"Related: an article at Gizmodo explains that it takes surprisingly little hardware to replicate (at least most of) Netflix's current online catalog in a local data center. "
It's not surprising. It all boils down to the compression algorithm used. By maintaining a library of nearly exclusively B list movies Netflix is able to seed their algorithm with just a few titles like "Plan 9 from Outer Space", "Catwoman", and "Gigli". The rest of the movie files contain quite a bit of material that has a high degree of overlap with these films which allows for heavy compression. Did you know that "Hitch" for example only takes up 6mb when referenced across a library of these 3 films using the netflix compression schema? It's true.