Stock Quotes in this Article: AAPL, AKAM, AMZN, DTV, LLNW, NFLX, TWC

The following commentary comes from an independent investor or market observer as part of TheStreet’s guest contributor program, which is separate from the company’s news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.

WINSTON-SALEM, N.C. (Magnum Opus Financial) -- There is certainly no shortage of coverage of how Facebook's online video-rental service could mean the death of Netflix (NFLX). But while owners of Netflix stock, which has been a virtual monopoly, should always be concerned about competition -- and there probably will be legitimate competition down the road -- they probably don’t have to run screaming for the exits today.

Sure, technically, Facebook is streaming content. But that doesn't mean we should lump it together with Netflix's unlimited streaming business, which works differently. Streaming refers to the fact that the content lives "in the cloud" and is delivered to you without ever "living" on your device. But Facebook's streamed content is available for only 48 hours, whereas under Netflix's model, your streaming "copy" never expires.

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    Thus, Facebook's new service strikes us as more in competition with video-on-demand services such as Time Warner Cable's (TWC) or DirecTV's (DTV), which also charge you to watch content for a limited period of time, or digital rental and download services such as Apple's (AAPL) iTunes'. Currently, only iTunes offers the option to buy a digital copy of the content, in addition to renting it for a prescribed period of time.

    It will be interesting to see if Netflix responds at all to the move by Facebook. If anything, a serious competitor to iTunes -- and Facebook’s distribution makes it just that -- may mean that we could see pressure on margins for AAPL’s iTunes business. And it is hard to imagine that TWC and DTV won't take the real brunt of this move since their VOD services allow you to rent via your television for $5.99 to $7.99, compared with Facebook's $3 rental fee.

    The proper response by NFLX would be to go out and buy Starz or DC Comics (which is unfortunately a subsidiary of Time Warner's (TWX) Warner Bros., Facebook's partner in its new video service) and compete against companies such as Disney (DIS) toe to toe on what NFLX does best: distributing content for a fee.

    While Facebook, Amazon (AMZN) and the like might dabble in Netflix's territory, it would take a full-fledged assault in order to dislodge Netflix from atop the leaderboard of content streamers. As for Amazon, it added streaming content for its Amazon Prime members without increasing membership fees, leading us to believe that this move will do little but cut into Amazon's margins. And further analysis will have to take into account the cost for Amazon to acquire a video library anywhere near the size of Netflix's.

    Also in Netflix's favor is that it is available on nearly every Internet-enabled device, whereas Amazon is really only available when the Internet is being accessed directly (the issue we see with the Facebook model so far as well). For Amazon to catch up to Netflix, it’s going to take a significant capital expenditure commitment.

    That said, while Netflix has seen a massive decline from its high of $247.55 just last month to its closing price of $192.99 today, it still may not be the time to rush in and buy Netflix stock. Rather, a long in-the-money call spread, short put spreads, or a call spread risk reversal may be just what the doctor ordered.  The trend is certainly down at this point, but eventually Netflix will find a floor. For now, we have rolled our NFLX 205/200 short put spreads down and out to the April 185/180 put spreads and will see how the stock trades over the next 30 days.

    Keep in mind that eventually, serious competition will come to Netflix,
    and the multiple will never be what it once was. But so far, we don’t
    think that moment has arrived for Netflix.

    The real winner in all of this may just be Akamai (AKAM) or Limelight Networks (LLNW), which are both responsible for delivering mobile video over a range of platforms. Think of it like buying Qualcomm (QCOM) instead of choosing between Google (GOOG) and Apple in the smartphone war. Both Akamai and Limelight should win as players enter the space to deliver a variety of content to subscribers, purchasers and renters alike.

    Brad Kelly is president, founder and portfolio manager for Magnum Opus Financial, a Registered Investment Advisory firm based in North Carolina that serves clients in 10 states. Kelly has been trading for 10 years and managing money professionally for clients for five years. He is president of the Piedmont Club Men's Investment Group and frequently is a guest lecturer at University of North Carolina Greensboro, in the finance department.