The LA Times reports that Netflix is closing the Red Envelope Entertainment division because "...the Red Envelope Entertainment unit competed with its main suppliers, Hollywood studios." A Netflix spokesperson told HackingNetflix that only 4 employees will be moving on (the L.A. Netflix office has 77 employees).
Netflix's Red Envelope Entertainment invested in more than 100 films, including Sherry Baby, Helvetica, Confessions of a Superhero, John Waters: This Filthy World, and Cowboy del Amor. You can view the entire list of Red Envelope Entertainment movies on the Netflix website (many are available through through Netflix's Watch Instantly).
I'm really disappointed that Netflix has decided to stop buying independent films. There are so many great small films that languish because they can't find an audience or get funding, and Netflix was able to provide both. In a 2006 Wired story, Ted Sarandos, Netflix's chief content officer, said that he eventually wanted to buy every film at Sundance.