At first, Netflix, Inc. (NASDAQ:NFLX) was a dumb pipe. NFLX stock was driven by making deals with content providers to license their content to show on Netflix. Technology improved and now streaming providers are everywhere. So Netflix pivoted and moved into original programming.

It now says it will spends billions of dollars every year on original programming. So where is this all headed and what does it mean for NFLX stock?

From a business standpoint, Netflix wants to make so much original programming that it is effectively another channel like HBO. It is well on its way.

The idea is that it will draw down billions of dollars in debt to produce the shows, and that recurring subscription revenue from its growing global base will eventually start to make a dent in negative cash flow. Then Netflix will raise subscription prices gradually.

Then at some point, subscription revenue exceeds programming costs and debt service, and NFLX stock becomes driven by ongoing profit. NFLX stock will carry tens of billions of dollars in debt, but that’s no different than any other media company.

It’s not clear how long this will take and it doesn’t really matter from a business or consumer standpoint. The point is that it will probably happen sometime.

What could forestall this from happening? First, if content gets weak, then consumers may get fed up paying for the content, especially if prices rise. The other issue is competition.

More and more streaming services are lining up, although Netflix has a huge head start. Still, at some point Hulu, Crackle, the streaming services of Walt Disney Co (NYSE:DIS), Apple, Inc. (NASDAQ:AAPL), and Amazon.com Inc. (NASDAQW:AMZN) will have tons of offerings.

Consumers will likely choose two or three channels. Netflix wants to be the dominant brand.

But then what? In the old days, a studio would produce lots of films and TV shows, and then license the rights to its library to third parties for usually five to seven years. So the studio would generate initial revenues when the content was first released, generate ancillary revenues from other media, and then the library itself would have value.

So a company could project out cash flow from its library over a period of five to seven years.

In the world of original streaming content, there won’t be much licensing to be had. It’s possible that, like the old days, people would bypass a film in theaters and “wait for it to come to TV.” It’s possible that network TV, pay and basic cable, and local stations will pay for that original streaming content.

But these outlets all have original programming now, as well. Anyone who wants to see original Netflix programming probably already has Netflix, which doesn’t help NFLX stock. Netflix has 53 million subscribers already.

So the library itself may be limited in value.

Which means eventually revenue growth is going to tap out. Subscriber additions will slow and then flatten out. Subscription fees will start to come down as more and more players fight for viewers. Netflix will have to scale back on original programming to remain profitable.

That’s a long way away. In the meantime, NFLX stock remains beyond pricey. It’s incomprehensibly expensive. But that doesn’t mean the market cares.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.