Netflix, Inc. (NASDAQ:NFLX) shares have actually decreased in value over the last five days despite releasing an earnings report that beat expectations last Monday afternoon. The media streaming company is still up more than 250 percent so far in 2013, so investors shouldn’t be too bitter about the small decline, but it does illustrate a plausible cap on the company’s stock in the medium term.

A new report from Morgan Stanley (NYSE:MS) on Netflix, Inc. (NASDAQ:NFLX) takes an interesting perspective. Benjamin Swinburne, the lead analyst on the report, puts Netflix up beside the other companies in its industry, and looks at their relative valuations. For all of the “disruptive” qualities analysts are trying to foist onto the Netflix narrative, it appears the company is just another cable provider.

Netflix and cable TV

The idea that Netflix, Inc. (NASDAQ:NFLX) is just another cable company has come up before, and Morgan Stanley released a similar report this time last year that compared the company to other cable providers. That report contained a comparison of value between cable TV providers and Netflix based on their programming investment.

Netflix

The central thesis of the Morgan Stanley report is that “the business models [are] likely to converge over the very long run.” In terms of the program investment multiple, that appears to be happening. Netflix, Inc. (NASDAQ:NFLX) has made strides in the area in the last year. The firms on the chart are, from left to right, Discovery Communications Inc. (NASDAQ:DISCA) (NASDAQ:DISCK), Scripps Networks Interactive, Inc. (NYSE:SNI), and AMC Networks Inc (NASDAQ:AMCX).

The value of Netflix, Inc. (NASDAQ:NFLX) is likely to converge with the other cable companies because Netflix is part of the same industry. With companies like HBO offering Internet-based watch-what-you-want services and Netflix services becoming available on cable providers’ set top boxes, the trend seems clear.

Netflix isn’t good at the cable business

Bundling is one of the practices that cable television is most reviled for. The practice involves forcing content cable companies and users on them in order to earn higher margins. This is something that Netflix, Inc. (NASDAQ:NFLX) does not have the opportunity to do because it only offers one “channel.”

This means that earnings potential at Netflix, Inc. (NASDAQ:NFLX) isn’t quite what it is at the other cable companies, and the fact that Netflix pays for licensed content really doesn’t help. Morgan Stanley takes a look at the margins of the four companies.

Essentially Netflix, Inc. (NASDAQ:NFLX) is part of the cable industry whether its investors like to agree or not. The company is beginning to become just another cable company, but one that pays more for content, and earns less as a result. As Netflix, Inc. (NASDAQ:NFLX) focuses more on home-grown programming margins might increase, but risk might also become a problem.

Competition is increasing in the cable space and the Morgan Stanley analysts expect programming spending to increase as a result. Netflix, Inc. (NASDAQ:NFLX) may suffer from the increasing costs. Margins are already low, and the company’s revenue structure isn’t exactly flexible.