By Dan Mitchell
April 24, 2012

FORTUNE — The most surprising aspect of Netflix’s (NFLX) earnings and future-guidance announcement on Monday is that anyone was surprised by it. The company reported that revenues for its first quarter were up by 21% and losses were $4.6 million, compared with a profit a year ago of $60.2 million. That’s actually not bad given the investments the company has made to expand.

But the stock at midafternoon was down by more than 15%, based mostly on the company’s projection that subscriber growth rates would be more or less flat for the year. Many accounts cite the well-publicized “missteps” the company made when it changed its pricing plans last year, effectively boosting prices for many customers, and when announced it would spin off its DVD rental business, then reversed itself.

But the main reason for the anemic projections is simple competition, which everyone knew, or should have known, was coming. Competitors like Amazon (AMZN), Hulu, Dish Network (DISH), Redbox (CSTR) are piling into a market that Netflix once dominated. Not only will they increasingly compete with Netflix on price, but also on bidding for content. Meanwhile, companies like Hulu and Amazon are joining Netflix in presenting some of their own original content.

That will drive down revenue and drive up costs. The competition started getting serious even as many of Netflix’s formerly lucrative licensing deals were expiring. It recently outright lost access to movies from Sony (SNE) and Disney (DIS) thanks to the expiration of its deal with the Starz (LMCA) cable channel. It’s hard to fathom why anyone might have been taken by surprise on Monday — if anything, the news was better than might have been expected. Look for competition to further intensify in future quarters, and don’t be surprised when the news turns out to actually be bad.

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