We imagine compensating our consumer in order to separate the income and substitution effects. Since the price of DVDs fell, we "compensate" the consumer by taking away income until she can exactly afford her original consumption bundle at the new higher price, PD2. The compensation amount is computed as 
= (PD2 - PD1) x DO.
Since the price fell, is a negative number. Suppose DVDs dropped in price from $25 to $20 and our consumer was originally buying 10. We would compensate her (20 - 25) x 10 = -$50. In other words, we would take away $50 to remove the income effect.
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