You asked a straight question - how to reduce piracy. I answered - treat customers with respect (no DRM), and many of the current pirates will become paying users. If they want to "eliminate piracy" - they can forget about it, it will never happen. They can however increase their profits by acting decently. Today they are mostly focusing on chasing pirates wasting resources on that completely in vain. They should focus on catering to legitimate users instead. And it will pay off. As proven by those who act decently and principally don't use DRM.

> Because if I'm selling files for $5 with no copy protection and Joe Pirate is giving them away for $0 (but he doesn't want me to disrespect him by filing legal action against him or hurting his feeling by labeling him a pirate), tell me why people are going to give me $5 for the same thing that they could get for free?

I thought this is simple. People already can get it for free by pirating it. I.e. you have such choices:

1. Sell for $5 with DRM that reduces usability by limiting platforms where this can be used and etc. etc. By using DRM the distributor also offends paying customers by default by treating them as potential criminals. Joe pirate breaks DRM, and gives this out for $0 with no DRM, which can be used anywhere.

2. Sell for $5 with no DRM. It gives wide platforms availability and shows respect to the customer. Joe pirate gives out the same thing for $0.

Note, Joe pirate will give it away in either case. So what is better for the distributor, to act like a jerk, and still getting pirating in result, or to act decently and with repsect (and still getting pirating in result)? Obviously the second is better, since more people will in return pay, rather than pirate. That's how respect works - it's mutual.

I.e. what can be improved, is making it easy to buy and treating the buying customers decently. I'm repeating myself really. People will buy - out of respect in return, and naturally out of willing to support the creators. Since studio execs see everyone as a thief, they can't grasp this simple truth.

Great example is CD Projekt Red company, owners of the GOG.com games distribution service, and creators of the highly acclaimed Witcher games. They had multiple talks about piracy and complete uselessness of DRM. They sell only DRM free games on GOG - as a matter of principle. Search for their interviews if you are interested. People gladly support them, because they treat people with respect. They even brought an example, that DRM gives an incentive to pirate - i.e. people break DRM and pirate out of the opposition spirit. But when there is no DRM - there is less incentive to begin with. (Here is a great article about it: http://www.forbes.com/sites/danielnyegriffiths/2012/05/18/th... ).

If you want to put it in practical terms for video industry, let some studio become vocal about their opposition to DRM and their willingness to break this sick trend. And let them put it in practice (the way I described above). They'll see the increase in sales and the number of legitimate customers. I'm not joking. But such studio needs to be brave and bold when they come out with principal DRM free stance, because naturally others in the industry will try to attack them. But they should simply ignore and persist - and they'll be victorious.

I.e. to make it more formal - instead of focusing on reducing piracy (negative), focus on increasing the sales (positive). The second includes building the loyal fan base (fans gladly support the creators), producing high quality and unique stuff (people would rather pay for really good things, than for low quality) rather than following the "mass market" approach, treating people with respect (no DRM) and so on. This is proven to work. Note that CDPR whom are brought above excel in all these. They communicate with their fans actively, they pay high attention to details and don't ever produce mediocre stuff. They are original and unique. And really high quality. See their talk about their approach: http://en.thewitcher.com/forum/index.php?/topic/31748-cdprs-...
I can agree that those who can't come up with something original and follow the "mass market" are at a disadvantage. But that's the nature of competition. Even DRM won't help mediocre stuff to become really good.

However DRM gives publishers/distributors the taste of power and control. And it's one of the basic lusts in people. Which is even greater than lust for money. So it's not so much about piracy - it's about them playing "the boss", or "the big brother" for that matter. So many aren't ready to give up the taste of power.

I'd also recommend your studio execs friends to listen to this very insightful talk from Cory Doctorow: https://www.youtube.com/watch?v=HUEvRyemKSg - you should watch as well, if you didn't yet. He addresses the issue of DRM and how it affects the technology adversely, and especially how wrong are attempts to abuse the legal system to enforce DRM (i.e. DMCA and Co.).