In a nondescript office park just minutes away from Disneyland, there is an unremarkable warehouse. Inside this anonymous building, a chapter is coming to a close. It is a Netflix DVD distribution plant – once a thriving ecosystem that processed 1.2 million DVDs per week, employed 50 individuals, and generated millions of dollars. Now, there are only six employees left to handle the metallic discs. This era will officially end on Friday when Netflix closes the door on its origin story and ceases to send out its iconic red envelopes.
Hank Breeggemann, the general manager of Netflix’s DVD division, expressed his sadness about reaching the end, acknowledging the significant role it played in their lives. He stated in an interview, “But everything runs its cycle. We had a great 25-year run and changed the entertainment industry, the way people viewed movies at home.”
When Netflix first started mailing DVDs in 1998 – with the first movie being “Beetlejuice” – no one in Hollywood anticipated that the company would eventually disrupt the entire entertainment industry. It began as a brainchild of Reed Hastings and Marc Randolph, successful businessmen seeking to revolutionize the DVD rental business. No due dates, no late fees, and no monthly rental limits – it did more than that. The DVD business crushed competitors like Blockbuster and revolutionized public viewing habits. Once Netflix ventured into streaming and original content production, it completely transformed the entertainment landscape. In fact, the economics of streaming, which actors and writers argue are detrimental to their interests, lies at the heart of the industry strikes that have brought Hollywood to a standstill.
Even prior to the strikes, streaming had rendered DVDs obsolete from a business standpoint. At its peak, Netflix was the fifth largest customer for the Postal Service, operating 58 shipping facilities and 128 shuttle locations to achieve one-day delivery for 98.5 percent of its customer base. Today, there are only five such facilities, including the one in Anaheim. DVD revenue for the first half of 2023 amounted to $60 million, while streaming revenue in the United States during the same period reached $6.5 billion.
Despite the reduced staff, this facility still handles around 50,000 discs every week, encompassing a wide range of titles from popular releases like “Avatar: The Way of Water” and “The Fabelmans” to more obscure films such as the 1998 Catherine Deneuve crime thriller, “Place Vendôme.” Each employee at the Anaheim facility has been with the company for over a decade, some as long as 18 years. Though most of them will soon be leaving the company, there will still be a hundred individuals working on the DVD side of Netflix’s business.
Some employees, like Edgar Ramos, started working here straight out of high school. They possess the skills to operate Netflix’s proprietary auto-sorting machines and the Automated Rental Return Machine, which processes 3,500 DVDs per hour with precision. Mr. Ramos, while sorting envelopes into ZIP code bins, expressed his sorrow, stating, “I am sad… Wish we could do streaming over here, but it is what it is.”
Mike Calabro, Netflix’s senior operations manager, has been with the company for over 13 years. He reveals that unexpected moments of lightheartedness have played a crucial role in his decision to stay, such as the drawings made by renters on the envelopes or the Cheetos dust and coffee stains on returns, which reveal the integration of the product into customers’ lives. When asked if he had ever met the most active customers in person, Mr. Calabro promptly replied, “No!” The facility deliberately maintains an anonymous appearance, in stark contrast to Netflix’s other properties adorned with its prominent logos. Visitors are clearly not welcome. Mr. Calabro explained, “If we put Netflix out on the door, we would have people showing up with their discs, saying: ‘Hey, I’d like to return this. Can you give me my next disc?'”
Netflix’s DVD operations still cater to approximately one million loyal customers. Bean Porter, a subscriber to both Netflix’s DVD and streaming services since 2015, expressed her devastation at the discontinuation of DVDs. She utilized her subscription to watch episodic television shows like “Yellowstone” and “The Handmaid’s Tale” – content created for other streaming services that would have required additional subscriptions. Ms. Porter and her husband watch three to four movies per week, appreciating Netflix’s DVD library for its depth and diversity compared to other subscription services. She often hosts backyard cookouts where neighbors gather to watch movies on an outdoor screen, an experience made easier with DVDs due to internet connectivity issues. She has also become involved with Netflix’s DVD operations on social media, posting videos, engaging with fellow customers, and directly communicating with the company’s social media managers. Frustrated, she commented, “I’m pretty angry. I’m just going to have to do streaming, and I feel like what they’re doing is forcing me into having fewer options.”
To mitigate the backlash, Netflix allows DVD customers to keep their final rentals. Ms. Porter plans to hold onto “The Breakfast Club,” “Goonies,” and “The Sound of Music.” As for the last DVD she intends to watch, she will leave it up to chance. She remarked, “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.”
The employees possess a more optimistic outlook. Lorraine Segura, who joined Netflix in 2008, used to open 650 envelopes per hour. When automation was introduced, she was one of the few employees sent to the Fremont facility to learn how to operate the machines and train others. Now, as a senior operations manager, she oversees the workflow with Mr. Calabro. Reflecting on her time at Netflix, she said, “I’ve learned a lot here: how to fix machines, how to set and achieve goals.” She believes that her experience at the company has empowered her to explore new opportunities in the world.
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