When it comes to streaming services, Netflix (NFLX 4.17%) is the godfather of them all. Without Netflix's success, consumers wouldn't have a sprawling variety of options at their disposal today. But ironically, Netflix's streaming innovation is coming back to haunt it.

Compared to other streaming services, Netflix is expensive. Its standard plan (consisting of streaming two devices at once and full HD quality) costs $15.49 per month -- the most expensive standard-tier streaming service available. However, Netflix thinks this will change, arguably making it the best streaming investment on the market.

Netflix is profitable where its competitors aren't

Many streaming companies are wrapped up in their parent companies, making their financials hard to discern. Take Disney's Disney+ streaming service, perhaps Netflix's most fierce competition. The company doesn't report specifics about the profitability of the service, but just stated in its recent earnings announcement that Disney+ was experiencing higher losses.

The idea is to capture customers, then raise prices to a point where profitability is acceptable. Netflix reached this threshold a while ago, so now it looks like the bad guy for having an expensive streaming service versus a cheaper Disney+. This higher price point is partially why Netflix lost subscribers in the first and second quarters of 2022. However, in Q3 it added 2.4 million.

But regardless of subscriber losses or gains, Netflix stayed profitable. In Q3, Netflix delivered earnings per share (EPS) of $3.10, bringing its trailing-12-month (TTM) total to $11.16. Profitability isn't something that Disney+ can claim, and Netflix's management believes it will become a problem in the future.

In the shareholder letter, Netflix claims its competitors are losing money, with estimated combined operating losses across all competitors of over $10 billion. Compared to Netflix's TTM operating profit of $5.7 billion, its competitors have a long way to go. No business aims to stay unprofitable forever, so it believes these competitors will need to raise their prices to survive.

With Netflix already in a steady state, it can focus on the next iteration of its business while its competitors are still establishing their customer base.

Netflix's revenue-boosting plan

As mentioned above, Netflix's offering is costly. But it's creating a new, cheaper option to attract price-sensitive consumers. In November, Netflix will be launching its Basic with Ads tier. This version will inject about four to five minutes of ads before and during content every hour, and it's priced at a competitive $6.99 per month -- cheaper than Disney+'s ad-supported plan at $7.99 per month.

To keep users from downgrading tiers to save money, Basic with ads is only available in the lowest grade of HD quality, only supports one device at a time, and cannot download any content. Most of these stipulations should limit current subscribers' downgrading from the standard and premium plans, but only time will tell if this tier works as intended.

Additionally, Netflix is cracking down on password sharing. To be clear, Netflix always knew consumers were doing it. But it helped grow the brand, and now Netflix has a plan to monetize it instead.

Starting in early 2023, Netflix will roll out a solution that will affect over 100 million households using Netflix without paying for it. Netflix gave investors a sneak peek at its plans for Latin America. In five countries, Netflix allowed users to add additional households for $2.99 extra per month and limited the number of households an account could add based on the subscription tier.

Both of these initiatives should boost revenue -- as long as they don't backfire. Consumers could get fed up with Netflix and cut their subscriptions, but it's unlikely to happen.

After all, these same changes will likely come from the many alternatives to Netflix once they reach their intended audience.

So is Netflix the best streaming investment? In my opinion, yes. Its competitors have a lot of work to do, and Netflix is already three steps ahead of them. However, I'm cautious about the stock. Three months ago, it traded for 15 times earnings. Now it's up to 26 times. I'm not convinced Netflix's performance warranted this run-up, but its recent earnings report changed the narrative around the stock.

At 26 times earnings, I think there are better-valued investments. But Netflix has been a stellar long-term performer, and betting against the company hasn't worked out well for bears over the long term.