I thought I had posted this after I wrote it awhile ago, but it turns out I didn't.
Internet piracy, the illegal downloading of movies, music, games, etc., will only be stopped when the makers of said items stop trying to sell solely for profit. The "Big Four" record companies control about 70% of the worldwide music industry and an astounding 80% of the United States market (http://en.wikipedia.org/wiki/Record_companies). The movie studios are similar, with the "Big Six" and the "Mini-Major" companies controlling vast amounts of media that people consume (http://en.wikipedia.org/wiki/Major_film_studio).
When a record label or movie studio pays its biggest stars millions of dollars, not to mention the royalties and percentages of profits from music sales and films, respectively, the people who consume this media have little problem with downloading from torrents, various website, and programs such as The Pirate Bay, Kazaa, etc. Especially in this economy, people have less money to spend.
The solution to these problems is simpler than the record companies, film studios, etc. want us to think. Various "reports" out of the RIAA claim that billions of dollars and "thousands of jobs" are lost every year due to piracy. Exactly what kind of long-term jobs are lost due to piracy?
To battle this, music studios need to recognize that CD's are going out the door, and few people buy entire albums, especially when iTunes offers the one hit song from a popular album for 99 cents. Music labels need to set up their own stores, undercut Apple's pricing, and watch the profits roll in. Movie studios need to set up their own online stores as well, sell their movies for half what the DVD cost (because there is no physical disks and physical transportation costs to pay for), and watch their profits come in as well. And when a user has downloaded a song or movie, that's it. It's in a high quality, non-DRM format, and the user can do whatever they want with it. Meanwhile, the companies, if they wanted, could include a tiny file that connects a downloader to a particular file. If that file ever makes its way onto The Pirate Bay, torrent sites and the like, the user would be responsible for a REASONABLE price to pay the companies in so called "lost revenue." The price paid however, needs to high enough for the downloader to not do it again, but not enough to bankrupt them.
There also needs to be an option for a digital locker. Since many online shops such as amazon/itunes/google play/etc. are selling their own content, why can't it be easier to get all of your media into one place and enjoy it when you want it, where you want it?
These solutions could work, if the companies would be willing to even try it. The short term profits might take a hit, but the long-term benefits would include having loyal, legal consumers.