For streaming video business Netflix (NASDAQ: NFLX) — formerly known as the by-mail DVD rental business Netflix — the sky seems to be the limit.  In the three years since the company began offering instant streaming video via PCs, the service has spread to over to over 20 different devices made by more than ten different manufacturers. Oh yeah, and NFLX stock has soared nearly +700% in those last three years.

Netflix used to mean one home video release of a popular movie coming through the mail every week, but now it’s all about integrating home entertainment. In January 2011 Netflix means $10 a month to watch an unlimited number of hours of television and movies over the web. That can be on an Apple (NASDAQ: AAPL) iPad while travelling, a Microsoft (NASDAQ: MSFT) Xbox 360 in the  basement or via the Google (NASDAQ: GOOG) and its eponymous Google TV software running on a Sony (NYSE: SNE) Internt Television HDTV.

As no surprise, this pervasive reach of Neflix has made it wildly popular. Research firm Piper Jaffray issued a note on Tuesday morning that traffic to Netflix.com was up an estimated 39% year-on-year during the company’s fourth quarter of 2010. The company jumped from 10 million subscribers in February of 2009 to 16 million subscribers by November 2010.

Netflix is also popular with investors, currently trading at around $187 per share. One year ago it was trading at just above $52 per share and Piper Jaffray’s target price is $217 per share.

What’s Next for Netflix?

After years of dramatic growth though, what can possibly be next for the company? Can Netflix honestly expect its subscriber base to continue growing by millions of subscribers each month with many content providers becoming even more disgruntled with streaming video competitors?

Some think that Netflix’s massive growth won’t slow down just yet. Goldman Sachs analyst Ingrid Chung called Netflix a “killer app” for tablet PCs following last week’s Consumer Electronics Show. Vizio, Motorola (NYSE: MMI), and Research in Motion (NASDAQ: RIMM) were among the many companies that announced tablets at CES, almost every one of which includes support for Netflix’s streaming video service. With some analysts predicting 40 million tablets sold in 2011, there’s a massive new product pool for Netflix to find subscribers in. PC Mag‘s report last week that Blu-ray movie players and Internet-connected set top boxes from Sharp, Samsung, Sony, Toshiba, and even Best Buy (NYSE: BBY) via Dynex will be introducing a devoted Netflix button to their devices remote controls and menus, creating even easier access to the home video company’s ubiquitous streaming service.

The coming boom in the tablet market and the introduction of new viewing options on living room set top boxes don’t necessarily ensure continued growth for Netflix though. These options will, if nothing else, simply to cater to an existing subscriber base whose appetite for instant satisfaction in their entertainment is only becoming more ravenous.

There are two major evolutions in Netflix’s future if the company hopes to maintain its current momentum. The first is expansion into new markets. Now that the company has committed to streaming video as its primary focus, they are free to begin testing service in foreign markets. Their first foray into international waters came last summer when they launched streaming only subscriptions in Canada. CEO Reed Hastings committed to expanding beyond North America if the service was a success in Canada. 2011 is the time when those plans need to come to light so shareholders know that the future is bright.

The second step will be the introduction of premium and advertising supported instant streaming options via Netflix. The overall state of Internet television and instant streaming services is that it’s all a jumbled mess. Users get access to content through Netflix, cable providers like Time Warner (NYSE: TWX), websites like the Disney (NYSE: DIS), News Corp. (NYSE: NWS), and General Electric (NYSE: GE) joint venture Hulu, rental digital storefronts like Amazon (NASDAQ: AMZN) video service and Apple iTunes, and official network and cable channel websites.

Television and movie content providers don’t know where to put their products anymore because there’s no clear avenue to maximum revenue. If Netflix is going to continue dominating the home video market, it needs to diversify its streaming offerings. By offering premium rentals inside its existing streaming service, it will reintroduce high cost single rentals to movie studios stung by dwindling DVD sales and the death of physical rental outlets like Blockbuster.

Advertising supported new television content will keep users satisfied while also maintaining revenue streams for major networks. Both television and movie studios would be fools to not support these initiatives given Netflix’s existing reach. They’ve already got 16 million users at their fingertips, and that number will only continue to grow provided Netflix offers more and more content.

If Netflix fails to expand beyond the North American market in 2011 or find a way to expand their streaming services beyond a catalog of new films and b-list archive content though, the company will hit a ceiling by 2012. This is a make or break year for Netflix. Whether or not they make it depends entirely on getting content partners to come on board.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.