NEW YORK – Netflix 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, based in Los Gatos, Calif., revealed late Monday that it ended September with 23.8 million U.S. subscribers. That’s down about 800,000 from June. In September, the company predicted it would 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 spinoff of 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, Netflix created what many perceived as a more complicated rental process at a company that began its rise with a new, easier way of searching for and finding entertainment.

Netflix shares fell $41.47 to close Tuesday at $77.37. The stock is down from more than $300 just 3 months ago. The last time the stock was trading so low was in April 2010, but that was during its steep ascent.

The results prompted a downgrade to “neutral” from “buy” from Citi Investment Research analyst Mark Mahaney on Tuesday.

Netflix Inc. did report better-than-expected financial results for the third quarter, but that was drowned out by the din of subscriber cancellations, expense controls and a one-time tax benefit, said Wedbush analyst Michael Pachter.