720p or 480p would be more realistic; the bandwidth costs for serving 1080p would chew through that $5 pretty quickly. (Assuming reasonable video bitrates) Besides, a very large chunk of consumers own machines that cannot handle 1080p.
Before you scream bloody murder, remember DVDs are only 480p.
Let's assume that a 1080p movie encoded for streaming using H.264 ends up at 8GB (a generous overestimate for most movies). At entry-level datacenter pricing of $0.10/GB, bandwidth costs will leave $4.20 for the rest of the supply chain.
$0.10/GB is way more than market rates for bandwidth. Dedicated server hosters such as 100TB.com charge about $200 for 100TB, ie. $2/TB or 0.2 cents /GB, resulting in a grand total of 1.6 cents for a 8GB movie stream.
Before you scream bloody murder, remember DVDs are only 480p.