So your saying that a movie like Zyzzyx Road that had a budget of $2,000,000 & a gross of the worst in history of a pathetic $30.00 & by 2006 only made about $368,000, made it's money back on merchandizing, International, TV rights, rental & DVD sales!!!!
That was a direct to DVD movie that was released theatrically just to qualify it for foreign release to earn it some extra cash. I can't find the DVD numbers on that movie specifically, especially since it's an independent deal, but it was released on dvd, and there is a certain fee for the rights and certain percentage the producing company earns for sales. In addition, with planned direct to DVD releases, there is usually a deal already in place, so no one in their right mind would exceed a budget that would infringe on profitability.
One of my best friends, who produced an independent feature that cost $125K and had no name talent, nearly got a dvd distribution deal. Just the DVD rights was half a million plus sales, or $2 million for a buy-out without sales. If they had just one name star, the initial fee would have been $2 million plus sales or a $5 million buy-out. Zyzzyx road earned it's money for it's investors no problem on it's dvd deal.
In my best Robert Shaw from Jaws "Don't you tell me my business again."