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Netflix Has to Compete With Free

By Daniel Sparks - Oct 22, 2019 at 12:39PM

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There are ways for both Apple+ and Disney+ customers to get access to free one-year trials.

There's no doubt about it: Netflix's (NFLX -3.45%) competition is intensifying this holiday season. Both Apple (AAPL -1.41%) and Walt Disney (DIS -2.50%) are launching streaming services at aggressive prices in November. In addition, both services will be available for some customers for up to one year at no cost.

Aggressive pricing, free trials, and promotional offers for these new services will put Netflix to the test. The streaming-TV giant, however, isn't worried.

Disney+ streaming service on a TV

Image source: Walt Disney.

Free trials make subscribing an easy choice

In September, Apple said customers who purchase any of its products capable of streaming Apple TV+ would be given one year of free access to the service when it launches on Nov. 1. Further, those who haven't purchased a new Apple device will be given a seven-day free trial. Walt Disney is similarly making its new Disney+ service, which launches on Nov. 12, available for a free 7-day trial. 

On Tuesday, Disney+ made its new service even more compelling for some customers. Verizon (VZ -0.19%) said it is offering 12 months of free access to Disney+. The deal is good for "all new and existing 4G LTE and 5G unlimited wireless customers," as well as "New Verizon Fios Home Internet and 5G Home Internet customers," Verizon said.

While both Apple and Verizon's one-year promotions will reach only some of their subscriber base, there could be more promotions to come.

Of course, even for the customers who do not qualify for these promotional offers, the two new streaming services are priced very competitively. Apple TV+ costs $4.99 per month and Disney+ is priced at $6.99 a month. While Disney+ is pricier than Apple TV+, it's arguably a better deal since the service includes an exhaustive library of Disney, Pixar, Marvel, Star Wars, and National Geographic films in addition to new original content.

Both of these services undercut Netflix, which costs $12.99 for a comparable version of the subscription (or $15.99 with the option to stream on more than two screens simultaneously). 

Of course, these sorts of promotions aren't new in the streaming-TV industry. Netflix, for instance, is free for many T-Mobile (TMUS -0.68%) customers. And AT&T (T -0.38%) includes free access to HBO GO for its AT&T Unlimited Plus customers. Still, as more new high-quality streaming-TV services come to market at lower prices and are available with promotional deals, the pressure is on for Netflix to continue proving its worth to customers.

Netflix isn't worried

With Disney and Apple slated to launch their streaming services next month, Netflix management addressed the elephant in the room in the company's third-quarter update earlier this month. "Our long term outlook on our business is unchanged," management emphasized, going on to note that it's been preparing for heightened competition in streaming for years by building out a massive library of original content.

In addition, Netflix argues that the market opportunity is large enough for new competition to succeed without negatively impacting its business. "The upcoming arrival of services like Disney+, Apple TV+, HBO Max, and Peacock is increased competition, but we are all small compared to linear TV," management explained.

We'll have a better idea of whether Netflix is right after the holidays.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Netflix, and Walt Disney. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool recommends T-Mobile US and Verizon Communications and recommends the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2021 $60 calls on Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$236.72 (-3.45%) $-8.45
The Walt Disney Company Stock Quote
The Walt Disney Company
$119.61 (-2.50%) $-3.06
Apple Inc. Stock Quote
Apple Inc.
$171.70 (-1.41%) $-2.45
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$44.11 (-0.19%) $0.08
T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
$145.86 (-0.68%) $-1.00
AT&T Inc. Stock Quote
AT&T Inc.
$18.36 (-0.38%) $0.07

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