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Really the only valid reason to do this is that the goodwill will help them make more money in the future. Strictly losing money with no upside in the future is

by smabie 6y ago

Really the only valid reason to do this is that the goodwill will help them make more money in the future. Strictly losing money with no upside in the future is in violation of the "duty of loyalty" that all corporate officers have toward shareholders.

mehrdadn 6y ago
> Strictly losing money with no upside in the future is in violation of the "duty of loyalty" that all corporate officers have toward shareholders. I'm pretty sure that's just the absurd HN take on the "duty of loyalty", not an actual fact. Also, if you absolutely need a pessimistic reason, I imagine it would avoid headaches with customers complaining (regardless of who's right).
- bsanr2 6y ago
  This. If someone is paying for your service and not using it, perhaps they have an inaccurate idea of what your service (and their payments) actually entail. If that's the case, then you have a customer who's going to come to you eventually to figure out what the hell they've been paying you for all this time, and/or in need of a particularly expensive crash training course (because it's coming out of nowhere). Better to drop them and then onboard them again as new customers (which, functionally, they would be) if they decide to come back. There ARE industries that survive on the, "One loud sign-up multiple silent payment extractions," model; everyone hates them and they have to ju~st skirt regulations to get by ("I'm sorry, we didn't receive your cancellation, please fax it with proof of necessity, last month's payment is still due.").
  - goodside 6y ago
    If I sign up for a gym membership and then don’t show up for months on end, I don’t feel like I’ve been swindled — I knew that’s how it works when I signed up. I’m not confused about what a gym membership is for or why I’m paying for it. I might still never cancel because I don’t want to admit how lazy I am, so each instance of me considering the wasted money ends with me thinking, “I really should get to the gym more. Maybe next week.” This same dynamic plays out with any service that sells you long-term self-improvement but is burdensome to use. Exercise tracking apps, diet tracking apps, health-conscious meal kits, subscription lessons for music or foreign languages, etc. There are shadier examples for sure, but it’s not always cut-and-dry evil.
    - S_A_P 6y ago
      On the flip side I think it’s probably cheaper to cut ties with an inactive user than deal with small claims lawsuits, chargebacks and other hassles from people who forget they are subscribed. Honestly I could see this being an honesty test class action at some point.
    - TeMPOraL 6y ago
      On the other hand, you can also do it nicely even in self-improvement space. Beeminder comes to mind; they let you set your productivity goals and costs of not meeting them, and they only ever charge you if you fail, and accept that you've failed - charge is automatic, but if you tell them there were extenuating circumstances, they'll give you that money back.
ponker 6y ago
Thanks for putting “duty of loyalty” in scare quotes because it is about as real as the “boogeyman.”
em-bee 6y ago
there is no duty to shareholders to maximise profits. see the references in this post: https://news.ycombinator.com/item?id=16171149 https://news.ycombinator.com/item?id=16171149
rconti 6y ago
Long term, both being, and being seen as the kind of company that doesn't needlessly abuse their customers, is in the best financial interests of a company.
- lotsofpulp 6y ago
  Unless your customers have no choice, like Comcast, Altice, Charter, etc.
redis_mlc 6y ago
US courts have ruled that company management have "wide latitude" in how they manage the company. (The reason is that the courts don't want to get involved in the minutae of running private companies. They'd rather you just update your company bylaws.) However, shareholders, or most famously private equity (PE) companies, may pressure mgmt. to adopt certain policies and goals, and use their voting shares to encourage or even enforce that.
mattkrause 6y ago
That's not really true. The standard, from In Re Walt Disney, is that business decisions aren’t reviewable unless “the exchange was so one-sided that no business person of ordinary, sound judgment could conclude that the corporation has received adequate consideration". In, Shlensky v. Wrigley, the Chicago Cubs’ were sued for refusing to install lighting for nighttime games: their president believed baseball was best as “a daytime sport." This is absurdly nebulous (and kind of bizarre), but the Cubs nevertheless won. That decision was based on Davis v. Louisville Gas and Electric Co, which says “the directors are chosen to pass upon such questions and their judgment unless shown to be tainted with fraud is accepted as final. The judgment the directors of the corporation enjoys the benefit of a presumption that it was formed in good faith, and was designed to promote the best interests of the corporation they serve.” It is probably true that this policy earns Netflix some intangible goodwill. It might plausibly make them more money. However, even if it didn't, it would still be within its rights to implement such a policy.

