Piper Jaffray added Netflix (NFLX) to its Alpha list, signaling that the stock displays potential for solid near-term appreciation [link]. To back its outlook, Piper cited Blockbuster’s weaknesses and the fact that rent-by-mail currently makes up only 20% of the movie rental market.

I totally agree, in the short term. However, in the long term, I think Netflix has its work cut out for it, if it is to continue growing in the age of bundled cable/internet/phone/whatever packages. I have no data to back this up, but it is my initial reaction that as “on demand” watching becomes more accessible with cable packages, folks will be more inclined to just click a button and watch the movies that their cable provider is offering.

I realize that NetFlix has an excellent “watch instantly” feature, but most folks aren’t going to be bothered connecting the computer to the television. And television still is the reigning champion when it comes to watching movies.

So I wonder: Will NetFlix continue to innovate its way out of a potential pickle? Or will it go the way of Napster and become irrelevant?

Disclaimer: I don’t have a position in any of the companies mentioned, though I am a NetFlix subscriber.