The EU Just Killed Arr

What is the issue? There is 2 month's notice. If you have bad services and customer don't need it any more makes sense to allow termination, instead of contining to bill customors for nothing.

This is more healthy and would push more SAAS to focus on Sales not building tricks to force retain customers!

The legislation applies to “Connected Products” which most SaaS services aren’t

Seems like great for competition, if someone can steal your business you have a bad business.

I can't wait to move to Europe and end my Adobe subscription that I forgot to cancel a few months ago.

> Boom. Subscription gone. Access revoked. Business workflows broken.

Maybe we need more regulation to require a grace period after a failed payment...

What a complete misrepresentation...

Limiting notice period to two months and forcing you to give customers the possibility to terminate at any time is not killing ARR. It might moderately increase churn but even then, unless you are frankly dishonest, not that much.

You still have ARR when your customer can terminate their contract.

Even yearly discount which the article presents as done for are still a thing with the possibility of early exit. You just put a clause indicating that the discount is forfeited if the customer leave before the end of the contrat. Phone companies do that all the time.

Is there a distinction made between business customers and consumers? (B2B/B2C)

As a user, this is great news. I think that the artificial lock-in to services that have near zero cost of on-boarding and off-boarding is not what nice companies should do.

As an entrepreneur, this is amazing news! This means users can now more easily switch to my superior service.

At least this is how I choose to see it. It seems to encourage healthy competition and I'd rather compete on the service quality and value than the cleverness of my contracts and discounts. I'm sure it will hurt the bottom line of some companies, but I'm not sure it's a bad thing.

Just adopt the JetBrains model? Each consecutive year of uninterrupted subscription gets you a discount, up to a point.

If your ARR is built upon the idea that your customers cannot cancel their subscription, you're getting it very wrong.

30% of the corporate blog links on HN the last 4 weeks have mysterious distance from the facts they purport to relay.

Then, they pivot to something vaguely related that is more fun to talk about.

The distance is never closed, and then you're hit by the ur-slop: "That's not X—its Y" and realize where we're at: it used to be a good idea for SEO to write informative blog entries, then it got outsourced from subject matter experts to marketing, then it got delegated to the interns, then the interns got told to use an LLM. And I love LLMs! Just makes me smile and wish for a new way to run links sites.

I wish EU (or may be just a Swedish thing) also could have same kind of cancellation possible for post-paid phone/ internet, eye-glasses subscriptions.

Does that mean, things like AWS Reserved Instances or Savings Plans do not comply with this EU law?

The EU trying to solve a non-existing problem.

If a company offers a discount (or not) for a longer minimum term contract and you accept then that's just liberty in action as long as the terms are made clear in advance. There is neither a need nor benefit in regulatory intervention, especially considering all the actual issues on Europe's plate...

Good Riddance. ARR is one of those 'fake' metrics like 'EBITDA' that mean nothing but numbers with make up.

a more reflective number is last year revenue + revenue growth rate. and yeah costs / growth of costs.

This is amazing pro-market regulation!

So, can I use this against Google to get our locked-in annual gmail subscription nuked in 2 months, instead of next May when the contract change date is?

The article mixes two months notice cancellation, non-recurring contracts, and business predictions. It is AI generated randomness for marketing.

The article is hyperbole and this only impacts ARR for consumer services, which tend to be either month-to-month paid in arrears, or annually prepaid. It doesn't change anything, but if your gym membership goes high-tech it might be easier to cancel.

The specific provisions[1] covering unfair contract terms apply only to "unilateral" contracts, meaning contracts that are offered to a customer who meets two important criteria. First that they attempted to negotiate specific terms in the contract. Second that they had no ability to influence those terms but continued to purchase the service anyways. Real, scaled, committed SaaS ARR isn't going anywhere.

[1] https://eur-lex.europa.eu/eli/reg/2023/2854/oj/eng#cpt_IV

This will accelerate innovation, companies no longer will take your subscription for granted

This will radically change the customization, integration, onboarding, implementation, and training end of these contracts.

The only thing this 'kills' is a stupid metric. You can no longer guarantee a customers LTV will be more than two months. So the metric used to try to value these businesses will change a little. Otherwise, if you offer a good product and don't engage in scummy practices to lock people in, you should be unaffected. If you're a scumbag (and unfortunately, there are a lot of them out there) you will need to work a bit harder to maintain your subscribers.

This is a silly article. It seems premised on the idea that ARR can only happen with contractual or vendor lock-in. Which is silly. Like most things, if you can get in the door, and aren't price gouging, few people will want to rock the boat for the sake of it.

If you wanted to get rid of your subscription, you were going to waste money on something you weren't going to use, and that doesn't really help the business or you. (except the business leeches cash, but that shouldn't be their business model anyway)

So nothing of value was lost.

This article is just a lie and also seems deeply confused. First it talks about the (false) claim that you can no longer count a yearly contract as such, then it switches to "involuntary churn" without at any point explaining why those concepts are related in any way.

The regulation[1] explicitly says:

> Nothing in this Regulation prevents a customer from compensating third-party entities for support in the migration process or parties from agreeing on contracts for data processing services of a fixed duration, including proportionate early termination penalties to cover the early termination of such contracts, in accordance with Union or national law.

[1]: https://eur-lex.europa.eu/eli/reg/2023/2854/oj/eng

saas subscriptions is the new gym memberships

This is wonderful, occasionally the EU bureaucracy gets something right

Yes it’s good for customers, but it’s also good for vendors. They are no longer subject to this arbitrary and destructive pressure from investors, and may see a revenue increase as customers lower the bar for signing up

The right measure of ARR is statistical anyway. Just because a contract lasts for a year in no way establishes the contract as recurring. It has been a very arbitrary standard

Wow, companies being forced to provide good service to customers through a contract term and upholding the primary driving force of market capitalism (customer can take their money to a better provider).

Sounds like distopia! /s

Would this law have helped that non-profit that had their annual Slack subscription increased from $5k/year to $200k/year?

https://news.ycombinator.com/item?id=45283887

As the domain suggests, lovely piece of examplary slop.

Didn't pirates die off quite a long time ago?

Offering a discount for longer contracts and jacking up the price for shorter contracts have no noticeable difference to either party.

I feel like this article is thus being overly generous. The EU simply wants consumers to be able to cancel digital products that have no marginal cost anyway, which makes intuitive sense imo.

Believe in your product. Or don't.

Choose.

Can't wait for "capitalists" to speak up against this.

First of all OP is a shill for this paid.ai thing (as if this domain name isn't a telling sign, lol): https://news.ycombinator.com/submitted?id=arnon

Second it's ridiculous. No one is killing ARR. That's absolutely not what EU is doing.

> Boom. Subscription gone. Access revoked. Business workflows broken.

> It’s the equivalent of your electricity being cut off because you didn’t click “confirm payment” on a reminder email.

Not what EU is doing again. At all. What a slop.

You can still sell N-years of service at Y % discount? It just has to be paid at the start of contract?

This is a big problem for many enterprise startups. Most (90%+) are customer funded, not VC funded, and it is common to have a few big design partner customers as they figure it out. Imagine several 3yr $1.5M ($500K/yr) contracts, so a team of 10-15 funded on that.

Companies have annual whimsical budget cycles, with new innovation initiatives always big easy targets as not cemented yet. This change makes it very easy to yank one of the 3 year commitments... Which would cause layoffs of a third of the startup.

Thank you EU I guess?

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