How is this sustainable?

I think there are two economic factors going on: The first is that filmmakers have gotten better at making stuff look amazing for less cost, like how the makers of "Game of Thrones" used to brag that their spectacular show cost a quarter of the same sort of thing would have cost in a feature film. The other is that Disney+ streaming is very new, it debuted a little over a year ago, and "The Mandalorian" is a "loss leader" - that is, something that is meant to lose money but to bring in new subscribers. In that, I think it's been a success, the show is popular, Disney+ has 80 mil subscribers and rising, and they're selling so many Baby Yoda toys and crap that the royalties may be offsetting the cost of the show. Because like people said, the reason Disney bought the Star Wars franchise wasn't for the movie profits - it was for the right to sell Star Wars toys to every child on Earth!

Disney+ is also, FYI raising its monthly fee next year - from $6 a month to $8 a month. Still a good deal, IMHO.

Disney+ is the paywall. Subscribers 87M (Dec 10), annual fee $70. Annual revenue $6.1B!

They are not in location as much now and have a better system instead of green screen. They have huge digital screens for the many of backdrops now. So less time in the editing and effects rooms.

How can Disney just throw money at a series like this for viewing without going behind a paywall?
You're kidding right? You know how many billions of dollars Disney is worth? I think they can afford it.

I could be completely wrong in this but this is just my thoughts.

They can make the show look as good as they do because they own ILM, Lucas's special effects production company. So it's not like another studio who has to shop around and use other companies to do their effects. It's in house so therefore cheaper. Again, I could be wrong, I am sure someone else has more knowledge of that.

I also think you'll have to watch as the show progresses. I feel like most shows always start out with a big budget and great looking effects. But, as the show loses interest (as many do) or the company wants to cut costs, that's when effects begin to get cheap. the Christopher Reeves Superman franchise being an example of that. However, I feel these producers/creators are aware of when a show needs to end as opposed to keeping it running longer than it should. So we may not get to that point in production.

Lots of people without kids are paying for D+ just to see this show. And lots of people with kids already own their favorite animated movies on DVD, so they wouldn't pay for D+ if there wasn't some high end new content.

From what I've read, The Mandalorian costs about $15 million per episode. By comparison, The Crown on Netflix runs about $13 million per episode. So this kind of spending for the streaming services is not unheard of.

As someone else mentioned, The Mandalorian is the only reason many people even have a D+ subscription.