(FORTUNE Magazine) – WHEN HOLLYWOOD DEVELOPED THE digital videodisc a decade ago, no one expected TV shows on DVD to amount to much. Television series hadn't sold well on videocassette, in part because good shows stayed on the air forever.

Yet by eliminating commercials, adding extra features like blooper reels and star interviews, and then packaging seasons of episodes in fancy boxed sets, the studios have created a $1.5 billion revenue stream that has been growing by more than 20% a year. A just-released set of Seinfeld DVDs is taking the TV-on-DVD business to new heights.

Seinfeld fans have been plunking down up to $119.95--a record price for a TV series--for a gift set that includes eight discs, the first 40 episodes of the show, a script signed by co-creator Larry David, playing cards, and a set of salt and pepper shakers from the fictional Monk's Diner. Others are paying $49.95 for either the 18 episodes of the series' first two seasons, which aired between 1989 and 1991, or for season three. "People have just become huge collectors of DVDs," says Tom Adams, president of Adams Media Research, an industry expert.

The Seinfeld release will be a windfall for two studios: Time Warner (parent of FORTUNE's publisher), which acquired ownership of the sitcom when it bought Turner Broadcasting and its Castle Rock unit, and Sony Pictures Entertainment, which is marketing and distributing the DVDs. Producers and cast members will also share in the profits. No one's talking numbers, but the net revenues to the studios from Seinfeld should easily top the $178 million generated by The Sopranos, the previous bestseller. More than four million copies of the first three DVDs will be shipped; five more seasons are to come. "The most amazing thing about it is that you turn on your television, and how many times a day can you watch Seinfeld?" asks Michael Lynton, chairman of Sony Pictures Entertainment.

Seinfeld's ratings have held up well over the years, especially with young men, the primary buyers of DVDs. One reason that the DVD is only now being released is that Sony and Jerry Seinfeld wanted to protect the show's value in syndication as long as possible. Howard West, Seinfeld's manager and a producer of the series, says, "This show will be around long after I'm gone. It's like Lucy or The Honeymooners."

With the help of the cast--which reunited for a prime-time special on NBC, an hour of Oprah, a TV Guide cover, and a Rockefeller Center party--Sony created a media blitz around the DVD. Seinfeld himself appeared bemused by all the fuss when he donated a "puffy shirt" from one of the show's classic episodes to the Smithsonian's Museum of American History. "I can't even tell you the pride that I feel being the focal point of what has to be the most embarrassing moment in the history of the Smithsonian Institution," he said.

No, what's embarrassing is the rush of executives to capitalize on the DVD gold mine by plumbing their vaults for old shows. Now on DVD: Punky Brewster. Can Jake and the Fatman be far behind? -- Marc Gunther