At one point, I developed a hypothesis that for a big software vendor, turning a blind eye to piracy was like a form of "dumping" on the market. Consider a vendor like Microsoft. They could make their money selling legit copies to businesses, and through package deals on new computers.
Meanwhile, anybody who tried to sell a simpler or even better product at a lower price was forced out of the market by the "free" copies of Microsoft that were widely available.
The same "free" software gave Microsoft an advantage in the platform wars (e.g., Windows vs Mac) as well. Though most of the mainstream software was available for both platforms, people would buy a computer that could run the software that they could get for "free," often by copying the disks at work.
I remember a conversation with a friend. He was buying a new PC. I suggested getting a Mac (around 1996). He said: "The Mac doesn't run AutoCAD." I suggested that he couldn't afford AutoCAD anyway, and he just gave me a wink and laughed.
I don't know how this applies to movies and music, i.e., what a "cheaper alternative" looks like. When I was a kid, we would never see a first-run movie. Instead, we'd have to wait until it showed up at the discount theater, where we could see it for a buck. Today, there may be no reasonable business model for providing a lower priced channel for content, because content competes with pirate content.