One question has followed me relentlessly from my early days as a video store clerk on up to being the writer you’re reading right this very minute. And just last week it came up again from one of my editors: “As long as I live, I’ll never understand how they make any money making direct-to-video movies; I mean, who watches this stuff?” Lots of people. And don’t kid yourself, there’s a lot of money in the video market, especially for direct-to-video (DTV) titles.

Here’s how they work:

Step 1: The Hook

The first step in the life of a successful DTV movie is finding the right hook. The most common hooks involve getting a famous or simply recognizable television actor or theatrical has-been. If you can’t get one of these you should secure the rights to a good or popular movie title and make a “sequel.” If someone is making a movie based on public domain works of fiction (like War of the Worlds), make a film based on that content. Short of any of these things, make sure you make a movie similar to other popular movies, and give it a title or box cover that could easily confuse people into thinking it might be just like it.

Step 2: Make It or Buy It Cheap

Do you have $50,000? You can make or buy one of these direct-to-video titles. But it’s not just indie producers making these, the studios have departments that chuck these out. The key is to set a low budget and stay on it. The bean counters already have the math worked out (we’ll get to that in a second), just listen to them and make it cheap, cheap, cheap. No. It doesn’t matter if it’s any good.

Step 3: The Sales

If you think they need to sell the movie to you, you are quite mistaken. These companies aren’t making movies for you. They’re making movies for Blockbuster, Hollywood Video, Movie Gallery, Netflix. And Wal-Mart, you can’t forget about Wal-Mart. These are the biggest consumers in the world when it comes to this crap. They need movies on their shelves, and these folks offer direct-to-video movies at a price much lower than the big-name, theater-released films. When you consider the sheer bulk of copies these corporations buy and you compare that to “Step 2,” you begin to realize where the profit comes from.

So who buys them? Well, there’s a small portion of consumers out there who HATE late fees. Or who owe too much money in late fees. Or whose credit is so bad they cannot get a credit card to open a rental account with. That’s right, this market is poor. And many of them have figured out that the cost of a $10 movie at Wal-Mart, minus the money they’ll get from the pawnshop when they sell it comes to a rental plus a little late fee. Except that they don’t have to return it right away. In fact, they can keep it indefinitely, even forever if it’s a good one.

Other times the consumer is simply often uneducated. Some of them can’t even read. They look at the box and try to see if there’s anything to recognize. Or they just don’t care. They want something to watch and will try anything once. Or they were big fans of the movie the direct-to-video movie is ripping off, or the movie this is a sequel to, or the TV actor in it. Or they just have a twelve pack of beer and want to watch the dumbest thing they can find. There are a dozen different reasons someone might choose Transmorphers (although, in that case, none of them are good) as their movie de jour. But odds are it’s all going to go back to your hook.

Step 4: Collect the Cash, Make Another

That’s the kicker, the real trick is just to know your market and figure out how many copies you can get away with selling to stores that NEED a constant influx of product. The DTV market is just a complex math problem balancing cost analysis with a box cover that will convince the big box stores that people will buy or rent it. Why aren’t these things any good? They don’t have to be. Not if the price is right and people will watch it anyway. I wish there was a better or a sexier answer than that. But the truth is these things make money because they cost less to produce and distribute than the profits they reap from the chain stores. Lather. Rinse. Repeat.