(upbeat music)

there was this.

- Welcome to "Blockbuster Video".

- [Narrator] But then Netflix changed everything.

Once a DVD distributor.

- It's easy

- [Narrator] It became a streaming pioneer

revolutionizing the way people watch TV

and movies.

Other networks and studios raced to catch up.

And now Disney, HBO and NBC are chipping away

at Netflix's market.

And in April, 2022.

- Report from Netflix saying it's lost subscribers

For the first time in a decade.

- [Narrator] That was enough

to send its stock plummeting 35% in a single day.

Netflix's worst day since 2004.

And though the stock hasn't fully recovered,

the company made gains in the third quarter

adding 2.4 million subscribers.

So what happened to the streaming giant this year

and how is it bouncing back?

Netflix lost 200,000 subscribers

in the first quarter of 2022

instead of the 2.5 million it projected to gain.

Netflix said that completely shutting down

its service in Russia following the country's attack

on Ukraine resulted in the net loss.

The company also attributed the loss

to increased subscriber churn.

Part of that came from a price increase

in January.

- It wasn't the first time

that Netflix had raised prices

but it was a price increase

that triggered new sort of consumer defections.

- [Narrator] Along with increased competition

and inflation, it also had to contend

with another problem, password sharing.

- These are over a hundred million households

that already are choosing to view Netflix.

They love the service.

We just gotta get paid at some degree for them.

- [Narrator] So the streamer moved

to make a change.

- We're not trying to shut down that sharing

but we're gonna ask you to pay a bit more

to be able to share.

- [Narrator] And that wasn't all.

As the company tried to control costs,

it laid off more than 450 people

over the next few months.

- The stock decline triggered a series

of changes that the company is still enacting.

So one of the biggest changes that came

after that decline that was announced

that same day was that Netflix

would add an ad supported tier of service.

- [Narrator] But those changes aren't about face

for the streamer which has famously assured ads

and embraced sharing.

- Those who have followed Netflix know

that I've been against the complexity

of advertising and a big fan of the simplicity

of subscription.

- [Narrator] That simplicity worked

in the company's favor at a time

when growing was the goal.

- In the early days of the rise

of streaming and really the streaming wars

what helped convince consumers

to cut their cable bill was

that Netflix was flexible

and you could binge series whenever you wanted.

You weren't encumbered with ads

in the same way that you were on cable

and you could share what you paid

for with family and friends.

- [Narrator] And in 2020,

that model really worked

especially during the pandemic.

The company's vast content library

and binge able series drew in customers confined

to their homes.

The streamer's share price rose from $319

in March of 2020 to over $550 in early 2021.

It also added a record 37 million new users

in 2020 on the strength of popular shows

like "The Queens Gambit",

"Tiger King".

- My name's Joe Exotic, and this is Sarge.

- [Narrator] And "Bridgerton".

- I wish to be entertained.

- There's a subset of companies

that benefited intensely from the pandemic

and the way people's lives changed during it.

And a commonality that you see

in those companies is that when times are good

it's very hard to imagine times becoming bad again.

- [Narrator] But things did get bad

as the pandemic wore on and people started

to leave their homes.

In 2021, the company's growth began to slow.

- COVID created a lot of noise

in how to read the situation,

boosted us a lot in 2020.

And then in 2021, I think we thoughtfully said

it was mostly pull forward

which was the logical conclusion.

But now coming into 2022

that you know doesn't really hold.

- [Narrator] April wasn't the first time in 2022

that Netflix's stock sank.

In January, after the company forecasted

slower subscriber growth,

shares fell 20% in after hours trading.

- In the streaming business,

the number of subscribers that are paying you

to watch your content is really one

of the most important metrics

of a company's health.

- [Narrator] But while streaming services

like Disney plus or HBO Max have other ways

of generating revenue--

- Netflix almost entirely is

in the business of streaming.

And so that is, its lifeblood.

And when it loses streaming subscribers

that is a problem for the heart of its business.

- [Narrator] And with a crowded field

of streamers, gaining new subscribers

can be difficult.

- The challenge that all the streaming companies

are having now, particularly in the US

is they have acquired most of the customers

that are ever going to pay to stream.

They have to figure out how to make more money

from those people than what that puts front

and center for all of these services

is the importance of competing on content.

- [Narrator] After April stock decline,

the company scrambled to act quickly.

- There have been rivals that have been

in the business of selling ad supported tiers

for quite some time.

There have been other streaming services,

Spotify for one that has

always been very stringent

about password sharing.

So these are levers that existed

before that Netflix hadn't pulled.

And so I think that moment sort

of raises the question of was Netflix too slow

to do all that it could have

to avoid the severity of this moment?

- [Narrator] This year, Netflix's share price

is down more than 60%

but the streamer reported something

of a turnaround in the September quarter.

The company added twice as many subscribers

as expected in Q3,

sending shares up in after hours trading

immediately after its report.

- Thank God we're done with shrinking quarters.

Everything the company's focused on

whether that's on the content side,

on marketing, lowering prices to the ad supported,

the paid sharing, the thoughtful approach we're

doing there lines us up

for a good next year.

- [Narrator] Looking ahead, the streamer says

it's new ad supported tier will launch

in November for 6.99 a month,

and the company this week laid

out some of the steps it will take to crack

down on password sharing and make it easier

for subscribers sharing accounts

to make their own.