Netflix (NASDAQ:NFLX) in Big Earnings Beat, Guidance Great, But International Losses, Content Renewal Costs Largely Ignored

Netflix (NASDAQ:NFLX) has done it again, exceeding the bullish estimates of analyst in their latest earnings report, adding 3.1 million new subscribers to the fold, a record, and offering up great guidance.

As far as overall subscribers at the end of the fourth quarter, they've now risen to $20 million.

One thing that has been mostly ignored, is the costs of expanding international operations to keep growth acceleration over the long term, as well as the cost of renewing existing content deals with media companies. The latter could be costly to Netflix, although not in 2011.

Costs for international expansion will come in at an operating loss of $50 million in the second half. Netflix also said they're going to enter into a second international market, having already started operations in Canada. They haven't yet identified the market they're going to enter.

Netflix generated earnings of $47.1 million, or 87 cents a share in the fourth quarter, far above the $30.9 million, or 56 cents a share they generated last year in the same quarter. It was a 52 percent gain.

For the entire year, Netflix earned $161 million, or $2.96 a share, on revenue of $2.16 billion. The year before they earned $116 million, or $1.98 a share, on revenue of $1.67 billion.

Content deals are vital for the company, but the more subscribers they get, the more clout they have, as their market cap starts to exceed a number of the companies supplying them content.

That doesn't mean they can be lax though, and securing a distribution deal with Starz premium cable channel after the current one runs out in 2012 is a must for them, as it supplies content from Disney and Sony.

But Netflix isn't resting on its laurels, as they're working with a number of studios and media companies in content deals, which they said they'll announce every several months throughout the year as they land them.

Even with the need to look closer at the cost of doing business, Netflix growth rate should continue to go on unabated for years, especially if they time international deals in a way that spreads out the cost and allows some market to turn profitable while others are still having their foundation laid.