How Netflix is Bigger Than the Free Trial Model

If you have the content, they will come

Key Takeaways

  • Netflix removes its free trial period and redirects new subscribers to a free to-watch vertical with severely limited content.
  • Other streaming services are unlikely to adopt Netflix’s plan, but its success could lead to a shift in conventional market wisdom.
  • New streaming platforms like Quibi, which saw a huge downturn in subscribers, serve as a cautionary tale for free trial programs.
The Netflix logo is displayed on the screen of an iPhone in front of a television screen.
Chesnot / Getty Images 

Netflix has ended its long-time, 30-day free trial promotion, setting the groundwork for a potential new normal. It could signal a new barrier for other companies seeking to break out of the crowded field of streaming services.

The streaming giant announced its plan to roll back its free trials, which have been a staple for the company for the better part of two decades. A Netflix spokesperson told Variety it is "looking at different marketing promotions in the US to attract new members and give them a great Netflix experience." The new strategy is not as likely to be adopted by other streaming services, experts say.

"Netflix takes this specific strategy in the US at a very mature stage," said Ezra Eeman, Head of Digital, Transforming, and Platforms at the European Broadcasting Union, via email. "Probably they calculated that they are just burning through cash to keep their current free trial program in the air trying to onboard a largely stubborn group of no-payers. Optimizing for these kinds of micro-conversions might undermine the long term relations they are aiming for."

A New Normal?

The company is reallocating resources and manpower to its new Netflix Watch Free platform, which allows potential users to watch from a selection of free movies and television episodes without a membership. The company saves the bulk of its content for paying subscribers only.

Netflix promo text when trying its Watch Free option.
Netflix

While Netflix is making headlines now, it was hardly the first streaming platform to make this announcement. As is often the case, Disney did it first. Its streaming service, Disney+, leads the pack with its decision to discontinue the free trial staple that has galvanized subscribers. It chose to do so after adding Hamilton, a major hit for the service, to its streaming platform and foregoing a theatrical release due to the coronavirus pandemic.

With a built-in audience due to decades of developing a subgenre of its own, Disney—serving everyone from sports aficionados with ESPN to geeks with Marvel and Star Wars and a slew of movie classics—has carried the streaming service to relative success. Executives at Netflix are hoping they’ve reached a similar level of cultural relevance.

"[For] other streamers that are just entering the market, free trials might still make sense as part of their growth strategy."

28-year-old Amazon temp worker Sean Keith says Netflix’s plan won’t affect his viewing habits, citing he uses a family member’s account to access the movies and shows he wants to watch but notes that complete elimination of free trials would steer him away from other services.

"It’s a trial run, that’s literally what it says it’s for. I can’t know if I want to spend money on your service if I don’t know everything about it, you feel me?" he said in an in-person interview. "Netflix can do it because they’ve been around for a long time and I feel everyone has an account, but these other services? No."

Failure to Launch

Boasting over 200 million worldwide subscribers, Netflix has more paying users than other streaming platforms, with its main competitor, Amazon Prime, coming in with approximately 150 million global users.

Netflix crossed the 200 mark due in large part to the coronavirus pandemic. The company announced it added 26 million subscribers in the first two quarters of 2020—nearly equaling its year-end 2019 addition of 28 million users. Netflix has become synonymous with streaming television and movies. The company’s shift toward phasing out a free trial program is not for every platform.

Amazon Prime Video 30-day free trial page

"[For] other streamers that are just entering the market, free trials might still make sense as part of their growth strategy, as free trials might lower marketing and customer acquisition costs," Eeman said.

Ambitious mobile-focused streaming service Quibi learned this lesson the hard way. The star-studded service sought to disrupt the streaming market with its gimmick of 10-minute-or-less content, but instead, it was a flash in the pan. Mobile app marketing intelligence firm Sensor Tower calculated the retention rate of the new service and found 92 percent of those who signed up for the free trial failed to stick around after its 90-day expiration.

"Netflix can do it because they’ve been around for a long time and I feel everyone has an account, but these other services? No."

While the platform boasts that over 5 million people have downloaded its app, it refuses to give exact numbers on its subscriber base. In August, some additional 33 percent of Quibi subscribers told analytics firm Kantar they planned to drop the service in the next three months. It takes a lot more than a slew of celebrity faces, it turns out, to keep a streaming service afloat.

As Netflix is soon to find out, the free trial period isn’t always the way to be successful, but with a nearly inexhaustible library, Netflix is not as likely to hemorrhage subscribers.