In an unexpected move, streaming giant Netflix will no longer offer a free trial to viewers in the United States. The Verge reports that the company has already been phasing the feature out over the last month, a practice it started internationally over the last couple of years. Though Netflix did not make a formal announcement, a visit to the company’s Help Center confirms that free trials are not available in the United States and select countries. Netflix reminds subscribers there are no contracts, commitments or cancellation fees. They can change their plan at any time and get access to their full library of content regardless of the plan they choose.
Tiered subscription plans
Netflix currently offers three subscription plans: the basic plan for $8.99/month, the standard plan for $12.99/month and the premium plan for $15.99/month. The differences in plans are the video quality, resolution and the number of screens you can watch simultaneously. For example, with the basic plan, subscribers can only watch Netflix on one screen at a time.
Instead of free trials, Netflix is trying to reach prospective subscribers through other methods. For example, in September, the SVOD service offered 10 free movies and TV shows to non-subscribers in close to 200 countries and territories. The movies were made available in their entirety, but TV shows like Grace & Frankie, Love Is Blind and Elite only allowed viewers to watch the first episode. Netflix said the program selection may change periodically which seems likely to keep prospective subscribers interested.
At the time this promotion launched, a Netflix spokesperson said, “We’re looking at different marketing promotions to attract new members and give them a great Netflix experience.”
Netflix’s free content promotion is still available. Viewers do not have to sign up or register to watch this free content. They just go to Netflix.com/watch-free, and click on “watch now” to watch the content.
Second quarter growth
Though Netflix has not released its third quarter financials yet, its second quarter financials show that COVID-19 has resulted in a spike in membership for Netflix. At the end of the company’s second quarter, the company has total revenue of $6.1 billion, a 24.9% increase year-over-year. They also added 10.09 million new members, compared to 2.7 million paid net additions in the second quarter of 2019. The streaming video on demand service had 192.95 million total members worldwide at the end of June.
“We live in uncertain times with restrictions on what we can do socially and many people are turning to entertainment for relaxation, connection, comfort and stimulation. In Q1 and Q2, we saw significant pull-forward of our underlying adoption leading to huge growth in the first half of this year (26 million paid net adds vs. prior year of 12 million),” said Netflix in their July 16 letter.
“As a result, we expect less growth for the second half of 2020 compared to the prior year. As we navigate these turbulent circumstances, we’re focused on our members to continuing to improve the quality of our service and bringing new films and shows to people’s screens,” Netflix added.
Netflix follows Disney’s discontinuation of free trials
In June, Disney+ discontinued offering seven-day free trials to new subscribers, just weeks before the debut of Hamilton on the D2C streaming subscription service. A spokesperson for the service said they were testing different marketing strategies, offers and promotions to grow Disney+, which has been incredibly successful. The service launched in November 2019 and, by early August, Disney+ had reached 60.5 subscribers, already achieving its five-year goal of attracting 60 million to 90 million subscribers by 2024.
Insider Take
This move by Netflix was surprising, particularly in light of the pandemic. There are families stuck at home who are struggling to make ends meet. While streaming services are not essential like food and utilities, they have helped make shelter-in-place orders a little less maddening with huge catalogs of content to entertain us. It is also surprising because the company has had a great year so far. They anticipate slower growth in the second half of the year, so removing the free trial seems counterintuitive. It will only increase revenue if people subscribe despite the lack of free trial. It could turn people away.
