(Netflix article updated with Verizon iPad plans.)

NEW YORK (

TheStreet

) --

Netflix

(NFLX) - Get Report

is tumbling after its rating was cut to underperform by an analyst.

Morgan Keegan analyst Justin Patterson is particularly concerned about content costs related to Netflix's new deal with EPIX, a joint venture between

Viacom

(VIA) - Get Report

,

Metro-Goldwyn-Mayer Studios

and

Lions Gate Entertainment

(LFG)

that could add up to 20,000 new titles to Netflix's streaming content.

Patterson estimates that the EPIX deal could cost Netflix about $1.10 a subscriber per month, "providing other content owners with a baseline for negotiations and limiting Netflix's flexibility to obtain more digital content without eroding margins."

Of course, Netflix could increase prices for customers, but Patterson said that move would risk slowing gross adds and increasing churn. "We believe shares no longer reflect fundamental changes in Netflix's business model and that risks now significantly outweighs return," he wrote in a note.

Competition is also increasing within the space.

Hulu

, the online site for streaming television and movies, is starting to tap into Netflix's market. Last month the company announced Hulu Plus, a $9.99 per month service that will provide users with streaming content of some of their favorite TV shows, like

Glee

and

Modern Family

.

Reports also surfaced on Monday that Hulu could be readying itself for an initial public offering, which will surely turn heads of Netflix investors.

Verizon

(VZ) - Get Report

also announced on Wednesday that it will offer its FiOS TV subscribers the opportunity to watch live shows on their

Apple

(AAPL) - Get Report

iPads.

Verizon currently allows subscribers to watch on-demand video on mobile devices.

Other potential competition includes HBO to Go, ABC's iPad application,

Coinstar's

(CSTR) - Get Report

expansion of Redbox kiosks and

Comcast's

(CMCSA) - Get Report

on-demand library.

Patterson now has a price target on Netflix of $100.

Shares of Netflix are falling 4% to $127.32 in morning trading.

-- Reported by Jeanine Poggi in New York.

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