What counts is the amount of cash a business generates, after all expenses. Netflix generated 15% less cash in 2010 than in 2009. The explanation can be found in their report:
Cash provided by operating activities decreased by $48.7 million or 15.0% during the year ended December 31, 2010 as compared to the year ended December 31, 2009 primarily due to increased spending for content acquisition and licensing other than DVD library of $267.8 million. This increase was coupled with increased content delivery expenses of $78.7 million primarily resulting from a 9.7% increase in the number of DVDs mailed to paying subscribers and higher costs associated with our use of third-party delivery networks to deliver streaming content, increased promotional advertising activities and expenses related to our affiliates and consumer electronics partners totaling $33.6 million, increased payroll expenses of $36.2 million due to a 11% increase in employees, increased fulfillment expenses of $33.4 million, and increased current tax provision of $30.5 million. In addition, excess tax benefits from stock-based compensation increased by $49.5 million. The increase in these expenses was partially offset by an increase in subscription revenues of $492.4 million resulting from a 41.3% increase in the average number of paying subscribers.
Their off-balance sheet obligations have now grown to $1.5b, which represents a significant risk, should demand for their service slow down due to competition. Basically, Apple, Google,... could bancrupt Netflix on pricing in the future. Of course Netflix would issue more stock before that happens. Maybe that is not so far away.
By the way, Netflix has so far (last 6 months) only purchased $60m worth of stock out of the $300m declared for a 18month period. Looks like Netflix also thinks the stock is too expensive to buy right now.