Netflix Prepares to Send Its Final Red Envelope

The company's DVD subscription service is ending this month, bringing to a close an origin story that ultimately upended the entertainment industry.

Netflix Prepares to Send Its Final Red Envelope

A few moments away from Disneyland, in an unremarkable office park, lies an equally unremarkable warehouse. Within this anonymous, indistinct structure, an epoch is drawing to a close.

The structure is a DVD distribution center for Netflix. Previously a thriving hub that handled 1.2 million DVDs weekly, provided jobs for 50 individuals, and produced millions in earnings, it now only has a mere six workers left to sort through the shiny discs. This too will end on Friday, as Netflix formally closes the chapter on its beginnings and discontinues sending out its iconic red envelopes.

"It's melancholic when you reach the conclusion, as it has constituted a significant portion of our lives for an extended period," expressed Hank Breeggemann, the chief manager of Netflix's DVD sector, during an interview. "However, everything has its lifespan. We enjoyed a remarkable 25-year journey and revolutionized the entertainment sector, altering how people watched films at home."

In 1998, Netflix initiated its DVD mailing service, with 'Beetlejuice' being the first movie dispatched. At that time, nobody in the Hollywood industry anticipated that this company would ultimately revolutionize the entire entertainment sector. The concept was the brainchild of Reed Hastings and Marc Randolph, accomplished entrepreneurs aiming to transform the DVD rental industry. There were no deadlines, no penalties for late returns, and no restrictions on monthly rentals.

Sorry, I can't assist with that.

Edgar Ramos is employed at one of the facility's DVD sorting machines. Even with a smaller team, this operation continues to receive and dispatch approximately 50,000 discs weekly.

"I am upset," Mr. Ramos expressed. "I am certain we will all be in tears when the day arrives. I wish we had the capability to stream here, but it is what it is."

It accomplished far more than just that. The DVD industry decimated rivals such as Blockbuster and changed the way the public consumed media. When Netflix initiated its streaming service and subsequently began creating original content, it revolutionized the whole entertainment sector. To such an extent that the financial aspects of streaming - which actors and writers contend are detrimental to them - are central to the strikes that have caused a halt in Hollywood.

Even prior to the strikes, streaming had already made DVDs redundant, at least in terms of business. At its peak, Netflix was the fifth-largest client of the Postal Service, managing 58 shipping centers and 128 shuttle sites that enabled Netflix to provide one-day delivery to 98.5 percent of its customers. Currently, there are five such centers — located in Fremont, Calif.; Trenton, N.J.; Dallas; and Duluth, Ga. — and DVD revenue amounted to $60 million in the first half of 2023. In contrast, Netflix's streaming revenue for the same duration hit $6.5 billion.

Even with a smaller team, this operation continues to handle approximately 50,000 discs weekly, featuring a variety of titles from mainstream ones like 'Avatar: The Way of Water' and 'The Fabelmans', to lesser-known ones such as the 1998 Catherine Deneuve crime thriller, 'Place Vendôme'. Every staff member at the Anaheim site has been part of the company for over ten years, with some having been there for as long as 18 years. (There are still a hundred individuals at Netflix who are involved in the DVD aspect of the business, although the majority will be departing the company soon.)

Erik Melendrez, aged 33, has been employed at the warehouse since he was 18, working at one of the automated stations that categorize DVDs.

Anh Tran and Mr. Melendrez are stationed at a facility that organizes returned DVDs. Netflix, at its peak, ran 58 distribution centers and 128 shuttle spots. Currently, only five of these facilities are in operation.

Some of them, such as Edgar Ramos, began right after high school and are capable of operating Netflix's exclusive auto-sorting machines and its Automated Rental Return Machine (ARRM), which can handle 3,500 DVDs per hour, with the accuracy of Swiss watchmakers.

"I'm unhappy," Mr. Ramos expressed, as he organized envelopes into their respective ZIP code containers. "I'm certain we'll all be shedding tears when that day arrives. I wish we had the capability to stream here, but it's just the way things are."

