Giovis I don’t know about you folks, but I like watching DVDs. It’s simple. You pop in a disc and — voila! — the movie starts playing. Apparently, I’m an old fart. My fiancé, the tech wiz, recently rigged up four different machines so we can stream Netflix videos via the Internet. I finally learned how to work all of the controllers, and I was feeling pretty good about making the switch. That is, until I read that Walt Disney Studios in Burbank — one of the largest employers in the Valley with more than 5,000 employees worldwide — cut about 200 jobs (June 15), in part because DVD sales are dropping. The cuts include layoffs and unfilled positions, mostly in the company’s home entertainment division in Burbank, according to anonymous sources cited in various articles. Warner Bros. Entertainment let 50 people go from their Burbank headquarters last week. Double whammy. I can’t help but feel a little responsible. I haven’t walked into a video store to rent a DVD in ages. And I can’t remember the last time I bought a DVD for my home collection. With Netflix streaming, I have no reason to shuffle DVDs in and out of the mailbox. Come to think of it, I don’t have a use for the Blu-ray player my tech wiz bought when they first came out. So I’m one of more than 23 million Netflix consumers contributing to the demise of one content format and layoffs. Guilty. Netflix is sitting pretty. It reported net income of $60 million on revenues of $719 million in the first quarter ended April 25. That’s compared with net income of $32 million on revenues of $494 million in the same period last year. In addition to adding 3.3 million domestic subscribers, Netflix invested in its streaming content. It clinched a new deal with CBS and expanded relationships with 20th Century Fox and Lionsgate to offer hit shows such as “Glee” and “Mad Men.” That’s great for Netflix customers like me, but it was painful for some of the workers at Fox and Lionsgate who lost their jobs because of the declining home entertainment trend. Sales of DVDs, Blu-ray discs and digital movies fell 18 percent in the first quarter compared with a year ago, according to the Digital Entertainment Group, an industry trade group. Not only are DVD sales declining, but fewer people are going to movie theaters. (No guilt about declining box-office sales here. I frequent the theaters.) For those who follow the industry, none of this comes as a newsflash. It is worth noting, though, because Valley residents and workers affected by the layoffs may or may not find a job. If they find one, there’s a good chance they may not be doing exactly what they’ve always done. I spoke to an acquaintance, who owns a small post-production house in Los Angeles, about the topic. His company produces DVD extras and behind-the-scenes content for some of the studios. Sure, he’s watched demand for that content drop off. But he’s not doom-and-gloom about it, and he’s still finding steady work. Opportunities crop up with new formats, he said, noting that his dream was never about making DVD extras. Those projects simply provided a steady paycheck, allowing him to work on other creative endeavors. He’s working on a documentary for HBO at the moment. My guess is some of those who lost a job at Disney or Warner Bros. are in the same boat. Some will struggle to find work for a while. Some will immediately land on their feet. And some may get job at a studio on the digital side of the business. I can’t blame the studios for aligning themselves with major changes in the movie business. It’s impossible to stop the kind of change that’s rattling their home entertainment divisions. (As a newspaper journalist, I understand the pain and opportunity that comes with advancements in the digital space.) For the studios, Netflix’s innovation is snatching up sales in one division and adding sales in another — digital distribution. While it will take time to shore up the profitability gap between physical and digital content, the content itself is king. That much is not going to change. Netflix, meanwhile, is planning on taking over the world. In its first-quarter note to shareholders, the company said its competitive strategy “is to grow as fast as we can, so we can afford more content, more marketing and more R&D (research and development) than our competitors.” Business Journal Editor Jaclyn Giovis can be reached at (818) 316-3126 or by e-mail at [email protected]