The Dirty Little Secret of Subscriptions: Magic Water

I recently said that running a game-as-a-service (GaaS) is like keeping water in a leaky bucket. You consistently have to add more water to make up for the leaks and you can never plug all the leaks.

In the subscription version of GaaS, there is a type of magic water that never leaks out of the bucket. It keeps being water, doesn’t say much, never makes a fuss and never leaves. It is about 10–15% of the water at any given time. It’s the dirty little secret of subscriptions: accounts that never cancel and rarely if ever use the service.

This phenomenon appears in every subscription service I’ve ever worked on. Some accounts stay subscribed forever and don’t use the service. Users probably just forget and aren’t checking their credit card statements. Or maybe they are and think they’ll use it, like a gym membership, but don’t. Wells Fargo even has a TV Ad offering to help you manage and cancel your unused subscriptions.

In one of my subscription businesses, we had users who subscribed for over eight years and NEVER used the service. We were doing a Customer Lifetime Value (CLV) analysis and we didn’t know how to handle them since they had never cancelled. Is their lifetime forever? We took them out of the data set since they were such an anomaly. But they weren’t immaterial, there were a lot of them. They seem to be a fixture of consumer subscription products and something you can rely on.

HOWEVER, you can scare them off by reminding them of their subscriptions and presenting them with a decision (product management rule #578: don’t ask your customers to make decisions). For example, there is a subscription management theory that says engagement equals retention. For certain segments, it makes sense that the more they use the subscription benefits, the longer they will stay a subscriber. Following this theory, we released a feature that actively showed users their subscriptions in a prominent way, the same as you would see your favorites. We wanted them to use their subscription benefits and hopefully reduce overall churn. It turns out that was a bad idea and revenue dropped because we reminded a bunch of people of their subscriptions and they cancelled. We rolled that feature back (for everyone, maybe we should have rolled it back only for the “never-churn” segment?)

If you have a variable cost structure, like video streaming costs, or if you license content on a per use basis instead of flat fee, then these never-churn users are great customers. You get the money without the corresponding costs. And don’t feel bad for them because if you look across your subscriber base as a whole, the never-churn customers balance out the “take-unfair-advantage-of-trials” or the “all-you-can-eat” users.

The lesson here is that you should be careful of not assuming that your subscriber base is homogeneous. There are lots of very different behavioral segments you need to understand and treat differently.

Matt McCloskey believes that art and entertainment are intrinsically good for society and helps creatives make money. He has over 20 years experience in e-commerce, video games and video (AT&T, Xbox, Halo, Twitch).