The problem I think is rooted in piracy, at least as it is practiced in first-world countries where convenience is worth more than price. Piracy has several built-in practical issues, because it is frankly inconvenient to be conducting illegal business, and DRM provides another inconvenience. But despite these endemic problems with piracy, it does offer a huge convenience: universality. The legal movie market is fragmented and therefore a pain to deal with, where the black market is very universal, with mirrors of content on all the major distribution channels (torrents, rapidshare/HTTP sites, and USENET are the big three).
The interesting thing to me is that all three of these distribution channels have successful paid services springing up around them. There are private VPN services you can pay for to torrent from a foreign IP. Almost every HTTP distribution site such as rapidshare has a premium service you can pay for to get more volume. And USENET has several news servers that retain data for years and offer direct encrypted downloads. So it is clear to me that people are willing to pay for the benefits these services offer.
If you line up the pros and cons, I would say that legal services win out on almost every count except two: price and universality. The success of grey market services and nearly-universal services in other industries (iTunes, Steam) tells me that price is not the real blocker, if only movie studios would get their act together and let distributors license everything in the world.
I would love to see a world where cable TV providers, digital streaming services and physical retail services all had access to the entire catalog of movies and competed on price and convenience. The current world where services compete with content catalogs and exclusivity just seems unsustainable because it is worse for consumers in the long run.