I don't want to venture a guess of how low adult DVDs will go but I do have a rough idea of how low they can go. A basic single-sided DVD can be manufactured in mass quantities (5k piece lots or greater) for $1.50 each, probably less. The keep case, printed materails and direct labor costs are somewhere between $1.25 - $2.00 per unit domestically, much less overseas. At the high end this puts manufacturing costs at $3.50 per title. Tack on any profit and royalites, licensing, overhead, etc., and you get a decent idea of what the minimum price could be.
This line of thinking does not take into consideration the amortization of any costs associated with production, mastering, editing or "talent". For the vast majority of adult titles this adds up to what I would guess to be $5000 - $15,000. Consider the fact that the studios don't have an accurate means of guessing an average title's chances for success they typically amortize these costs into their first production run. This could easily add from $1 to $5 additional cost depending on the size of the first run.
My rational also doesn't take into consideration the simple fact that most DVDs are just remastered VHS titles that have more than recouped their intial production costs.
Let's face it there's money to be made but there's also huge money to be lost. Many people assume that online stores have little to no overhead. This is simply not true. Any quality online store with good delivery times, customer service and product selection has to have an investment in inventory, staff and a place to operate from. (Granted, they can work out of a low-rent warehouse space instead of an expensive retail spot.)
The investment in development, network equipment, computers and software can be very steep for a high-volume commerce site. I read an article in The Industry Standard about 10 months ago that put the development price tag for second-generation commerce sites like DVD Empire, DVD Express and Divadee to be somewhere between 1 and 2 million dollars. That doesn't include marketing budgets. That's just development and IS infrastructure. You have to sell a helluva lot of DVDs to recoup that investment.
I think we will begin to see a trend towards appropriately priced product. DVDs taht are garbage will be priced low, higher quality product from the better studios will continue to command a premium. How low can the total crap go? $7 or $8 minimum from the loss leaders in high volume. A quality adult DVD shouldn't be available for less than $20 or so from the major studios, anything less just cheapens the brand.
Don't expect any major pricing changes in the near future until something like on demand streaming video threatens to take a slice of the DVD market away from the studios.
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