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The studios may be right. There is a sucker born every minute. If people will buy iTunes, they may buy downloaded movies too. People who think less is more.
Digital music is cheaper than CD's, ebooks are cheaper than paperbacks. This pricing scheme runs backwards to common sense.
MPEG4 compression can be more efficient, and look quite nice, but it takes more postprocessing (i.e. more computer processing power) to remove obvious encoding artifacts in something as compressed as a theatrical feature squeezed down to 1GB at DVD resolution (720x480 pixels). There would still be a loss of quality evident to a videophile, but probably not to John Q. Public.
Pay extra for something of lower quality that is restricted to where I can watch it?? Or buy the DVD instead?
And of course, the claim that movie piracy is costing the industry money would actually have evidence for a change (Bad movies costing them money couldn't possibly be the reason...)
Isn't it possible they're just a bunch of retards?