Pretty well on DVD will comfort the execs, but it won't make them feel truly happy about the whole ordeal. There were legal snafus, a long development and the movie has a big budget to overcome. The budget issue is a bigger problem then you think, because you also have to think in terms of opportunity costs; $100 million is enough to make 2 or 3 movies that could have potentially spawned sequels or big dvd revenue in their own right. Big studios don't spend $100 million so they can "do OK after dvd sales." They spend $100 million to rake in a ton at box office and big dvd sales or to hopefully kickstart a franchise. If this were LAIKA studios or something, I'd nod in agreement and say that breaking even before dvd sales probably made everyone happy all around. But this is Warner Brother's we're talking about here. Warner Bros., Universal and Paramount don't really fuck around with this kind of thing and think of it as a resounding success.
I mean, let's take a moment to look at a movie like Austin Powers, which is exactly the sort of success story that gives the suits gigantic boners. Austin Powers 1 made something around $120 million total box office once you combine US and global ticket sales, but it only cost $20 million dollars to produce, making it an unqualiified success for a low rent Mike Myers vehicle. It was then played pretty much around the clock on cable and home video, leading to a lot of good vibes and a pair of blockbuster PG-13 sequels. When you're in the movie business, that's exactly what you want. You want it to be PG-13 so everyone can go to it, you want it to eventually be on cable all the time and you want to be able to make a full-fledged franchise out of it so you can just just ride that baby into the ground and make as much money as possible with a minimum of advertising costs and guesswork. None of that is really a possibilty with Watchmen. They've got one real shot to make money off of a single film and that's it.