There's no magic solution to the problem of pirated movies available via the Internet, but if I was a movie company executive, here's what I'd do:
1) DVDs should be released the same day as a film hits the theaters. In fact, they could sell DVDs *at* theaters, and patrons could purchase the DVD for a discount after buying a ticket.
2) New DVDs should be available everywhere: Starbucks, gas stations, grocery stores, etc. This is already happening to a certain extent, but it should go further. The idea is to get DVDs into as many stores as possible and make it easy for the consumer to get them.
3) Next, DVDs are too expensive. I can rent a new release for 99 cents a night at Redbox, and buy one for $7. This is going in the right direction, but DVDs should still be cheaper. I realize that the price of a DVD is partially dictated by a number of factors, and the movie companies can't just magically lower prices without throwing the formula out of whack, but they need to start making price adjustments sooner rather than later. How that Blu Ray and HD DVD dics are showing up in retail stores, this provides a premium tier of product that will bring a higher cost and profit. This fact may help push down the price of standard definition DVDs just as DVDs pushed down the price of VHS video tapes a few years ago.
By lowering the price and making the discs available everywhere, people will be less encouraged to accept pirated movies. Piracy will never be stopped, but I think that the free market can be leveraged to minimize the problem.
Pirated movies aren't going away. 12 years ago it was possible to locate, download, and listen to mp3 files only if you were technically skilled. By 2000 or so, anyone could do it. The same is happening with movies. Now, it takes some skill and time to locate, download, and process videos to make them playable on a standard DVD player. I believe that in another 5 years PCs will be fast enough, bandwidth will be wide enough, and the software will be good enough so that nontechnical people can obtain and watch pirated DVDs quickly and easily.
Hopefully the free market can keep up!