by smabie 6y ago

mehrdadn 6y ago

> Strictly losing money with no upside in the future is in violation of the "duty of loyalty" that all corporate officers have toward shareholders. I'm pretty sure that's just the absurd HN take on the "duty of loyalty", not an actual fact. Also, if you absolutely need a pessimistic reason, I imagine it would avoid headaches with customers complaining (regardless of who's right).

bsanr2 6y ago
This. If someone is paying for your service and not using it, perhaps they have an inaccurate idea of what your service (and their payments) actually entail. If that's the case, then you have a customer who's going to come to you eventually to figure out what the hell they've been paying you for all this time, and/or in need of a particularly expensive crash training course (because it's coming out of nowhere). Better to drop them and then onboard them again as new customers (which, functionally, they would be) if they decide to come back. There ARE industries that survive on the, "One loud sign-up multiple silent payment extractions," model; everyone hates them and they have to ju~st skirt regulations to get by ("I'm sorry, we didn't receive your cancellation, please fax it with proof of necessity, last month's payment is still due.").
- goodside 6y ago
  If I sign up for a gym membership and then don’t show up for months on end, I don’t feel like I’ve been swindled — I knew that’s how it works when I signed up. I’m not confused about what a gym membership is for or why I’m paying for it. I might still never cancel because I don’t want to admit how lazy I am, so each instance of me considering the wasted money ends with me thinking, “I really should get to the gym more. Maybe next week.” This same dynamic plays out with any service that sells you long-term self-improvement but is burdensome to use. Exercise tracking apps, diet tracking apps, health-conscious meal kits, subscription lessons for music or foreign languages, etc. There are shadier examples for sure, but it’s not always cut-and-dry evil.
  - S_A_P 6y ago
    On the flip side I think it’s probably cheaper to cut ties with an inactive user than deal with small claims lawsuits, chargebacks and other hassles from people who forget they are subscribed. Honestly I could see this being an honesty test class action at some point.
  - TeMPOraL 6y ago
    On the other hand, you can also do it nicely even in self-improvement space. Beeminder comes to mind; they let you set your productivity goals and costs of not meeting them, and they only ever charge you if you fail, and accept that you've failed - charge is automatic, but if you tell them there were extenuating circumstances, they'll give you that money back.

ponker 6y ago

Thanks for putting “duty of loyalty” in scare quotes because it is about as real as the “boogeyman.”

em-bee 6y ago

there is no duty to shareholders to maximise profits. see the references in this post: https://news.ycombinator.com/item?id=16171149 https://news.ycombinator.com/item?id=16171149

rconti 6y ago

Long term, both being, and being seen as the kind of company that doesn't needlessly abuse their customers, is in the best financial interests of a company.

lotsofpulp 6y ago
Unless your customers have no choice, like Comcast, Altice, Charter, etc.

redis_mlc 6y ago

US courts have ruled that company management have "wide latitude" in how they manage the company. (The reason is that the courts don't want to get involved in the minutae of running private companies. They'd rather you just update your company bylaws.) However, shareholders, or most famously private equity (PE) companies, may pressure mgmt. to adopt certain policies and goals, and use their voting shares to encourage or even enforce that.

mattkrause 6y ago

That's not really true. The standard, from In Re Walt Disney, is that business decisions aren’t reviewable unless “the exchange was so one-sided that no business person of ordinary, sound judgment could conclude that the corporation has received adequate consideration". In, Shlensky v. Wrigley, the Chicago Cubs’ were sued for refusing to install lighting for nighttime games: their president believed baseball was best as “a daytime sport." This is absurdly nebulous (and kind of bizarre), but the Cubs nevertheless won. That decision was based on Davis v. Louisville Gas and Electric Co, which says “the directors are chosen to pass upon such questions and their judgment unless shown to be tainted with fraud is accepted as final. The judgment the directors of the corporation enjoys the benefit of a presumption that it was formed in good faith, and was designed to promote the best interests of the corporation they serve.” It is probably true that this policy earns Netflix some intangible goodwill. It might plausibly make them more money. However, even if it didn't, it would still be within its rights to implement such a policy.