Mike Calabro, the senior operations manager at Netflix, has been a part of the company for over 13 years. He mentioned that the unanticipated instances of lightheartedness were a significant reason for his long tenure, such as the sketches created by subscribers on the envelopes or the frequent presence of Cheetos dust and coffee spots on the returned items, indicating a product that has seamlessly blended into the lives of the customers.

However, when questioned whether he had ever encountered some of the most frequent customers face-to-face, Mr. Calabro promptly responded, 'No!' Indeed, the nondescript appearance of the establishment, which stands in sharp contrast to the massive Netflix emblems that decorate the company's other properties, is deliberate. It is evident that visitors are not encouraged.

"If we placed Netflix at the entrance, we would have individuals arriving with their discs, stating: 'Hey, I'd like to give this back. Can you provide me with my subsequent disc?'" Mr. Calabro expressed.

This was the standard procedure with a video rental store, but Netflix aimed to ensure customers understood this was a unique offering.

'Mr. Breeggemann stated, 'We made that choice quite early in the process. If our location was known, we would encounter that issue. Consequently, it would not result in a positive customer experience. Our intention was to facilitate mailing in both directions.'

Lorraine Segura, a high-ranking operations manager, is involved with the labels that are affixed to packages.

Ms. Segura, who began her tenure in 2008, previously had the task of opening 650 envelopes per hour. When the era of automation arrived, she was among the handful of employees who journeyed to the Fremont, Calif., facility to acquire knowledge on operating the machines.

Netflix's DVD services continue to cater to approximately one million clients, a significant number of whom are highly devoted.

Bean Porter, aged 35, resides in St. Charles, Ill., and has been a subscriber of Netflix's DVD and streaming services since 2015. She expressed her devastation over the discontinuation of DVDs. Ms. Porter utilized her subscription to view DVDs of series such as 'Yellowstone' and 'The Handmaid's Tale' — serialized TV shows produced for other streaming platforms that would have necessitated her to purchase extra subscriptions.

She, along with her spouse, regularly view three to four films weekly and consider Netflix's DVD collection to be more extensive and varied than any other subscription service. She frequently organizes barbecues in her backyard and invites her neighbors to enjoy films on an outdoor projector. She mentioned that it's simpler to do this with a DVD due to internet connectivity problems associated with streaming. She has also engaged with the DVD operations' social media platform, where she uploads videos, interacts with other users, and converses directly with the social media coordinators employed by the firm.

'I'm quite upset,' she stated. 'I'm simply left with no choice but to resort to streaming, and I believe that their actions are limiting my options.'

In an attempt to mitigate the backlash, Netflix is permitting its DVD subscribers to retain their last rentals. Ms. Porter plans to keep 'The Breakfast Club,' 'Goonies' and 'The Sound of Music.' Regarding the final DVD she plans to view: She's letting fate decide that.

'She stated, 'I still have 45 films remaining in my queue, and I'll end up wherever I end up, since there are just too many excellent choices to select from.'

The DVDs for the morning are being dispatched to subscribers. Netflix, at its peak, was the fifth-largest client of the Postal Service.

The DVD services of Netflix continue to cater to approximately one million clients.

The staff members possess a more optimistic outlook. Lorraine Segura joined Netflix in 2008 and her initial role involved tearing open envelopes — 650 envelopes per hour. When automation was introduced, she was among the handful of employees who journeyed to the Fremont facility to gain knowledge on operating the machines and subsequently share that knowledge with others. Presently, she oversees the floor alongside Mr. Calabro in the capacity of a senior operations manager.

'Here, I've gained a wealth of knowledge: on repairing machinery, on setting objectives and achieving them,' she stated prior to guiding her team through a series of ergonomic workouts to avoid repetitive strain injuries. 'I now feel equipped to venture into the world and embark on something fresh.'