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Netflix will stop billing some inactive members

Users who stop watching Netflix shows and movies won't be charged after two years.

Users who stop watching Netflix shows and movies won't be charged after two years.

The Netflix app is displayed alongside other streaming media services on the homepage of a Roku Streaming Stick. (Photo: Matthew Keys / Flickr Creative Commons)

Netflix says it will stop billing users who haven’t watched their shows or movies for more than two years.

In a letter sent to shareholders on Thursday, Netflix said the company provides an easy way for customers to pause or cancel their subscriptions, but some have chosen not to take advantage of the feature.

The company identified a “very small percentage” of subscribers who fit that description and stopped billing them for service a while ago. Their memberships are paused, and they can restart them at any time, Netflix said.

Going forward, the company will apply the same criteria to all of its 193 million subscribers worldwide.

“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,” Netflix said. “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 automatically bills users, and it’s plausible some sign up for the service and forget to cancel. The company didn’t release an exact number or percentage of users who fall into this category, nor did it specify how much money it might lose by pausing inactive member subscriptions.

On Thursday, Netflix said it added 10 million subscribers over the last three months, an indicator the company was still operating at a healthy level despite — or maybe thanks to — the global health pandemic. As more people stayed home, they turned to the television to disconnect from the real world — and Netflix, among others, provided that opportunity.

But Netflix says it’s not immune to the changing economic conditions that have hammered more-traditional forms of media over the last few months. The company said financial conditions could fluctuate as the pandemic continues, especially in areas of the United States.

On the other hand, Netflix said its production and marketing costs were lowered in large part due to the health crisis. In March, movie studios throughout the United States and around the world ceased production. In response, Netflix reduced its marketing budget.

Where it did spend money on content and marketing, it likely got more bang for its buck: As companies pulled back on their ad dollars, demand for commercial inventory in print, broadcast and online decreased. The lower demand meant any money that was spent went further.

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).