Earlier quoted context omitted.
No one makes money selling media for consumption anymore. This is a common belief among people in tech. It is also disastrously false. Frozen has sold 1.2 billion dollars worth of tickets. The related IP alone, to say nothing of merchandising, will be sold for decades to come, and bring in additional billions. You know the DVD, a dead format that can be trivially pirated? Yeah, they sold 3.2 million copies of Frozen.…
"all profit is completely sucked out of the equation by the time you get to the consumption delivery system" Is this false though? For all the success of the itunes store I seem to remember it not actually making a lot of profit from content?
All of these shares are negotiated and locked before a single DVD (or Blu-ray, or digital download, or what have you) goes on sale. As you might imagine, it's extremely hard to price an entertainment product profitably at retail, given how little flexibility the retailer has on its pricing to begin with. Sure, a retailer could set the price high -- but every other retailer is pricing low, so that won't work. It's a tough racket. Even still, these properties sell like hotcakes, so at least some money's being made. And entertainment sales are often correlated with sales of other big categories (electronics, toys, etc.), so retailers feel the need to keep the category around as a sort of proof point.
The death of the DVD is inevitable, but it's not as imminent as people would like to think. In the meantime, the life of the DVD is kind of a pain in the ass. :)