I understand that the economic models will have to change to adapt to the mutation of consumption. And the popular titles will always fare higher, no matter what media/distribution, and will lose less to the leak of royalties due to piracy. The market will regulate itself eventually through good manners of consumers or legal restrictions put in place.
Like the guy (Scott Krisner?) at the Sundance panel (CinemaTech) said, a lot of MP3 and movies are available for free online, yet we don't watch them all, even without effort nor cost to reach them artworks previously unavailable. Free time, taste and desire impose a self-regulation to the floodgate breach of unaccountable piracy. People continue to go to the movies and buy DVDs. What the industry is complaining about is the profit margin drop due to the percentage of illegal downloads. And that's where I disagree.
The Industry believes that they own every viewer, that in the absence of piracy every illegal viewer would convert into a potential customer. Therefore they tally the statistics on Peer-to-Peer networks and sum the resulting profits they should make of off them. The reality is different. Without free samples some titles lose visibility and street cred. Most importantly the initial buzz, so important to enthuse the customers, will catch up or not depending on the circulation on the web.
But that's a larger debate regarding Internet economic models...
The question is not whether free viewing and copyrights bypass steals a share of the exploitation of an oeuvre...of course it does, if all things are equal, if consumers are faceless numbers. In fact, people who go for a night out in town with friends at the movies would not be interested in a pirate file, even if it is sitting there on their hard drive. People with a quality home movie set want the best video quality and not an average resolution version found online. Film lovers prefer the big screen experience, with their heads up (like Godard use to say). These are just different demographics and the market cannot appropriate these versatile behaviors and put them in predefined models with a price tag on it.
Greed shouldn't command all maket decisions indeed! The Industry needs to stop thinking that (1) only the opening weekend gross makes a film profitable, (2) the online "market" falls entirely within their propriety, (3) the profit on a virtual file of worldwide exposition is proportional to the profit made from the sale of a physical good (a commercial DVD pack) in a local store (with rent, stocks and vendors payroll). Copyrights need to loosen up a little when the film has already repaid its cost in a theatrical run, or in a future TV broadcasting.
If copyright deals become the only barrier between the artwork and its public, then piracy should be encouraged. Supply and demand fix the price. If the niche market is negligible, the rights holders need to turn to alternate channels of exposition instead of speculating on a fantasied future value. Many masters of cinema (and other arts) died in misery before their production was worth a living, or even fame at least.
Cinema is not like selling cars. Producers, distributors, copyright holders, exhibitors, auteurs should be more humble, less mercantile, and sometimes accept the risk to give the public a show that will not be automatically bankable, at least not in the short term.