That subscriptions have exploded in popularity probably isn’t news, but you may be surprised to find that they’ve made it all the way to the state house. California’s recent Senate Bill 313 makes it much simpler and easier for consumers to cancel their subscription services. Among other protections, it stipulates that:
“A consumer who accepts an automatic renewal or continuous service offer online shall be allowed to terminate the automatic renewal or continuous service exclusively online.”
In other words, no more scouring web sites for hidden 800 numbers. No more mysteriously long call holds. No more tortuous calls with customer service reps following intentionally obstructive call scripts.
In addition, if you sign up for any subscription service (a streaming service, a meal plan, a ride share program) at a promotional rate, then that service has to get your consent before charging your credit card when the price returns to normal.
So does this sound the death knell for the wildly popular subscription business model? Far from it. It’s actually the best thing that could happen to subscription businesses.
Zuora, the company I co-founded ten years ago, makes software that lets any business launch and scale its own subscription service. We have clients in media, retail, transportation, manufacturing, you name it. But I firmly believe that Senate Bill 313 is not only good legislation, it’s actually good business. It all starts with a concept called the “negative option.” Let me explain.
Remember Columbia House Records? It was a mail-order music service that holds a dreaded place in the hearts of many of us who grew up in the Eighties and Nineties. For just a penny, Columbia House would send you ten albums of your choice. But after that, you were locked in, and had to pay full price for all kinds of awful records unless you specified otherwise—hence, the negative option.
It was a sad trick—consumers got sucked into providing their credit card information for a discounted product or free trial and then, when they failed to cancel in time, they continued to get billed. Another similar case: AOL’s 2.1 million users who still pay $20 a month for their outdated AOL dial-up service!
We’ve also seen companies like Fabletics (a Lululemon competitor fronted by actress Kate Hudson) and Adore Me (designer lingerie) come under fire for poor management of their subscription businesses. Unclear billing practices, difficult cancellation processes, poor communication—these subscription retail issues (and customer complaints) all flow from this idea of the “negative option” model.
To be fair, both of these companies took steps to improve customer transparency after receiving hundreds of complaints to the Better Business Bureau. But more than 60 years after Columbia House was started, it seems that many subscription businesses still don’t get it. So I’m all for Bill 313, because modern businesses understand that transparency and accountability are foundational elements of any successful subscription service.
Why is this bill so important? Because we’re witnessing the end of ownership as we know it. This is where our economy is headed. People want access to services, without the hassles of maintenance. Subscriptions are the business model of the future. California Senate Bill 313 marks a sharp break from the shabby business practices of the past, and the transparent, empowering services of the future.
Sign me up.
Read more about the Subscription Economy in the national bestseller Subscribed: Why the Subscription Model Will Be Your Company’s Future — and What To Do About It.