That's not how the economics work. Consumers have a level of disposable income. Just because they spent 0.99 on your movie doesn't mean that they won't also spend $10.50 on Avatar. The allocation of disposable income is not based on price as much as quality.
Secondly, $0.99 vs $10.50 is a failure in signal theory. You immediately signal to the consumer that the value of your movie is far less than most other forms of entertainment. The reason why the $0.99 model works for music on iTunes is that all songs are priced the same. There is no signaling of quality between songs. The 99 cent model works for iPhone apps is that it is low enough of a cost to value to risk ratio that it's worth 99 cents to try something out. If it is bad, there's no real loss to it. There's little opportunity costs associated with it.
But you can't sell a $10M budget movie at 0.99 and make a reasonable revenue.
