Netflix Chief Executive Officer Reed Hastings speaks during the launch of streaming internet subscription service for movies and TV shows in Canada at a news conference in Toronto
Netflix Chief Executive Officer Reed Hastings speaks during the launch of streaming internet subscription service for movies and TV shows to TVs and computers in Canada at a news conference in Toronto September 22, 2010. The Canadian introduction marks the first availability of the Netflix service outside of the United States. REUTERS

Netflix shares continued on the downward spiral Tuesday, falling another 8.7 percent after Monday's beating, which was about the same.

Trading around mid-day at $131, Netflix has lost more than a quarter of its value this year and 56 percent of its value since setting a record high of $304.79 in July.

The entire loss is attributable to the Los Gatos, Calif.-based DVD service's announcement it will split services. The old Netflix will become just video streaming, whereas the beloved DVD-by-mail service is to be redubbed Qwikster.

Netflix CEO Reed Hastings, in a note to customers, said the divorce is necessary and best. But he apparently only contributed to customer confusion.

Meanwhile, rivals have been quick to pounce. Amazon, the No. 1 e-retailer, has e-mailed all its customers a Halloween promotion offering free trials of its Amazon Prime streaming service.

Netflix was known for shipping DVDs and it attracted millions of customers, brands guru Clive Chajet told IBTimes. If they wanted to add a different service, I guess they had to have a different name.

But the split between Netflix and Qwikster has caused confusion, Chajet said, because it diluted the value of the Netflix brand. Hastings' mea culpa was necessary, he told IBTimes, because the company had to admit, It's our fault. We screwed up.

Jefferies analyst Youseff Squalli labeled the Qwikster monicker somewhat of an oxymoron because it uses snail mail. He also complained that by losing the films from Liberty Media's Starz service next year, Hastings could hardly apologize without any improvement for the underlying service.

With about 25 million customers, Netflix estimates half use mail-order as well as streaming video. But subscription hikes and loss of Starz contributed to subscriber losses.

Netflix shaved third-quarter estimates substantially last week.

Now that the shares have fallen drastically, the entire company is valued at only $7 billion, with enterprise value of $7.4 billion. That could subject Netflix to a takeover by a media company or a rival, like Amazon.

Netflix director Ann Mather is a director of Google, while director Charles Giancarlo, a former Cisco Systems EVP, is a partner with Silver Lake, the huge buyout company. Hastings himself is a director of Microsoft and Facebook.

Conceivably, the Netflix board could split the company in half, awarding shareholders pieces of Qwikster.