Production budgets are inflated because the only way to get a share of the profit is to get a share of the gross. But that is not nearly as scalable so it is necessarily limited. This forces the remainder of returns to contributors to be in the form of direct payments. Thus, actors earn 10s of millions up front, for example. But that also extends to everyone down the line. Effects houses need to charge a lot for their services because they rarely get a cut. There are indeed very real major costs to making a movie but those costs are low compared to the effects I've outlined.
More so, the limits of independently funding a movie are not necassarily any lower than what Hollywood can provide. It's just that Hollywood has historically proven to be the easiest route so it has been popular, but who's to say what the limits of competition are? VCs have pumped more money into tech startups for less return than some hollywood big budget movies, for example.
I've heard of "hollywood accounting" and the like before, but this particular effect is something new to me.
The effect you mention with effects houses, big-name-actors, etc. charging lots of up-front fees to compensate for the fact that the studio would try to screw them out of their cut of the profits sounds surprisingly similar to the health care situation in the US. Hospitals charge patients that they know can pay (private or gov't insured) much higher fees, because they know there are many, many patients who will not. There's also different affects related to which insurers are willing to pay which rates, etc.
More so, the limits of independently funding a movie are not necassarily any lower than what Hollywood can provide. It's just that Hollywood has historically proven to be the easiest route so it has been popular, but who's to say what the limits of competition are? VCs have pumped more money into tech startups for less return than some hollywood big budget movies, for example.