According to the Form 10-Q filed by Netflix on April 27, 2011 with SEC, during the first quarter of 2011 company's off-balance sheet commitments have increased from $1,075.2 million to $1,634.0 million. According to the filing, these liabilities arise from "streaming content license agreements that do not meet content library recognition criteria" (http://www.sec.gov/Archives/edgar/data/1065280/000119312511112061/d10q.htm).
For Netflix this represents 52% increase in off-balance streaming costs in just 3 months, and 1,423% increase from December 31, 2009 ($114.8 million).
|Dec 31, 2009||$114.8|
|Dec 31, 2010||$1,075.2|
|Mar 31, 2011||$1,634.0|
To put the $1,634 million number of hidden liabilities in perspective, Netflix's total revenues last year were only $2,162 million.
As other Seeking Alpha authors previously pointed out (https://seekingalpha.com/article/265748-amazon-com-s-rising-expenses-shouldn-t-matter-much-to-investors), Netflix accounting of the streaming content expenses is very questionable. Eventualy all these hidden expences will show up on the balance sheet and will dramatically affect reported earnings.
Moreover, if subscriber growth would slow down, Netflix might have trouble generating enough cash not even to make profit, but just to pay for its already accrued liabilities. Consider this: Netflix earnings for FY2011 are expected to be $4.50 per share, while hidden streaming content costs already have reached $30.25 per share.
Disclosure: I am short NFLX.