I accept your points, as plausible and logical. I disagree with the cost of production and estimation of losses.

Remember "Clerks" by Kevin Smith. Production $28,000 dollars, and made some actors famous from being neighborhood kids on the block. It is the costs of production that many have the argument with.  What really scares the Big Guys is the indie movement. They fear it and are trying to prevent it.

The simple economic price points are not hard to define. When the price of the product is cheaper and more convenient to you acquiring it from another method, the correct price is set.

What gets people going, is not that artists make profits, but how much they want and for as long as they want it. Unfortunately for digital media, the laws of supply and demand do not disappear because you want them to. If I could mine all the gold I want, the price will fall because I can supply as much as you want. Once digitized, the supply side becomes really easy to meet the demand side for next to nothing. Sorry, it won't go away as long as what you make can be digitized. Right or Wrong doesn't matter. Supply/Demand is a natural system.

I have traveled the world. In almost any country you can buy DVD's on the corner for $5-$10 that have about 20 movies on it. It is part of local economies in some places. You can't put Schrodinger's Cat back into the Box. ( <-- Talk about paradoxes)

The FBI just arrested a guy, glass worker, in New York for uploading a Pirated Movie (Wolverine pre release) he bought from a Korean in New York for $5. They arrested the John but forgot about the Korean that sold it to him. Yea, he did a wrong. But why didn't they go after the Korean. I can surmise, this is now big business for people that can "fight" back. People you don't turn in. People lawyers won't sue. At least Lawyers that like living.

So even if you successfully turn the internet into a "clean" model. People will just buy it at its real price point from the guy on the corner. Will people stop making movies? No, of course not. They will just reduce the cost to make the movies or lower prices.