Netflix Nears the Hazardous End of an Era: DVD Distribution to Cease


The Fading Legacy: Once a thriving hub that processed an astonishing 1.2 million DVDs weekly, employed a workforce of 50, and reaped millions in revenue, the Netflix DVD distribution plant now operates with a mere six employees tasked with the solemn duty of handling these metallic discs. This chapter will conclude on a somber Friday, as Netflix officially closes the door on its origin story, ceasing to send out its signature red envelopes.

Hank Breeggemann, the stalwart general manager of Netflix’s DVD division, shared his reflections, stating, “It’s sad when you get to the end because it’s been a big part of all of our lives for so long. But everything runs its cycle. We had a great 25-year run and changed the entertainment industry, the way people viewed movies at home.”

A Transformation Unimagined: When Netflix embarked on its journey of mailing DVDs in 1998—ushering in the era with the shipment of “Beetlejuice”—few in Hollywood could have foreseen the company’s capacity to redefine the entire entertainment landscape. Conceived as a brainstorm between the visionary minds of Reed Hastings and Marc Randolph, accomplished entrepreneurs with a desire to revolutionize the DVD rental industry, Netflix set out with a radical proposition: no due dates, no late fees, no monthly rental limits.

But it accomplished much more. The DVD rental business obliterated competitors like Blockbuster, reshaping how the public consumed content. As Netflix ventured into streaming and delved into producing original content, it catalyzed a sea change in the industry, a transformation so profound that the economics of streaming now lie at the heart of labor strikes that have brought Hollywood to a standstill.

The Impact of Streaming: Even prior to these strikes, the rise of streaming had rendered DVDs obsolete from a business perspective. At its zenith, Netflix ranked as the Postal Service’s fifth-largest client, boasting 58 shipping facilities and 128 shuttle locations, enabling one-day delivery to 98.5 percent of its clientele. Today, a mere five such facilities remain in operation. DVD revenue for the first half of 2023 amounted to a modest $60 million, paling in comparison to Netflix’s streaming revenue in the United States, which soared to a staggering $6.5 billion during the same period.

Enduring Dedication: Despite the dwindling staff, the Anaheim facility continues to process around 50,000 discs each week, encompassing titles that range from the well-known (“Avatar: The Way of Water” and “The Fabelmans”) to the obscure (such as the 1998 Catherine Deneuve crime thriller, “Place Vendôme”). The unwavering commitment of the employees shines through, with each having served the company for more than a decade, some even marking 18 years of loyalty. While some began their journey straight out of high school, like Edgar Ramos, they have since become adept at overseeing Netflix’s proprietary auto-sorting machines and the Automated Rental Return Machine (ARRM), a behemoth capable of processing 3,500 DVDs per hour with Swiss-watch precision.

“I am sad,” confessed Mr. Ramos, his voice tinged with melancholy as he sorted envelopes into their respective ZIP code bins. “When the day comes, I’m sure we will all be shedding tears. I wish we could transition to streaming here, but alas, it is what it is.”

The Unseen Heroes: Netflix’s senior operations manager, Mike Calabro, whose tenure spans more than 13 years, treasures the unexpected moments of levity that have enriched his journey. These include whimsical drawings by renters on the envelopes and the enduring imprints of Cheetos dust and coffee stains on returned DVDs—testaments to a product deeply interwoven with customers’ lives. Yet, when questioned about encounters with the company’s most active customers in person, Mr. Calabro’s response is swift and unequivocal: “No!” The facility’s discreet facade, intentionally bereft of the prominent Netflix logos adorning the company’s other properties, underscores its strict ‘no visitors’ policy.

A Loyal Following: While the sun sets on the DVD era, Netflix’s DVD operations continue to cater to around one million steadfast customers. Bean Porter, a resident of St. Charles, Ill., has subscribed to Netflix’s DVD and streaming services since 2015. She expressed her profound disappointment at the impending end of DVDs, emphasizing their unique value. DVDs provided her access to shows like “Yellowstone” and “The Handmaid’s Tale,” episodic content from other streaming services that would otherwise have required additional subscriptions. Beyond this, she and her husband, avid cinephiles, watch three to four movies each week and consider Netflix’s DVD library richer and more diverse than any other subscription service. Hosting backyard cookouts with neighbors and outdoor movie screenings, she finds DVDs more convenient than streaming, particularly due to intermittent internet connectivity. She has also become actively engaged with the DVD operations’ social media channel, posting videos, interacting with fellow customers, and engaging in direct conversations with the social media managers working for Netflix.

A Bittersweet Farewell: “I’m pretty angry,” she admitted. “I’m just going to have to turn to streaming, and I feel like what they’re doing is forcing me into having fewer options.”

In a bid to cushion the blow, Netflix has allowed its DVD subscribers to retain their final rentals. Ms. Porter intends to keep “The Breakfast Club,” “Goonies,” and “The Sound of Music.” As for her last DVD choice, she’s leaving it to fate.

“I have 45 movies left in my queue, and where I land is where I’ll land, as there are too many good options to pick from,” she concluded.

Embracing New Beginnings: As the chapter on DVDs nears its end, the employees of the Anaheim facility harbor a more optimistic outlook. Lorraine Segura, who embarked on her Netflix journey in 2008, reminisces about the days when she tore open 650 envelopes an hour. With the advent of automation, she became one of the few employees entrusted with the responsibility of traveling to the Fremont facility to master the operation of machines and pass on this expertise to others. Today, she stands at the helm alongside Mr. Calabro, functioning as a senior operations manager.

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