Netflix, Inc. (NASDAQ:NFLX) has everyone speculating over what higher prices mean for the NFLX stock price and profits. The last time NFLX tried to raise prices, it was nothing short of a disaster: customers leaving en masse, more than $11 billion chopped from the market value. Sounds like something for the horror movie genre.

Though this took place what may seem like a distant five years ago before shares had started their skyrocketing, in the minds of management, the event no doubt still looms large in their minds. Deja vu, all over again. It’s a reminder that customers can demonstrate remarkable price sensitivity even if your product is differentiated and seemingly better than the other options out there.

It’s also a reminder that even the top competitor in the internet streaming and video-on-demand space have to keep their eye on the prize. One blink, one misstep could send investors fleeing.

No one in the C-Suite has forgotten when Netflix lost 800,000 U.S. subscribers during the quarter that announced the price hike and the DVD business spinning off into Qwikster, which ultimately failed.

NFLX’s Big Content Push

One of the major differences this time around is the nature of the Netflix content library. It’s certainly smaller, having let licensing deals with the likes of the Epix cable network and Walt Disney Co (NYSE:DIS) expire, though with the latter not 100% of content will be taken off NFLX’s platform. That recent announcement of the sun setting on the DIS arrangement in 2019, sent some nervous ripples through the market, but the stock has continued to charge on up.

Notably, shows like Narcos, Orange is the New Black, and House of Cards have propelled Netflix into the realms normally reserved for Hollywood studios. Back then, NFLX wasn’t the studio-esque force it is today, reaping Golden Globes and Emmy nominations.

So while I don’t discount the value in a disruptor, I have to keep in mind that the market’s eye is always on the money. NFLX may be spending less on licensing rights — which don’t come cheap, especially for popular titles — by going the original programming route, but in turn, they have to spend billions on productions. That’s cash out the door with no clear return, as it can be a very hit-or-miss system.

Source: Statista

As a result, it’s hard to model where they end up, spending at current prodigious rates. Sure, the growth profile looks good but the sustainability of it all is still in question, especially when domestic saturation seems nigh.

NFLX This Time Around

So, given the product changes and the shift to the business model where the emphasis now is clearly on original content and user personalization, where does this leave NFLX?

DVDs are obviously a much smaller part of the business. Internet streaming boasts higher margins and fewer logistical issues that the physical DVD business runs into, not to mention postage fees that’s a cash outflow for NFLX. The DVD business also happens to be one on a perpetual decline. The question is just of when it falls off a cliff.

Logically then, NFLX is all about how to increase the value of the library and its technological capabilities both on the platform and the backend algorithms that match up content to user data. Subscriber growth indicates that the company is succeeding on both fronts.

Bottom Line on NFLX Stock

I still feel that valuations are too toppy for comfort. The business has shifted, the landscape has changed, and if they call pull of the price hike and further ones down the line without angering customers, this would be a more visible step towards profitability.

A 198x multiple is a high price to pay for really any company, and on a relative basis there are attractive companies in the tech space that trade for a fraction of that.

If you’re a growth investor, you may not agree with that assessment, but whichever category of investor you classify yourself as, the next step will to be see how this translates to the numbers. If marketing spend is down, content spend is in line, and operating earnings are up, I could be convinced to change my mind.

As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.