Years ago, when Napster was on its way out and a multitude of other P2P programs were popping up the recording industry screwed up so badly in their handling of things that CD sales continued spiraling downward. Hell, I even ranted about it in my then budding webpage. Apple saved the music industry. Now the film industry is making the same mistakes. I'm talking about cost and freedom of use.
Cost to go to movie: $5 to $15, depending on location, age, student id, etc. Cost to rent: $1 to $5 (better w/ netflix). Cost to purchase DVD: $7 - $12 for older and $15-$25 for new releases. Cost to download a movie: $20-$30.
If you own the DVD you can watch the movie on any DVD player--TV to Computer to portable DVD player. If you are so inclined and have the software you can record the movie to your hard drive, compress it and store it as a back up elsewhere (yes, you can do this if you've only rented as well, but I'm talking legal here). If you purchase a download you can: watch it on a computer, burn a DVD that will be playable...only on a computer! Also you can have no extra features or packaging and you have to cough up an extra buck for the DVD-R. So, basically, downloading gives you fewer options/features for more money.
The result: people will download illegal copies instead, or they will rent and record. If the movie industry wants people to pay for downloading they need to realize that people want options and reasonable prices. The cost to download needs to be less than the cost to purchase a DVD (or a VHS copy, really), and the use of the downloaded copy needs to be equal to a DVD (playable on any DVD player and transferable). Apple has already demonstrated that when these criteria are met people will pay and illegal downloading will lessen. Until the greedy bastards in the movie industry make sense I would like to encourage people to increase the amount of illegal downloading they do. Yes, piracy is wrong, but so is treating consumers like sacks of cash with no options and no opinions.
People don't download illegally because they are bad people, they do it because there is not a sensible downloading alternative. Piracy will never end, but it can be reduced if corporate USA would unclench its collective sphincter and treat consumers as intelligent decision making people...well, at least not treating them like indentured servants. Free market economies require choice and if that choice is not available people will go around the legal markets to get what they want.