Netflix prepares to send its last red envelope | ET REALITY


In a nondescript office park minutes from Disneyland sits a nondescript warehouse. Inside this nameless, faceless building, an era is ending.

The building is a Netflix DVD distribution plant. Once a bustling ecosystem that processed 1.2 million DVDs a week, employing 50 people and generating millions of dollars in revenue, it now has just six employees left to sift through the metal discs. And even that will stop on Friday, when Netflix officially closes the door on its origin story and stops sending its trademark red envelopes.

“It’s sad to come to the end, because it’s been a big part of our lives for a long time,” Hank Breeggemann, CEO of Netflix’s DVD division, said in an interview. “But everything continues its cycle. “We had a great 25-year run and changed the entertainment industry, the way people watch movies at home.”

When Netflix started shipping DVDs by mail in 1998 (the first movie shipped was “Beetlejuice”), no one in Hollywood expected the company would eventually change the entire entertainment industry. It all started as a brainstorm between Reed Hastings and Marc Randolph, successful entrepreneurs looking to reinvent the DVD rental business. No due dates, no late fees, no monthly rent limits.

He did much more than that. The DVD business destroyed competitors like Blockbuster and altered the public’s viewing habits. Once Netflix started its streaming business and then started producing original content, it transformed the entire entertainment industry. So much so that the streaming economy, which actors and writers say is worse for them, is at the center of the strikes that have paralyzed Hollywood.

Even before the strikes, streaming had made DVDs obsolete, at least from a business perspective. At its peak, Netflix was the Postal Service’s fifth-largest customer, operating 58 shipping facilities and 128 transportation locations that allowed Netflix to serve 98.5 percent of its customer base with one-day delivery. Today there are five such facilities: the others are in Fremont, California; Trenton, New Jersey; Dallas; and Duluth, Georgia, and DVD revenue totaled $60 million for the first six months of 2023. By comparison, Netflix’s streaming revenue during the same period reached $6.5 billion.

Despite the reduction in staff, this operation still receives and ships about 50,000 records a week with titles ranging from the popular (“Avatar: The Way of Water” and “The Fabelmans”) to the obscure (Catherine’s crime thriller Deneuve (1998, “Place Vendôme”). Each of the employees at the Anaheim facility has been with the company for more than a decade, some as long as 18 years. (One hundred people at Netflix still work on the DVD side of the business, although most will soon leave the company.)

Some of them started right out of high school, like Edgar Ramos, and can handle Netflix’s patented automatic sorting machines and its Automated Rental Return Machine (ARRM), which processes 3,500 DVDs per hour, with the accuracy of Swiss watch engineers.

“I’m sad,” Ramos said as he sorted the envelopes into their ZIP code bins. “When the day comes, I’m sure we’ll all be crying. I wish we could stream here, but it is what it is.”

Mike Calabro, Netflix’s senior director of operations, has been with the company for more than 13 years. He said unexpected moments of levity were a big part of why he had stayed, like the drawings tenants made on envelopes or the dust and coffee stains on Cheetos that often mark returns, evidence of a product that It has integrated well with customers. ‘ lives.

But when asked if he had ever met some of the busiest customers in person, Calabro quickly responded, “No!” In fact, the anonymous appearance of the facility, which contrasts sharply with the giant Netflix logos that adorn the company’s other real estate properties, is intentional. It is clear that visitors are not welcome.

“If we put Netflix on sale, people would show up with their records and say, ‘Hey, I’d like to return this.’ Can you give me my next album?’” Calabro said.

That was the typical transaction with a video rental retailer, but Netflix wanted to make sure customers knew this was something different.

“It was a decision we made very early,” Breeggemann said. “If they knew where we were, we would run into that problem. And then it wouldn’t be a good experience for the customer. “We wanted to send the mail both ways.”

Netflix’s DVD operations still serve around a million customers, many of them very loyal.

Bean Porter, 35, lives in St. Charles, Illinois, and has subscribed to Netflix’s streaming and DVD services since 2015. She said she was “devastated” that there would be no more DVDs. Porter was able to use her subscription to watch DVDs of shows like “Yellowstone” and “The Handmaid’s Tale,” episodic television shows created for other streaming services that would have required him to purchase additional subscriptions.

She and her husband also watch three or four movies a week and find Netflix’s DVD library deeper and more diverse than any other subscription service. She often hosts cookouts in her backyard and invites neighbors to watch movies on an outdoor screen. That’s easier to do with a DVD, she said, than with streaming because of Internet connectivity issues. She and she became involved with DVD Operations’ social media channel, posting videos, interacting with other customers, and chatting directly with social media managers who work for the company.

“I’m pretty angry,” she said. “I’m just going to have to stream and I feel like what they’re doing is forcing me to have less options.”

To alleviate the backlash, Netflix is ​​allowing its DVD customers to keep their final rentals. Porter intends to keep “The Breakfast Club,” “Goonies” and “The Sound of Music.” As for the last DVD he plans to watch: he will leave it in the hands of fate.

“I have 45 movies left in my queue, and where I land is where I land, as there are too many good options to choose from,” he said.

Employees have a more optimistic attitude. Lorraine Segura started at Netflix in 2008 and used to open envelopes: 650 envelopes an hour. When automation arrived, she was one of the few employees who traveled to the facility in Fremont to learn how to operate the machines and pass that training on to others. She now runs the floor with Mr. Calabro as senior operations manager.

“I learned a lot here: how to fix machines, how to set goals and achieve objectives,” he said before leading his team in a round of ergonomic exercises to prevent repetitive stress injuries. “Now I feel empowered to go out into the world and do something new.”

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