When I buy a DVD at a retailer, where does the money go?
March 21, 2010 11:56 AM   Subscribe

When I buy a DVD at a retailer, where does the money go?

Specifically, I'm trying to figure out what percentage or dollar amount, on average, out of the sale of each DVD goes to the movie studio.

This is for a college project so, while the source doesn't need to be perfect in an academic sense it does need to be somewhat credible (but I'll take what I can get).
posted by VTX to Media & Arts (5 answers total) 2 users marked this as a favorite
With the advent of the DVD, home video has become a vast retail business, with studios selling both new and past titles, as well as television programming such as The Sopranos, Friends, or Chappelle's Show, at wholesale prices that can go as low as $5 a DVD. Studios, which have meticulously analyzed these costs, estimate that manufacturing, shipping, and returns costs average 12.4 percent; marketing, advertising, and returns costs average 18.5 percent; and residuals paid to guilds and unions for their members and pension plans come to 2.65 percent. So, about two-thirds of video revenues are gross profits (which participants, such as stars, producers, and directors, may share in once the movie breaks even). In 2004, the studios' estimated video gross profit was $13.95 billion.
- "Hollywood's Profits, Demystified" by Edward Jay Epstein, Slate, Posted Monday, Aug. 8, 2005, at 6:13 AM ET
posted by carsonb at 1:05 PM on March 21, 2010

Here's an article from 2009.

posted by jenny76 at 1:11 PM on March 21, 2010

This is a complicated question, not easily answered at all. All I can lay out for you is a very general and overview of the process. Apologies if it's a bit complicated to follow.

Depending upon sales distributor and publisher, the title will sell (usually returnable) at a discount of about 40-60% off cover price (I'm putting in a very wide range here.) However there's a holy host of other factors that determine at what cost the end retailer (say your local chain or local DVD seller to the public) will end up paying. Let us assume for this first part the distributor (warehouser/mailer) and publisher (product creator) are the same thing (they sometimes are, and they sometimes aren't. It often depends upon size of original dvd creator). Do not confuse however publisher is always the same as licensor (or creator of original content.)

Sales overview to end retailer:
1. If there is a promotion in works, this can take anywhere from 2%-20% further off the retailer (end store) purchasing price. Conditions always apply such as 'must be promoted' or must be in X amount of numbers. Some promotions share the sales discount between publisher and end retailer based upon POS, or Point of Sale which means the retailer only gets that extra discount on actual items sold. Sometimes there is a kind of grouping promotion such as Buy 3 get 1 free promotion and this is decided generally either by POS or original publisher buy flat extra discount.
2. As a rule in the American market, any discounts offered to retailers (say your chain retailer or independent) must be offered to all retailers of the same sort. Likewise wholesalers (a kind of middle man distributor that purchases large amounts and redistributes to department stores, etc.)
3. Then there is also returnable and non-returnable buys. Returnable buys takes all the above points into account added upon the customary discount first listed. Under this, a retailer could buy 100 units, have them for however-long-time and then return all 100 units if they don't sell. Usually all $ is then refunded. Non-returnable buys (more rare) takes all points above into account but likely is near 10% or more off original cover price from the originally quoted discount off cover price.
4. Special sales: these are gift catalogs etc. Due to particular qualities unique to their own market, they could receive their own set of discounts (generally in line or more) and promotions.
5. Special buys: this is an extremely large lot buy of mixed titles by end customers (generally) that consists of an almost pennies on the dollar per unit, generally these items are termed either 'hurt' or discontinued edition. Your local large discount house (something 'lots' or 'buck something') buys these. These are always non-returnable buys.

Now, remember that gross - returns = net sales.

Everyone takes a cut and must due in order to maintain business and get the end product to you, the individual buyer.

Depending upon deals and feasibility, an original content creator (or author) may get a flat per product created percentage or a flat per product % per sold unit. The original creator might also take a lum sum (either one-time end-sum or renewed at a regular cycle) from the DVD product creator.

The DVD product creator will take all $ after paying out licensor if they are the original licensor. Remember that they have to pay overhead of creation of physical product and depending, may also have to shoulder the creation of original product (should they be purchasing an idea as opposed to a complete product (think Power Rangers after original Japanese episodes ran dry). If they are not also the warehouser/seller, they will receive a sum (usually based upon net sales, scaled to promotions/conditions cited above - but not limited to...) after paying out fees for warehouser/distributor.

If there is a warehouser/seller involved (which is quite often), they who bring the product to the market receive a % of the money from net sales (generally net). Remember, they also shoulder the expenses of warehousing, upkeep, shipping, staff as do all the above.

For the end retailer, they retain the $ from net sales in their venue (after their own overhead) after considering promotions/conditions of cost.

I know you want some kind of perfect number or equation but all the points above scale from product to product, firm to firm and the end seller, who ultimately has the right to sell the product at whatever price they desire.
posted by eatdonuts at 1:24 PM on March 21, 2010 [2 favorites]

You may mefi me if you need to, I am a professional.
posted by eatdonuts at 1:27 PM on March 21, 2010

***Depending upon sales distributor and publisher, the title will sell (usually returnable) at a discount of about 40-60% off cover price (I'm putting in a very wide range here) to the end retailer who sells the product to the public.
posted by eatdonuts at 4:25 PM on March 21, 2010

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