Why netflix or spotify don't offer an annual subscription?
It's a discussion post.
I'm thinking of adding annual pricing on my product, Inksprout. To me, this practice makes sense. Users get discounts (usually 20%) and your business gets cash upfront building stability.
Most SASS businesses offer this option except, you know, the 2 giants: Netflix and Spotify.
I couldn't find their particular reasoning while browsing on internet. Do you have any thought into why offering an annual subscription could be a bad idea?
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Annual subscriptions help solve churn problems. But these two companies don't have seasonality in their churn.
Other providers who do have seasonal churn issues (like HBO) do offer annual subscriptions.
For Inksprout, having an annual plan will likely be a benefit. Users have fewer points in time that they re-evaluate their purchasing decision.
That's a really interesting point. Good thing you brought up HBO. I guess the user sub could drop after their fav TV show (like I'd only care about Rick and Morty). Netflix is the same thing always there.
I guess they've figured an annual discount, which users are accustomed to, would not be worth offering.
I'd also add maybe they wanted to be flexible too with the pricing. Maybe. If all customers get pricing raise for instance, it's easier to calculate the effect.
My Guess:
Simple is better than complex.
It also acts as an KPI about their users. By not offering annual subscriptions they kind of remind their users that they are still paying for it... Then by reminding them they drive more traffic to their site. The people that no longer want to pay then cancel their accounts. This indicates that the user was uninterested in keeping their relationship with Netflix and perhaps their watching habits can provide more info on why. Netflix then takes that information into account when adding new content.
If they offered annual subscriptions they would get less insight into what content users care about on their platform. Thus, they offer shorter 1-month intervals where a user's money is basically their vote of whether they like the content or not.
Thanks for giving it a shot Ryan. Seems to me. KPI can just be easily measured with watch time as far as content selection goes.
But you are right. Canceling is the ultimate judgement call. If it is the case, I gotta give Netflix a big prop for being stoic!
Course knowing that they are a publically traded company probably means it's not as selfless of reasons as I'd like to expect. lol
Also, as for Inksprout... an annual subscription can be very useful. @lunchbag offered a discounted for life one last year right when I was trying to better hold of my finances. I jumped at the opportunity and will more than likely continue my subscription because of how valuable the tool has been for me. I wasn't really into monthly subscriptions at that time.
"The Tipping Point"
Right. Discount can push someone get onboard. I do like annual too. Pay for it and get moving. And thanks for showing the lunchbag. Cute little lunchy!