Netflix (Nasdaq:NFLX) Losing its Shine, More Bears Emerging

As long at the rules of the movie and TV distributorship were for DVDs to be delivered to mailboxes, Netflix (Nasdaq:NFLX) had a powerful moat and seemingly insurmountable lead in content delivery.

Now that the rules of the content delivery game are rapidly changing, a growing number of investors and analysts are getting more bearish on Netflix, as it's clear they're going to struggle to defend their market position as content delivery goes digital.

Netflix has noted this will lower costs for them. The problem is it also lowers barriers to entry for other companies, who now don't have to think in terms of developing a physical delivery system to compete with Netflix, but just put content online for consumers to download.

In other words, content delivery is about to become a commodity, and how will Netflix compete against giants like Amazon.com (NASDAQ:AMZN) when price is the deciding factor?

This won't mean they'll lose all their business, as there will always be people who prefer a physical disk to digital, but that numbers gradually decreasing, along with Netflix's original business model.

One major unknown is how the international expansion of Netflix will play out, and if they will gain some share there which will be difficult to penetrate. But that's talking of physical disks again.

If delivery is digital, the world is everyone's playground, and global market penetration for physical disks will be mostly irrelevant in that regard.

The other unknown is how long it'll take for consumers to adopt digital as the the form of delivery. Younger demographics will do this quickly, but older demographics will slowly respond.

That means Netflix has time to adapt to the new realities. But again, they're not big enough to compete on price alone, and when digital delivery becomes dominant, how will they be able to differentiate?

Netflix was trading at $240.16, dropping $7.39, or 2.99 percent, as of 1:49 PM EST.