Los Gatos, Calif. – Shares of Netflix plunged 35 percent by midday Tuesday, hours after the Silicon Valley-based company revealed it lost 800,000 U.S. subscribers during the third quarter following a price increase and the separation of its DVD rental and streaming video services.

The company, which now has 23.8 million U.S. subscribers, also warned of more anticipated subscriber defections.

“We greatly upset many domestic Netflix members with our significant DVD-related pricing changes, and to a lesser degree, with the proposed-and-now-canceled rebranding of our DVD service. In doing so, we’ve hurt our hard-earned reputation, and stalled our domestic growth,” chief executive officer Reed Hastings and chief financial officer David Wells wrote in a letter to shareholders.

Shares of Netflix were down $41.85 to $76.99 by midday, after trading at nearly $300 in July. Click here for the latest price.

This article was also published in Potomac Tech Wire.

Related links:

Press release –

Letter to shareholder (PDF) –

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