Verizon’s newly expanded ‘Netflix bundle’ offering is a recipe for churn

Last month, Verizon offered potential customers in New York City a free year of Netflix service and a $150 gift card if they signed up for FiOS Triple Play bundle.

Now, the telco has decided to offer the deal to new customers nationwide through Jan. 17.

The bundle, voice, Internet and TV (including HBO and Showtime) costs $60, a price that’s good for 12 months.

The package is “designed to capture cord cutters,” Tim Horan, an analyst for Oppenheimer, told Investor’s Business Daily.

And, at $60 a month, with Netflix and premium channels included, it is likely to do just that.

But, as good as it sounds, the promotion is a recipe for churn, and that’s the fly in the ointment.

Big promotions – and when you consider that the average rate for basic cable hovers abound $64 nationwide, the Verizon deal is a big one – promote big churn. Cord cutters and, perhaps, more importantly, cord nevers, may be enticed by the deal, but they’ll be back in the wind and shopping for a better one by the end of the 12-month introductory period.

Or, even more likely, they’ll just cut and run, keeping the Internet connection – if it’s a better deal than one offered by the competition – and paying Netflix $9 a month.

For Verizon? A temporary bump in subscribers, reduced margin and increased customer acquisition costs.

And, a landline? Really? Is there anyone under 50 who uses one at home? Who wants one? I’d venture that most consumers who buyt bundles for a low price never – never – actually connect those landlines to equipment… it’s just an entry point to a bundle deal.

While Netflix isn’t yet on any major operator’s set-top box in the United States, the Verizon promotion shows just how valuable the telco believes the service can be to its customers, especially those Millennials Verizon – and the rest of the pay-TV industry — is struggling to reach.

But a bit of advice for Verizon: Forget the promotion and offer an attractive Internet bundle that doesn’t have an expiration date and includes content Millennials want.

You’ll save money, reduce churn and address an audience that is your future.

And, give up on the landlines already.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn