In your example you wreck someone’s car which they didn’t buy at your junkyard. It’d be to think of it like this: you own a car dealership. You wreck your clients car worth 10K. You tell them to pick any car worth 20K off of your lot. Sure, the 20K includes your profit margins, but your client still gets $10K worth of car for free.
Yeah, just like with the original purchase. They made money on that too, but returned the full amount, including their margin. Amazon loses money on this compensation. They don’t sell stuff with a 10x margin.
Step 1: OP bought a video for $5.99 Step 2: he gets a refund + $5 gift card Step 3: OP can buy a video for $10.99 or whatever else he wants for $10.99
Ultimately, OP wins a $5 gift card and saw a free movie.