Thinking about pirated DVDs makes me want to dig up my Economics course notes; too bad I threw them away. Anyways, I was curious to see that if selling DVDs for $2 each can result in a profit, how much money were they pulling in when they were going for 3 for $20? For brevity, I’m not going to recalculate the costs, even though they were probably higher. I’ll just say that it costs $1 per DVD, which means that at that time, they were making over 500% profit!
As an aside, now I see a lot of random stores selling pirated DVDs as a means to boost their bottom line. You can buy DVDs with your Chinese buns, or get a hair cut and pick out some DVDs. These places probably go through a middleman to get their DVDs, and I’m guessing that after the middleman markup, wholesale cost for each DVD is $1. Which makes selling DVDs a great side business.
But back when they were going for $7 each, I’d expect the (true) demand was lower. If you wanted to watch 10 movies a month, maybe you would only buy 3 at PacMall, and the remaining you would rent download or skip. Now, for the same expenditure, you can watch all 10! I’m going to assume that most people operate with a fixed entertainment budget though, and not attempt to buy every movie they want to watch.
While the influx of supply lowered the cost, I think people get caught up in the package deals, so they end up buying movies that they didn’t really want to watch in order to fill up their deal. I guess the DVD vendors get a slightly larger volume to offset the lowered costs, but we as consumers get the better deal for sure since we’ve lowered their profit margin to a much more reasonable 200%.
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