Back in 1997 when Netflix, Inc. (NASDAQ:NFLX) first started lending out DVDs, and then again in 2007 when it started to deliver digital video via the internet, the company was breaking new ground. NFLX stock was a compelling opportunity simply because there was nothing out there like it. Investors let the company spend whatever it wanted without questioning, and consumers paid whatever price Netflix told them to, simply because there was nothing to compare it to.

In retrospect, the company may have picked up some bad habits, while at the same time failed to foresee what would eventually happen if Netflix became the success it has become. Streaming video services are now essentially a commodity and priced as such.

It’s a problem for owners of Netflix stock simply because the company wasn’t built to be a commodity-based business.

Here Comes the Flood

Credit has to be given where it’s due. Netflix CEO Reed Hastings had a vision twenty years ago, and despite doubts and criticisms thrown his way early on, he created a whole new industry on his own.

As is the case with all success though, once enough other players see it, they’ll start to copy it, garnering some of that revenue for themselves.

The latest entrant into the streaming video race, of course, is Walt Disney Co (NYSE:DIS), which recently confirmed it would be wading into streaming video waters with not one over-the-top television service, but two. One of them will provide ESPN’s sports programming through a medium that circumvents traditional cable providers, while the other will leverage the company’s vast treasure trove of entertainment including Marvel and Star Wars movies; both franchises are new owned by Disney. The two new streaming platforms won’t launch for a couple of years, but there’s little doubt at least the latter could present some problems for Netflix.

Disney is hardly the only other name to get into the game, however. Indeed, the list of organizations with an alternative to Netflix has quietly become uncomfortably length for NFLX stock owners.

There’s of course Hulu, which was built by a consortium of media giants including Comcast Corporation (NASDAQ:CMCSA), Twenty-First Century Fox Inc (NASDAQ:FOXA) and Disney’s ABC. It may have only started out as something of an experiment to keep Netflix honest and determine if the market could even support more than one streaming video option. As it turns out, it can support more than two… a lot more.

Amazon.com, Inc. (NASDAQ:AMZN) is clear proof of that. Members of its Prime service not only enjoy free shipping of goods purchase at Amazon.com, but they can also access a sizable audio and video library online. While its selection isn’t as robust as Netflix’s, it’s respectable, and Amazon has enough fans and followers of its exclusive originals to suggest Prime could be a stand-alone product rather than just an ancillary means of selling more merchandise.

The list goes on though. HBO — a division of Time Warner Inc (NYSE:TWX) — now sells subscriptions through a service called HBO Go, accessible on the same devices you can enjoy Netflix on. CBS Corporation (NYSE:CBS) is turning its All Access over-the-top option into something viable, with some exclusive content not even available through network broadcasts. DISH Network Corp (NASDAQ:DISH) has found success with its SlingTV, which by most accounts can be a complete replacement for traditional cable television for as little as half the cost of traditional TV. That’s the model Sony Corp (ADR) (NYSE:SNE) copied with its PlayStation Vue.

And, more alternatives pop up every day. Even Facebook Inc (NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL) are starting to attract video viewers away from Netflix’s offerings, even if only on a limited scale. Small projects can turn big quickly when you’re a Facebook or an Apple.

Bad News for NFLX Stock

It obviously wouldn’t be accurate to say the flood of competition Netflix now faces arrived instantaneously; they’ve been easing their way into the streaming-video marketplace for years.

It would be accurate to say they’re all just now collectively reaching a critical mass though, and Netflix is about to enter the heart of the storm of what can only turn into a price/spending war. That is to say, all of these players will seek to spend as much as they feel necessary to make their platforms the top choice among consumers, but at the same time charge as little as they feel they can afford to in order to prevent customers from defecting to the competition. That’s more or less the unofficial commoditization of streaming video.

It’s a dynamic that keeps all these organizations honest, but it’s also a dynamic that works against Netflix more than any other.

See, Netflix is the only name in the bunch that has the single-pronged business model of selling subscriptions to access video content it has leased or created on its own. Amazon, for instance, uses its streaming offer as a means of also selling goods. Sony’s Vue and SlingTV garner ad revenue from the commercials that still appear in the midst of its piped-in programming. Disney won’t have to pay anything for its content, which was going to be (and has been) created anyway. Ditto for CBS, mostly. And, Ditto for Hulu.

None of those other players have to be as profitable as Netflix has to be, as they all have other means of controlling costs or monetizing their subscribers. Netflix only has one way, and it’s about to face a serious struggle now that online video is being commoditized at rock-bottom prices.

And, let’s call a spade a spade — Netflix has gotten in the bad habit of spending heavily to keep its video selection flush with a massive amount of good content. That’s going to be a tough habit to break now.

If you own NFLX stock, this looming reality should bug you. At the very least it should have you asking tough questions about what Reed Hastings is going to do to find the sustainable balance between spending and pricing… a balance its competition don’t necessarily have to find.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.