Last week, Netflix Inc. (NASDAQ: NFLX) pulled out of the bidding for the rights to rerun “Seinfeld.” Monday morning, Evercore ISI analyst Ken Sena downgraded the stock from Hold to Sell and lowered his price target from $450 to $389 a share.

A report at CNBC cites Sena’s report:

Content providers themselves are becoming more proficient in their own over-the-top solutions, providing them more control and flexibility to achieve higher overall ROI (return on investment). Some recent examples include ABC’s live streaming of ‘The Oscars Backstage’ on Facebook, Apple’s 3-month exclusive for HBO Now, Snapchat’s new Discover platform, or even HULU, [Yahoo’s], or [Amazon’s] reported interest in acquiring Seinfeld streaming rights. Each of these signifies growing choice to the content provider.

The thinking is that content providers want to maximize their revenue and that Netflix’s usefulness in that quest is limited to how many dollars can be wrung out of the leading streaming video service. But is that really all there is to it?

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At the end of the fourth quarter of 2014, some 40% of U.S. households subscribed to at least one over-the-top (OTT) service. Of that total, 36% have access to Netflix, compared with 13% who have access to Amazon Prime and 6.5% who have access to Hulu. Content providers clearly believe that by going it alone or partnering with another company will cut into Netflix’s base. Maybe, and maybe not.

According to a recent report from Digitalsmiths, a Tivo Inc. (NASDAQ: TIVO) company, OTT services appeal to customers for three reasons:

• Convenience (57%)
• Lower cost (47.3%)
• Ability to watch certain TV shows and whole seasons (43%)

Digitalsmiths also reported that nearly 80% of pay-TV subscribers watch no more than 10 channels. This is leading subscribers to wonder why they are paying as much as $150 a month or more for a pay-TV package they don’t use.

This is pay-TV’s biggest problem, but it could point to an issue for all content providers. No matter how much pay-TV subscribers are now paying, nearly all want to pay less and to pay only for what they want. This will eventually pit HBO against ESPN and every content provider against another. There is little that is convenient or cost effective about such a scenario.

The researchers at Digitalsmiths say that 2015 “will be the year to determine whether OTT really disrupts the Pay-TV market.” Will Netflix’s basic $9 a month subscription fee trump HBO Now’s $16 monthly fee? Strictly on a cost basis, Netflix appears to win this contest, but HBO has probably got more high-quality, in-demand content than Netflix. That situation may even out as Netflix produces more original programming, but that is still a ways in the future.

It is tough to argue that Netflix is undervalued. Its forward price-to-earnings ratio is currently 76.54, a level associated with high-growth companies that do not pay dividends. Perhaps unfortunately for Netflix, the main metrics that investors use to evaluate its stock are subscriber count and subscriber growth, and Evercore believes that both are threatened in the near term.

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Even at the analysts’ new price target, the stock is richly valued. Shares posted an all-time high above $485 a month ago, but they have lost about half their gain since then and closed at around $438 last Friday. Shares traded down about 4.4% Monday afternoon at around $419, in a 52-week range of $299.50 to $489.29.

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