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NFLX: Netflix stock tanks as 800,000 subscribers flee

NFLX took a tumble Tuesday, after Netflix announced that it lost 800,000 subscribers. What will it take for the NFLX stock to rebound?

Netflix’s third-quarter earnings rose 65 percent even though the video subscription service suffered the biggest customer losses in its history, leading NFLX shares to drop. In this Oct. 10, 2011 file photo, the exterior of Netflix headquarters is seen in Los Gatos, Calif.

Paul Sakuma/AP/FILE

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Netflix (NFLX) shares plunged 35 percent Tuesday after the one-time Wall Street favorite revealed a massive departure of subscribers angered by price increases and other questionable changes at the rental service that was created to make entertainment a snap.

Netflix revealed late Monday that it ended September with 23.8 million U.S. subscribers. That's down about 800,000 from June and worse than what the company had hinted at before. In September, the company predicted it will lose about 600,000 U.S. customers.

And it may get worse. Netflix said it expects more defections in coming months.

The exodus began after the company raised its prices by as much as 60 percent in July and split up its streaming and DVD rental services. Its website was flooded by comments from angry customers. Many people also canceled service, especially on the DVD-by-mail side. The company is betting that its future is in streaming video, and CEO Reed Hastings has said he expects Netflix's DVD subscriptions to steadily decline, much like what has happened to AOL Inc.'s dial-up Internet service.

But Netflix bungled a spin off its DVD-by-mail service, giving it the name Qwikster and creating separate accounts for people who wanted both DVDs and movie streaming. By doing so, the company created what many perceived as a more complicated rental process at a company that began its meteoric rise with a new, easier way of searching for and finding entertainment effortlessly.

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