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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Netflix’s Spokane hub is key part of nationwide distribution system


The facility processes an average of 10,000 movies a day. 
 (The Spokesman-Review)

The secret sauce that makes Netflix click is custom software the Los Gatos, Calif. entertainment company uses to track 1.4 million DVDs moving around the country every day.

But a key part of the company’s business success is 41 mail-sorting hubs, including one in Spokane, where workers start the day at 5:30 a.m. and process stacks of red-colored mailing envelopes containing movies.

“It all comes down to the software we have and the ability to move things quickly,” said Steve Swasey, the director of communications for Netflix, a publicly traded company with a reported 5.2 million subscribers.

“The entire process is like a swan swimming across a lake,” he added. “It moves along easily, but underneath, there’s an enormous amount of effort and complexity.”

A good portion of that activity takes place Monday through Friday at the Spokane Netflix hub, which opened in February 2005.

The Spokane hub fills a modest-sized leased warehouse at Spokane International Airport’s business park. To discourage drop-ins, the company doesn’t bother to post any signs outside to indicate its presence.

Workers head to the nearby postal center at the airport each business day to retrieve about 30 trays filled with about 10,000 Netflix DVD mailers.

“Tuesday is the spike day when we’re busiest, right after people have finished watching movies on the weekend,” said Swasey. Fridays are the slowest day of the week and the hub is closed on weekends.

Netflix subscribers pay between $9 and $48 per month to watch rental DVDs of movies or TV shows. Titles are mailed to customers in paper envelopes, watched, then mailed back in the same envelope.

The order of films received is controlled by each subscriber, who creates an online wish list, or queue.

The mailed DVDs are shipped to and from the hub closest to each Netflix subscriber. Spokane’s hub processes DVDs for Eastern Washington, North Idaho and western Montana.

Other nearby Netflix hubs are in Boise, Seattle and Salem, Ore.

The Spokane hub carries an inventory of 35,000 titles at a given time, according to Swasey. “If movie titles don’t move or get requested, they get shipped to our Sunnyvale warehouse,” he added. That warehouse in California currently stores about 26 million disks, he said.

Since opening last year, the Spokane hub has continued growing. “We might be expanding here in a year or more” as the Netflix volume of mailings requires an upgrade to a larger site, Swasey said.

In all 41 hubs, the work taking place is a mix of mail-order technology tied to hands-on processing. The group of 10 Spokane workers earn “above minimum wage,” according to Swasey. After three months, each worker at the hub gets a free DVD player and a free Netflix subscription.

The crew’s morning duties include tearing open the 10,000 mailed-in envelopes and then sending the sleeves containing the DVDs through a barcode scanner.

The scanner reports the arrival of that disk to the Netflix customer and inventory database. That software-driven system helps the Spokane group separate all received DVDs into two groups — those needing to be mailed out that day to another subscriber, and disks not requested yet.

Workers also look for damaged disks, which Swasey said is a “very small number.” The company saves the mailing envelopes and recycles them, he added.

The DVDs needing to go out that afternoon are arranged on several work desks for the next step — insertion into new mailers. Most workers can insert between 600 and 1,100 disks into envelopes per hour, said Swasey.

Once inserted and sealed shut, the mailers go to a ZIP code sorting machine.

Each sorter also has a link to the Netflix master database. As the mailing envelope goes through the barcode scanner on the sorter, the database software finds the next person to receive that movie and adds the receipient’s address to the mailer label.

By late afternoon the DVDs going out are stacked and loaded into a truck that hauls them to the postal center.

Swasey said Netflix’s appeal is its quick turnaround and large selection of movies to choose from. The company has about 65,000 titles and continues to expand all the time, he said.

When someone requests an obscure title not carried in Spokane, the Netflix computer finds the nearest available hub and tells it to ship the item to the subscriber. “Our people don’t need to think about the name of the title or the address. The barcodes take care of the whole thing,” said Swasey. “It’s all electronic.”