Originally Posted by
S.Lemon
you also need to take note of the fact that major corporations who sell dvds, such as best buy, are often selling below the list price, if not just above it. this does mean that they do not make much of a profit off the dvd itself, but the loss is written off as an advertising expense.
This is a popular misconception, and it's not really so. Two companies, Best Buy and Wal-Mart, sell the bulk of the DVDs sold at retail stores in America, and so they're able to negotiate ridiculously low prices. As Kemmer pointed out, most of the money has been made back by the time it comes to DVD, so the primary expenses are in promotion (since production of a DVD costs a fraction of a cent). Studios will make this back quickly, so they can afford to sell their movie for less.
Due to economies of scale, independent producers of movies typically incur larger debts during production, manufacturing and promotion that major studios, relative to their respective financial means. Since they rarely if ever see ANY revenue from ticket sales, they have to earn back their expenses through DVD sales, which is why independently produced and distributed movies of all stripes regularly cost $20 or more, and include lower-cost incentives to drive early sales, and potentially build buzz.