Netflix (NFLX 0.01%) recently announced its 2023 first-quarter financial figures, and the results were mixed. Revenue of just under $8.2 billion fell below Wall Street analyst estimates, but diluted earnings per share of $2.88 beat expectations by a tiny margin.

Additionally, the business added 1.75 million net new subscribers during the three-month period. The stock was down 3% the day after the news on April 19, but it's up 10% so far in 2023. 

This was the third straight quarter that the streaming service leader grew its member base. While this data point gets most of the attention, investors should focus on another key metric that truly exemplifies Netflix's dominance in the industry. Keep reading to find out what this is and why it's so important. 

Benefiting from massive scale 

When it comes to Netflix's first-quarter financials, shareholders should probably be more excited about the fact that management now expects the company to generate $3.5 billion in free cash flow (FCF) in 2023, up from a prior target of $3 billion. For most of the past decade, Netflix was a cash-burning machine, as it tried to achieve growth at all costs. In fact, in the five-year period from 2018 through 2022, the business spent roughly $73 billion of cash on content. Netflix bears always questioned if the company could ever get to positive FCF. Last year's $1.6 billion of FCF and this year's upgraded projection certainly give Netflix bulls more reasons to be optimistic that this is the new normal. 

Free cash flow is essentially what a company has left over after paying all of its expenses, as well as reinvesting capital to grow. This money can be used to fund acquisitions, pay down debt, pay dividends, or repurchase shares. Usually, this signals that the company's growth opportunities may not be as robust as they once were. But in Netflix's case, this milestone is extremely important. 

First, it demonstrates how valuable the company's first-mover advantage in the streaming industry really was. Since first launching streaming capabilities in the U.S. in 2007, Netflix had minimal direct competition for a long while. And this allowed it to gain subscribers at a rapid clip each year simply because it was the better user experience compared to cable TV. Co-founder Reed Hastings' hope was always that at a certain level of scale, the cash flow would come. 

With 232.5 million subscribers today, this scale appears to have been reached. No other single streaming service can match this. This allows Netflix to spread out the $17 billion in content it will spend in each of the next couple of years among this huge customer base. With that big of a content budget, essentially all of its categories can be invested in, like TV series, movies, and documentaries, in all of its geographies. With a $17 billion budget, there should be something for everyone. 

And then it's worthwhile to consider some of Netflix's most formidable competitors today. The entertainment and media juggernaut Walt Disney and its Disney+ service have 161.8 million subscribers today. But the company's direct-to-consumer (DTC) segment posted a $1.1 billion operating loss in the latest fiscal quarter. CEO Bob Iger hopes to achieve profitability by fiscal 2024, which will be even more difficult to do now given how crowded the space is. 

Or what about Warner Bros. Discovery? The merger between WarnerMedia and Discovery last year saddled the combined entity with a ton of debt, $49.5 billion (as of Dec. 31) to be exact. And its DTC segment also operates at a loss. Both Disney and Warner Bros. Discovery are looking to seriously cut content costs to shore up their streaming segments. But this will make it that much harder to attract new subscribers, while trying to raise prices in the future. 

Netflix no longer needs to raise outside capital, and it has already continued its share repurchase program this year. Being first to the streaming party has paid off for the business, and it can continue benefiting Netflix for the foreseeable future, especially against its rivals.