Netflix loses customers over prices hike

The US video rental giant Netflix has reported a fall in subscribers in the third quarter of 2011, as customers respond negatively over price increases.

Netflix, which yesterday confirmed plans for a UK and Ireland launch in early 2012, had 23.8 million customers worldwide at the end of September, a drop of more than 800,000 from June.

Earlier in the year, the company raised prices for its DVD rental and online streaming services, causing an immediate backlash from customers.

Despite the customer drop, Netflix reported a rise in profits in the quarter by 65% year-on-year to $62.5m (£39.1m). Revenue was up 49% to $822m (£514m), far exceeding analysts' expectations.

However, the fall in subscribers was much sharper than predicted, causing shares in Netflix to fall in after-hours trading in New York by 27% to $87.

Netflix has already lost 60% of its value since July after it raised prices for its DVD rental and online streaming service, as well as confirm plans to sell off the DVD arm of its business.

"Our streaming marketing has been very effective in the past two years," said Netflix chief executive Reed Hastings in an interview.

"We are going to work on improving the user interface, expanding to more platforms and delivering more content. There's no grand gestures, there's just a lot of steady and intense efforts."