Why Netflix is a goner

It wasn’t that long ago that Netflix (NFLX +1.03%) was destined to become a category killer. Its disruptive business model of delivering DVDs by mail coupled with its availability of long tail content became so successful that it brought down mighty Blockbuster Video.

 

But a funny thing happened on the way from a stock price of $8 to $300: Netflix itself began to fall apart even as its shares soared.

 

That means the peak numbers could be dramatically inflated, and that the lows are still a long way down from here.

 

In the past few years, technology has caught up with Netflix — then blown past it — and along with it came a different way studios permitted content to be used. Netflix, or anyone else, can purchase a DVD and rent it out as often as they like. However, streaming content has to be licensed. The world started to move toward streaming content, and it still is. NFLX simply does not have the fiscal resources to license enough material to remain competitive, much less become a category killer.