Are free trial periods for video streaming services destined to fizzle out as a response to trial-stacking, or will they stand the test of time? Some might consider it anti-consumer, but then you wouldn’t expect a 30-day free trial for services like broadband, or the latest 5G package, or landscape gardening.
Free trials were discussed at length during this week’s OTT Blitz event from the guys at FierceVideo and The StreamTV Show. As you would expect, we heard a mixed bag of viewpoints on the value of free trials – ranging from critical for customer acquisition, to transformed fortunes after scrapping free trials altogether.
Disney+ was an early mover in ending its own 7-day free trial in the US only some seven months after launching, but titans like Disney can afford to. A company which should not be on the same page as Disney is CuriosityStream, the documentary-focused SVoD platform. David Emery, CuriosityStream’s Head of Growth, described how he spearheaded the decision to phase out free trials – and he hasn’t looked back.
“There are lots of reasons you run free trials, such as if the IP is untested or the technology is novel, but we are not a risky purchase decision. After dropping free trials, our cost per new subscriber fell dramatically and retention went up dramatically. After we stopped free trials, I said that Disney+ would be next to do it. So we decided to go against the grain of everyone else doing free trials and discount the annual plan instead,” explained Emery. There is no reason Netflix couldn’t be next.
Over at Hallmark, the largest greeting card manufacturer in the US which entered the SVoD scene back in 2012, free trials represent a very different prospect. Harry Lang, VP of Product at Hallmark Labs, the technology arm, was adamant that removing free trials would be bad news for Hallmark’s SVoD conversion rate.
“Free trial conversion does well for us. We extended this to 30 days in April, but have since rolled it back to 7-day trials. If we removed it entirely, there would be a drop. Removing free trial periods is not something we’ve actively looked at and I don’t think we will for some time, because our conversion rate is so high, and trials help build some affiliation with the brand,” said Lang.
Another perspective from the opposite end of the scale came from Ashley Podoll, CMO at Intellivideo, a white-label OTT platform operating in the health and fitness space. “Our market responded with 30-day or even 60-day free trials during lockdowns. We actually saw much higher conversion rates than we were all expecting, with some at more than 50%, but most have now gone back down to 14-day free trials,” admitted Podoll.
OTT analytics specialist Wicket Labs then weighed in, with CEO and co-founder Marty Roberts underscoring the importance of free trials, stating, “We’re seeing a 70% average conversion rate from free trials. The 7-day trial is optimal and converts at a pretty high rate.”
As for pandemic trends, his company’s Wicket Scorecard data insights platform measured a 30% to 40% increase in subscribers during March and April, which then fell slightly going into May and June. “We would’ve expected churn to spike in June and July but actually it didn’t, in fact churn has reduced a little bit. We’re not sure why but we’ll take that benefit. Some of these services hit their Q4 2020 targets in April or May this year. If we can maintain these churn rates, it’s going to mean free money,” added Roberts.
But while free trials typically mean subscribers come in through the front door of a subscription-based OTT video platform, which is the preferred customer acquisition method for these services, there is a burgeoning distribution market as an alternative revenue source.
CuriosityStream’s Emery compared the distribution versus product argument to food versus water, in that you can survive longer on the latter, in the context of striking distribution deals with the likes of Roku and Amazon. “Subscribing direct with us will give you a fuller experience. But this is not the end state, there will be transitions over several years with the distribution disputes we are seeing. Programmers and the platforms, everyone is pushing from both sides, so this is an opportunity to make improvements to experiences and business,” he said, making an interesting case for and against the ongoing feet-dragging from Amazon and Roku.
Hallmark Labs’ Lang built on this sentiment. “Basically everyone started out with just an app, then rolled out to Amazon and Roku, which is helping acquire new customers. Direct subscribers coming through the front door is still our main business, but distribution is great as additional revenue,” he said.
Additional pros of when a subscriber signs up to Hallmark Movies Now ($5.99 a month will get you access to the Christmas movie connoisseur) is the luxury of offloading CDN bandwidth and other delivery costs to a third-party. However, a downside here is that Hallmark would not own the customer data if they signed up through Amazon or Roku, meaning that customer is not marketable. Lang noted how he would receive some metrics and data, but not at the same level it would from a front door subscriber.
Bundles are great for many reasons, but further limitations arise from device restrictions. For example, a consumer may have signed up to CuriosityStream (at just $19.99 a year) via Amazon Channels, only then to encounter device incompatibility when trying to sign in on a device that Roku Channels doesn’t support, when signing up directly would give more ubiquitous device compatibility. End users are left frustrated, having bought a subscription but with less freedom than a direct subscriber has. There is certainly some confusion to clear up in distribution models.