Lifestyle + Wellness

From The Wall Street Journal – The Real Reason You’re Paying for So Many Subscriptions

BY Spectrum Wealth Management | Jan 23, 2024
By Ben Cohen
January 19, 2024

How much do you spend on subscriptions every month? OK, now guess again. Because whatever number you came up with wasn’t nearly big enough.

Think about everything that’s available through a monthly subscription these days. Your favorite streaming service. Also, three more streaming services. This newspaper! Cable TV. Music. Audiobooks. Makeup. Salads. Razors. Substacks. Toothbrushes. Your dinner. Your dog’s dinner. The number of subscriptions you have to manage is enough to make your head spin, at which point you could use a subscription to help you meditate.

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But paying for the subscriptions you use is not the only reason your bill is probably much higher than you realize.

It’s also because you’re overpaying for the ones you don’t use.

That, as it turns out, is one of the hidden forces behind the subscription economy: Americans spend billions of dollars on stuff they have forgotten about. A dirty little secret behind many of the world’s most popular subscription services is that they owe part of their success to our lack of attention.

There are some people who know precisely how much they’re spending on every subscription every month. Then there are the rest of us.

The consulting firm West Monroe surveyed thousands of Americans in 2021, asking them to guess how much they spent each month on subscriptions. Their average response was $62. When they were given more time to guess again, they increased their estimate to $96. They were still way off. The correct answer was $273.

But now Americans are paying more attention to their growing pile of subscriptions and canceling the ones they no longer need, don’t want or can’t afford. 

Hollywood is already feeling the effects of this shift in consumer behavior, as my colleague Sarah Krouse recently wrote. If you pay for Netflix and

Disney+ every month, but cancel other services and subscribe again when they release new seasons of your favorite shows, you’re not alone. Americans are getting more strategic about how they manage their streaming portfolios. In fact, nearly 25% of U.S. subscribers to streamers like Apple TV+, Disney+, Hulu, Max, Netflix and Peacock have canceled at least three services in the past two years, according to subscription-analytics provider Antenna’s data from November. 

And that was before NFL fans became Peacock subscribers last weekend to stream one football game. 

Many will keep paying $5.99 a month. Others will cancel next month. Some will bleed $5.99 a month because they were too lazy to cancel.

It just so happens that a neglected Peacock subscription helped inspire a fascinating, recently published working paper on this phenomenon of subscriber inattention. 

Neale Mahoney is a soccer fan who bought a Peacock subscription at the beginning of an English Premier League season intending to cancel at the end of the season in May. But when the next season began in August, the Stanford University economist remembered that he’d forgotten to cancel. Which is how he learned that the only thing more painful than paying to watch Arsenal is paying to not watch Arsenal.  

His co-authors at Stanford and Texas A&M University had their own cases of subscription regret. Liran Einav’s teenage daughter thought she had paid $5 for a test-prep service before getting her driver’s permit. She had actually paid for a $5 monthly subscription. Ben Klopack signed up for a free trial of Peacock and realized he was still being charged six months later without ever having watched Peacock. 

I could relate. I was surprised and deeply annoyed to learn not long ago that I’ve been paying every month for PBS Masterpiece because someone in my family bought a free trial through my Amazon Prime account several years ago. Which was also the last time anyone in my family opened PBS Masterpiece. I wanted to dunk my head in a pot of tea when I canceled. 

Sometimes you intentionally subscribe and forget to cancel. Sometimes you forget to cancel because you unintentionally subscribed. Either way, you’re paying for something you don’t value, which feels like lighting money on fire. Unfortunately, most of us are familiar with that feeling. 

“It’s almost a universal experience for consumers,” Klopack said. 

The cool thing about their National Bureau of Economic Research paper on subscriptions is that they found a clever way to measure such inertia. How? By looking at what happens when credit cards expire, are lost or stolen and have to be replaced. 

To almost everyone on the planet, this is a nuisance. But to economists, it’s a natural experiment. 

They recognized that getting a new card is one of the rare times you must actively renew your automatically renewing subscriptions, since you have to update the payment information on file with those companies. The economists analyzed millions of transactions from a large payment network and found a clear pattern in the months when credit cards are replaced: There is “a sharp, abnormal drop” in subscription retention. 

The study focused on 10 major subscription services and people who became subscribers over an extended time period. In the average month, the services lost 2% of those customers. But in the months of card replacement, they lost 8%. 

The goal of any good subscription service is to be sticky enough that it becomes a habit. You shouldn’t forget that you’re a subscriber. You should have a reason to remember every day. Still, there are plenty of industries that have long relied on customers who never use the product. You buy a gym membership in January, stop going in February but keep paying because you want to believe that one day you’ll wake up and get back on the elliptical. Meanwhile, your credit card is getting a workout every month.

But these economists weren’t looking at your local gym. They studied big subscription services across entertainment, security, retail goods and, yes, newspapers. They say that every single one benefited from subscriber inattention. 

I asked the people who thought about this curious problem of the subscription economy if they had come up with any solutions. Einav floated two ideas. 

The first is a simple prompt that asks a basic question whenever you sign up for a subscription: How often do you want to renew that subscription? Maybe it’s every month. Maybe it’s every year. Maybe it’s never—but at least that’s a choice and not the default. It would make a difference: The economists calculated that requiring this kind of active choice every six months reduces the excess payments from inertia by half. 

The second one is for the digital subscriptions that have come to dominate our lives. It’s hard to miss a package of coffee beans or a meal kit for beef bibimbap when they land on your doorstep. It’s way too easy to lose track of all your online services. 

But they know exactly how much you’re using your subscription—or not using it. They could use that data to your advantage instead of theirs. 

Netflix already does. The streaming giant asks inactive members who haven’t watched the service in years if they want to keep their accounts and cancels their subscriptions if they don’t respond. It’s like when Netflix asks if you’re still watching when you’ve fallen asleep on the couch—except this policy actually saves you money.  

You don’t have to be an economics professor to understand why other services would be reluctant to implement these changes that would cost them revenue. But soon they might not have a choice: The Federal Trade Commission recently proposed a new rule that would require most companies to provide annual subscription reminders. 

Of course, you could just scrutinize your bills for unwanted subscription charges. Or you could get technology to do it for you.

One of the automated services that identifies and cancels your subscriptions is Rocket Money, which gets a boost every January, when people make New Year’s resolutions to get smarter about subscription maintenance. There’s a free version of the app, but to access premium features, you have to spring for a monthly subscription. 

That’s right: To stop paying for subscriptions, it might pay to start one.

This article was originally published in The Wall Street Journal on January 19, 2024, and written by Ben Cohen. PHOTO/iStock image


Spectrum Wealth Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.