Is Netflix's Reign Short-Lived? (NFLX, WMT, BBY, DISH, AMZN)

Shares of Netflix (NASDAQ: NFLX) have been on a tear lately. Although the company has been rewarding shareholders for the last five years, investors should be asking themselves if now is a good time to start taking some profits. No one ever went broke selling near the top, and earlier today shares of Netflix put in a new all time high of $254.98.

Since 2005, Netflix has seen its number of subscribers jump from slightly below five million, to over 20 million today. As a result, shares have skyrocketed from $11.55 to the current price of $251.97. In the same timeframe, the company's market cap has grown from $574 million to $13.15 billion.

There is no denying the company's success, but one has to wonder how much growth Netflix has to go from here. As it stands, the company has no real competition in the online movie rental space, which has allowed for its exponential revenue and subscriber growth. Such things never last, however, as competitors always emerge in a lucrative business.

Here are a few potential up-and-coming rivals emerging in the online movie space:

1) Wal-mart and Bestbuy: Wal-Mart Stores (NYSE: WMT) and Best Buy (NYSE: BBY) are the top two DVD retailers in the United States. To compensate for declining revenue in the DVD disc space, however, both companies have acquired digital video businesses. Best Buy operates CinemaNow, while Wal-Mart has Vudu. Both corporations have been exploring a possible switch from their current pay-per-view models, to a Netflix-style subscription service.

2) DISH Network: DISH Network (NASDAQ: DISH) recently acquired Blockbuster with the intention of using the brand's name, inventory, and technology to create an internet video service.

3) Hulu: Hulu, which has mainly focused on online television programming, is making a push to add movies to its repertoire.

4) Amazon: Amazon (NASDAQ: AMZN): The online retailer recently began offering its Instant Video service.

All of these potential players are welcomed by Hollywood studios. As they see it, the increase in competition could lead to potential bidding wars for content, which would, of course, add to their bottom line.

Whether or not any of these companies will overtake Netflix as the industry leader is ultimately irrelevant. What matters, and what should matter to current shareholders, is that an increase in competition usually leads to a decline in market share, and a subsequent decline in share price.

It takes a substantial amount of capital to succeed in the online movie business, as content does not come cheap. Netflix does not have any problems in that department, however, as the company has increased spending in this area from $180 million in 2010 to a projected $2 billion in 2012. In order to succeed, its competitors will have to dig deep. With heavyweight names such as Amazon, Wal-Mart, and DISH Network in the mix, that should not be an issue. This game is just getting started.