Question about the Cost of Things

[Scott]

I was thinking about last months Pizza Hut promotion and the cost of DVD's. Pizza Hut would give you a DVD for free at the cost of a pizza. How can they do this? The movie I picked was BILL AND TED'S BOGUS JOURNEY. Well, how can they do this? Also the film comes in a paper sleeve rather than a DVD box. Now if we are just paying for the packaging of DVD's then just give me the disk for $2 and they can keep the box. I'll get my own box and be able to complete a nice DVD library. Instead of paying $50,000 for my library I could mayber $5,000 for all the films that I would have in my collection.

It's like the internet. $20 bucks for AOL a months, but if you cancel every time your free time is up then you could get more than 6 months free, because they always give you a free month if you call to cancel your service. Always. What is the real value of anything.

Same thing with all those $100,000 car commercials. They just ad it to the cost of the car.

I know this isn't news to you, but the whole things to wacky.

[Ash]

You know how companies are...

It probably cost the manufacturer a dollar or two to produce the DVD then they mark it WAAAAY up in price to make an awesome profit.

As for Pizza Hut and that promotion...I'm willing to bet that every title they offered were distributed by the same movie studio in the hopes that you'd buy more movies from them at regular retail stores.  (that's just a guess though)  
Pizza Hut probably got a sweet deal from the studio.

I remember way back when I used to work at Olan Mills Portrait Studio as a photographer...I learned that an 8x10 picture cost them 30 cents to make then they turned around and sold them for $30 apiece!

[George]

The pizza hut promotion works like this.  Pizza Hut sells you the pizza for, lets say, $10.00 dollars.  Generally a pizza like that may cost $4.00 to make, leaving $6.00 in profit.  Some of that money is then kicked back to the movie distributer to lay off some of the cost of the DVD.

It works in much the same way with a major store chain.  The DVD's cost 17.00 not because of the box, but because of the distribution costs, stocking and placement fees, etc.

When the math is all said and done, the distributor of the movies makes about the same amount of money on either DVD.  The difference is in the overhead to cover getting the DVD to you.  A pizza joint can do it much cheaper and on a smaller scale, plus the overhead is much less.

[The Burgomaster]

I worked in a video store back in the 1980s. We ran a promotion with the Pizza Hut across the street. If you rented a certain number of movies from us, we gave you coupons for free pizza. If you bought a pizza from them, you got free movie rentals from us. I can't remember how many movies you had to rent or pizzas you had to buy to get the freebies, but I'm sure neither of us made any money on the deal. We did it more as a way to bring new customers into the store so that we could make money off their rentals after the promotion ended.

As for the free DVDs . . . I would guess that Pizza Hut got thousands of them at less than $1.00 apiece. McDonalds had a similar VHS promotion a few years ago that included GHOST and a few other titles.

[Nathan Shumate]

Buy a box of Chex cereal, and you get "The Muppets Take Manhattan" on DVD for free.  (Supply your own sleeve.)

[Scott]

How much do you think it actually cost to produce a DVD and distribute it in a sleeve? I know they are sharing benefits to this, but he idea  being that a film dosn't cost that much. They make up the price according to what they want. 100 DVD boxed movies would take up more space and weight than 100 sleeved DVD's.

I mean a studio or distributor can charge anything they want. After all they produced the item, but my concern is that we are paying for the packaging and space it takes up on the store floor. This added cost is not needed.

[George]

You ARE paying for the space.  As an example, grocery chains, with one or two exceptions, charge money for a product to be sold in their stores.  These are called "slotting fees" and can be as high as several THOUSAND DOLLARS PER STORE.  The cost of slotting is passed on to the consumer.  The benefit to the brand owner, lets say Kellogg's, is huge because their product is placed in, and associated with, that grocery chain.  They then sell more products due to the increased distribution.

You are also paying more for packaging.  Look at a 6 pack of toilet paper versus a 12 pack.  Logically the 12 pack should cost twice as much but it rarely does; it's usually a bargain  Alot of the cost savings in due to the decreased packaging cost.

[The Burgomaster]

The most significant cost associated with a DVD is probably the fee that the distributor pays for the rights to sell it. Package design can also be expensive, but once the initial design is finished, the actual cost of printing thousands of cover inserts is probably very low. DVDs from cheapo distributors often come with simple, unattractive artwork and photography on the covers and a brief synopsis on the back. This shaves some money off the cost and allows the DVD to be sold for a rock bottom price.

I place a fair degree of importance on packaging. I have seen people selling DVDs on Ebay without the original boxes. You can usually buy them at a very cheap price. Personally, I'd rather pay a few bucks more and get the original box.

But I don't have much common sense anyway . . . so you can ignore anything I say.

[Scott]

I would think with the internet that if I wanted only the DVD disk. I could get only the DVD disk at a considerable discount.