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New York Law Dictates How Companies Can Offer & Manage Subscriptions

Recurring revenue. It is the holy grail for businesses.

Recurring revenue, as the name suggests, is continuous revenue a company expects to receive from its customers. Businesses often measure recurring revenue over a particular period of time, say a year; known as annual recurring revenue (ARR). ARR is frequently used by businesses operating on a subscription-based model such as Netflix, Quickbooks On Line, and gym memberships.

Having steady or rising ARR enables businesses to scale rapidly, get funding, and expand.

While subscription-based models are a boon for businesses and their ARR, they can be a quagmire for consumers who want to free themselves of the commitment. As we all know too well, companies can make it torturous to cancel a subscription. “Friends” fans will well remember the episode when Chandler tried to cancel his gym membership only to be upsold and then tried to close his bank account from which the gym fees were withdrawn only to be upsold, there as well. It’s only funny when it’s a riff on a sitcom. Less so when the frustration is real.

Knowing the risks to consumers, New York recently put a law in place restricting how businesses offer and manage subscriptions. The New York statute requires businesses to provide clear disclosures, informed consent, and a way to easy cancel a subscription.


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