Placeholder Image

Subtitles section Play video

  • - [Narrator] Before there was all of this,

  • (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.