Equus worker with servers at the company’s City of Industry facility.

Equus worker with servers at the company’s City of Industry facility. Photo by Ringo Chiu.

Customers of Netflix Inc. are downloading more and more movies. So the Los Gatos film distribution giant is changing the way it delivers those movies.

As a result, Equus Computer Systems, a local division of a Minnetonka, Minn., hardware company, is building computer servers – lots of them – for Netflix. The servers will be loaded with Netflix movies and placed at Internet service provider companies. That way, Netflix doesn’t have to pay other companies to transmit its movies for online distribution. The change means that Netflix saves bandwidth and money.

The deal, which the two companies reached after discussions that took place last year, was big enough to lead Equus to move its local plant from Pomona to the City of Industry last month. The new 102,000-square-foot facility is more than double the size of its previous site.

Equus isn't just building hardware for Netflix here, it's also making servers for ServersDirect.com. The plant has the capacity to manufacture 250,000 of the systems annually. The new location employs about 100.

It’s a significant addition to City of Industry’s economic life. The city has lost 15,000 jobs in the past four years. Manufacturing once accounted for 80 percent of the city’s companies; today, it’s less than 20 percent.

“We’re happy to have somebody come into the city that’s actually doing some manufacturing again,” said Don Sachs, executive director of the Industry Manufacturers Council, which functions as a chamber of commerce for the city.

About a half-million manufacturing jobs have been lost in Los Angeles County over the last 22 years as companies have moved out of state and overseas, and as factories have automated.

Equus servers will be shipped to such Internet service providers as Time Warner Cable Inc., which stream Netflix films and TV shows directly from regional data centers to customers’ televisions and computer screens.

John Pollock, Equus’ vice president of marketing and product management, said the company moved to City of Industry because it needed more space to build and develop the servers.

“It really does buck the trend we’re seeing in manufacturing,” Pollock said. “We’re not just installing components or turning screws.”

He said the goal of the operation was to put Netflix’s most popular movies on the servers in order to save the company money on what it has been paying for use of Internet wiring, or bandwidth.

“It’s the most popular shows (and movies) that are being streamed on average,” Pollock said. “Nine times out of 10 that content will be saving network bandwidth.”

Inside the plant, a fiber cable runs directly from the street to the factory floor and into the servers. It’s a direct link between Netflix and the machines storing its content, so Netflix controls what media winds up on its servers.

“That was part of the reason we moved there, to get the fiber uplink,” Pollock said.

Robert Kleinhenz, chief economist at the Los Angeles County Economic Development Corp., said the fiber cabling makes the Industry move valuable as Netflix expands.

“It positions that company to grow as the market grows going forward for several years to come, as opposed to hitting upper bounds of capacity through other delivery means,” Kleinhenz said.

Equus builds computer hardware for resellers and independent software vendors. It was founded in 1989 and has about 200 employees. Intequus, the cloud computing division of Equus, provides the new hardware design for Netflix.

Content delivery

The need for the servers has been driven by Netflix’s growth. The company’s subscribers increased from about 5.6 million in 2006 to 20 million in 2011. Streaming video has been growing dramatically, too: In 2009, Netflix subscribers downloaded 10.6 million movies; by 2011, that rose to 23.6 million.

A Netflix representative declined to comment for this article.

Alex Dudley, vice president of public relations for Time Warner Cable, said the move gives Netflix a better connection to its network.

Dudley said companies such as Time Warner Cable aren’t worried about how they get content and neither are customers. There won’t be any difference in picture quality.

“I think they’re factoring that the best way to enjoy Netflix is with a broadband connection,” Dudley said.

Stephen Condon, vice president of marketing for Tempe, Ariz.’s Limelight Networks Inc., one of the companies Netflix has been using to stream its content, said it’s not uncommon for high-traffic websites to use content delivery networks such as the servers Equus is making for Netflix.

“It’s not new technology that they’re deploying,” Condon said. “It’s a service for Netflix to work directly with the ISP to have this content delivered.”

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