Free trials to a streaming TV service, especially an upstart in an increasingly-competitive space, are a good way to lure new subscribers into an offering filled with movies and TV shows.
But what keeps those customers around — and converts them into paying ones — once the free trial expires or their favorite show or movie ends?
Those are questions many in the streaming space are pondering, and there’s no single answer that offers a best approach, according to a new Bloomberg Businessweek story on the matter.
The story notes how headlines were abuzz at Disney’s apparent-meteoric success with upstart streaming service Disney Plus, signing on more than 10 million customers less than a month after launch. The sign-ons beat expectations, but it’s unclear how many of these are customers who paid in advance for the service, how many are on free trials, and how many signed up for a one-year free subscription thanks to their Verizon bill.
Even more unclear is how many of these customers will stick around after their free trial ends or the blockbuster Star Wars spinoff The Mandalorian goes on hiatus later this year.
Free trials are an effective way of luring customers in. WWE Studios, a part of the professional wrestling behemoth, found this out the easy way when it launched WWE Network a few years ago. For $10 a month, wrestling fans had an all-access pass to shows, documentaries and pay-per-view matches, the last one being a huge draw compared to the price some satellite and cable companies charge for access to an event like WrestleMania, which can quickly top $80 for a single-view pass.
Five years ago, when WWE Network launched, the company reported around 2 million total subscribers shortly after WrestleMania. That number had fallen by a quarter to 1.5 million total subscribers just a few months later, Bloomberg reported.
An executive with WWE Network said the company wasn’t moving away from free trials because, though the churn rate is high, they’re an effective and cheap way to market to potential customers.
But others have found success in taking the opposite approach: Marketing their high-value content while eliminating free trials — and even raising prices when the content is especially compelling.
That’s the strategy streaming service DAZN took: After finding subscribers didn’t continue paying for a service after a much-anticipated boxing match, DAZN’s Executive Chairman John Skipper moved to eliminate the service’s free trial, raised the subscription price to $20 a month — one of the most-expensive in the industry — and introduced additional boxing matches to encourage current and potential customers to stick around.
Disney is also reconfiguring its approach: Executive said they learned a lot about customer viewing habits thanks to its acquisition of Hulu from Comcast (before this year, Disney had a minority, then majority, stake in Hulu). The data helped Disney formulate a strategy to present additional offering — Hulu originals, licensed shows and blockbuster movies — to subscribers to encourage them to stick around after they finished watching a series. The company also reconfigured its strategy for Hulu’s Live TV offering, suggesting new customers and those on its on-demand tier sign up for its $55 a month live service to watch football games and other sporting events, then suspend their subscription once the season wraps up.
Disney’s hoping to learn lessons from Hulu so they can be applied to Disney Plus before the company’s deal with Verizon expires next year. Without one, the company expects to see “a wave of cancellations unless Disney drops a number of new series,” an executive told Bloomberg.