Yesterday, Netflix announced that its aggressive international expansion plans will bring its internet movie and television streaming service to the U.K. and Ireland in early 2012.

The announcement should have been a bright spot for a company which has been flying high for the past several years. But it was overshadowed by a bout of bad news: last quarter, Netflix lost 800,000 subscribers in the U.S.

The loss is. as you might have guessed, primarily attributable to Netflix’s splitting of its DVDs-by-mail and online streaming services, which effectively represented a significant price increase. This, not surprisingly, was followed by a customer uproar.

Faced with angry customers threatening to ditch their Netflix subscriptions, Netflix CEO Reed Hastings took to the Netflix blog and issued an apology.

However, he didn’t do anything about the price increase, and to make matters worse, he announced a rebranding for Netflix’s DVDs-by-mail service, a rebranding that was canceled after it sparked even more outrage.

Customer anger and threats, of course, don’t always materialize into action, but now we know that they did for Netflix. “Our primary issue is many of our long‐term members felt shocked by the pricing changes, and more of them have expressed that by cancelling Netflix than we expected,” the company admitted as it released its Q3 earnings. On the flip side, well under 10% of those subscribers who stayed signed up for both the DVDs-by-mail and streaming packages.

Investors, who had previously seen its stock price top $300 just months ago, battered the company on the news, shaving more than 25% off its value yesterday after hours. When the markets open today in New York, a share of Netflix stock will probably be yours for under $90. Talk about ‘ouch!

The good news for Netflix is that the company isn’t the internet version of Lehman Brothers. After all, the company still has nearly 24m customers. But Netflix’s missteps in the past several months have created some long-term challenges that, if not dealt with appropriately, could prove very detrimental.

Reuters’ Felix Salmon explains:



He goes on:



Salmon suggests that Netflix’s strategy was “sub-optimal” for all parties involved, and that if it wasn’t riding so high, it might not have been so eager to sign deals that, in retrospect, were perhaps too rich.

Which raises the question: where does Netflix go from here? Its plans have been largely based on the assumption that it would continue to grow at a certain pace and enjoy the luxuries that come with an exorbitant valuation.

Now, with the company losing subscribers and facing losses in the short-term, it’s not inconceivable that Netflix will never be the same again.