Given he fact that Dan & Ned setup the network to begin with you can say that yes it came out of their pocket including all of the early miners & investors, then it took a life of it's own. 

How do they make money? The same as everyone else...by selling steem.

The problem is that the general public does not understand that not only the government can create money (banks do it all the time but it would be a long and technical explanation on how they do it).

If they don't get the analogy about the credit card rewards then I am not quite sure what to say.