionally subscribed. Either way, you’re paying for something you don’t value"

"what happens when credit cards expire, are lost or stolen and have to be replaced."

"getting a new card is one of the rare times you must actively renew your automatically renewing subscriptions, since you have to update the payment information on file with those companies. The economists analyzed millions of transactions from a large payment network and found a clear pattern in the months when credit cards are replaced: There is “a sharp, abnormal drop” in subscription retention."

"In the average month, the services lost 2% of those customers. But in the months of card replacement, they lost 8%."

"there are plenty of industries that have long relied on customers who never use the product. You buy a gym membership in January, stop going in February but keep paying because you want to believe that one day you’ll wake up and get back on the elliptical."

"They studied big subscription services across entertainment, security, retail goods and, yes, newspapers. They say that every single one benefited from subscriber inattention."

"The Federal Trade Commission recently proposed a new rule that would require most companies to provide annual subscription reminders."