Netflix (NFLX) doubles its free trial period

Includes: BBI, NFLX
by: David Strahlberg

The Internet Stock Blog comments on a recent email that Netflix (ticker: NFLX) sent out to its subscribers. [Copied with permission from The Internet Stock Blog.]

Dear xxx,

For a limited time, we're offering our valued members a special
opportunity to give your friends and family one month of free Netflix
service; that's twice the length of our regular free trial! Just
forward this email to your friends and family, and they can enjoy a
month of DVD rentals for free. We're only offering a limited number of
these special memberships, so pass this on soon!

-Your Friends at Netflix

Quick comments:

  • Extending the period for free trials is equivalent to a price
    cut for new subscribers. It allows Netflix to attract new subscribers
    without cutting its profits from current subscribers, who may be
    devoted to the service and thus less price sensitive than potentially
    new subscribers.
  • Does this promotion suggest that Netflix is failing to achieve
    its new customer goals? Netflix is now underpriced by Blockbuster
    Online, and Blockbuster recently outlined plans to further expand its online movie rental service.