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Are Netflix subscriber numbers here to stay?

Jennifer Collins Jan 26, 2012

Adriene Hill: In it’s profit report, the video subscription site Netflix says it made $41 million during the final three months of 2011. It also managed to add back a bunch of subscribers it had lost when it raised prices last year.

But Marketplace’s Jennifer Collins reports, not all those subscribers may stick around.

Jennifer Collins: Hundreds of thousands of people who ditched Netflix last year, may have come back because of this offer.

Netflix Ad: Get your free one month trial at Netflix.com.

In fact Netflix says it added 600,000 subscribers in the last three months. Tony Wible tracks tech stocks for Janney Capital Markets.

Tony Wible: It was entirely due to free.

A big chunk of those customers threw off DVD’s by mail and opted only for streaming video. Wible says the free trials are one way Netflix is trying to get customers back after the exodus last year. He says the holiday season gave Netflix another excuse to get new subscribers: it offered free trials on gifts like the Barnes and Noble Nook.

But should Netflix be able to someone on a free trial as a subcriber?

Sucharita Mulpuru of Forrester Research says lots of companies from book-of-the-month clubs to cable TV operators interpret “subscription” as broadly as possible.

Sucharita Mulpuru: The magazine industry knew that this was a problem.

Advertisers worried some magazines were inflating their numbers, because if you get a free magazine that you don’t care about in the mail — you might just throw it out.

Mulpuru: And that’s why they actually have a very, very specific metric that they force to be disclosed for advertisers which is: what is the number of paid subscribers?

Netflix’s free trials may have been especially successful because of the holiday season. They came with apps pre-installed on all sorts of hot Christmas gifts like the Barnes and Noble Nook.

Mulpuru: You know I don’t know if that is as fair of a metric as looking at paid subscribers.

After all, some analysts say Netflix may also have trouble keeping those subscribers. Netflix is facing competition from Hulu and Amazon. Many new subscribers only get to watch the videos available for online streaming and that streaming library is not nearly as deep as Neflix’s DVD collection.

I’m Jennifer Collins for Marketplace.

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