The only digital media distribution business model with long term viability is one that makes digital media easy to use but hard to copy. In my opinion Hollywood is absolutely correct in saying that the digital revolution in media reproduction of video (and audio) has in effect facilitated the destruction of the recorded music industry and is now threatening the recorded film (video) industry.
I believe that the telescope of time will show that if the trends of the last 10 to 15 years continue then the late twentieth century Information Technology innovators may very well go down in history as a bunch of philistines who, IN EFFECT, mortally wounded the recorded music industry and deprived the musicians of their day, as well as musicians past and future, of their ability to collect just rewards for their artistic works. The same will likely follow suit for the film industry. I will go even further and say that I also believe that the Engineering community as a whole and the Audio Engineering community in particular has an obligation to find ways to halt and reverse this trend by finding innovative ways to make digital media easy to use but very hard to copy at the highest resolution/quality.
I have heard of Ultraviolet, but not tried it. It seems to be cloud based streaming of movies that you have purchased. I personally would prefer the option to completely download the movie to my mobile device for viewing later. I believe that Ultraviolet only allows standard definition streaming to IOS and Android tablets.
Hollywood has been too slow to embrace mobile screens and media servers as a an opportunity to expand the popularity of its products. Shiny silver discs are rapidly going the way of the buggy whip, and yet it is still illegal for a paying customer to transfer the bits from that shiny disc to the device where he actually wants to access the content represented by those bits.
A version of the business model you speak of is being tested right now; it's called Netflix. If your household consistently watches more than 8-10 movies a month, you're at or below the $1 each level assuming you're staying within your ISP data cap.
The only modification needed to capture your full model would be to widen the film base to ALL films produced over the last few decades. This would shift the valuation of a film in the consumer's mind from cost to time. Piracy would literally collapse overnight as you can't pirate your spare time.
From my experience with Hollywood as a technology provider:
They are driven by fear and greed, just like any business.
Fear- Antitrust paranoia makes it difficult for studios to even talk to one another. Distribution of movies is walled off from production in theory because of this.
Greed- Money is made by accountants, not production. Most movies 'loose' money, after the accountants work the book. That is why top actors and directors take a cut of the 'gross'. There is no 'net'.
These emotions are difficult to translate into the new digital world. DVD sales, both preorder and foreign rights are now well understood. But, Hollywood doesn't trust Silicon Valley after the DVD copy protection was broken by a Danish teenager. 'Yeh, we trust tech, sure!" is the motto now.
Most tech companies would screw up any digital distribution system, except for Apple. iTunes works and people make money. iTV type solution would also work, and everyone would make money.
BUT, that would move the center of control to Apple. Money is the most important thing to Hollywood, after Control. Watching what Apple did to the music industry has put Hollywood in a dilemma. If we want Control, we won't make as much Money. If we just want to maximize Money, we give Control to Apple.
I think the problem is that Hollywood are thieves as big as the pirates that download. If I buy a new release movie I pay up to $25 for a DVD and $32 for a BlueRay even though the manufacturing cost for a DVD is about 12cents and for a BlueRay maybe 15cents. That's theft too. I sit around and wait patiently until they sell for under $10. It might take a few years but it usually occurs once it has appeared on TV. At $10 or less it isn't worth my time to even consider copying or downloading, so it those greedy SOB's would just put them on the market in the first place for $9 there would be virtually no piracy. A good way to achieve that would be to say that exclusive distribution deals are illegal, (aka monopoly) and competition would quickly move things to a level that would prevent piracy.
I think Hollywood has an exaggerated view of what their product is worth. They have essentially been evaluating a movie's value based on the estimated number of times a pirated copy was downloaded. But it is free to watch a pirated copy, so naturally anything might be watched. If piracy were suddenly completely eliminated, how many would pay to watch "Scary Movie 5", a movie that was barely profitable. The belief that the number of pirated downloads is proportional to lost profits leads Hollywood to believe "Scary Movie 5" should have made far more money. The number of pirate downloads is a very poor metric. That a person is willing to watch a movie for free is no indication that he will pay to watch it. In fact, I don't see how anything much at all can be inferred from the number of pirate downloads.
the other side of the story is when I buy a movie, can I watch it on my phone or tablet or tv or pc? And can I take it with me to watch on the plane or train?
Instead, you get a disk that can only play to a hd tv - can you legally copy it to play on your phone/tablet? You shouldn't have to buy a copy for each platform. And should you be able to put a copy on your media server, instead of on a physical DVD? How do you differentiate between a copy on the media server and a copy on 10 other computers off the internet?
The other issue is a $20 blue ray in USA is a months salary in many countries, so then what? If they sell the movie there for the equivalent of $1.00, shouldn't you be able to import that copy into the USA? Why should a US consumer pay more because he has more money?
First of all, content makers should be paid for their work. Unfortunately, in the real world, the middle-men take almost all the profit.
Screenwriters, who are very much like engineers in that they create the blueprints for the product, are literally living below the poverty line, except for a handful of well-known names. And as more and more movies are pirated, there is less and less money to "trickle" down to the screenwriters because the middle-men (studios) are the money gate-keepers.
Conversely, when Hollywood has 100% control over access to movies, it prices them so high it increases the temptation to pirate. And so it goes.
The solution would be to price movies on-line at some level that pirating will not be worth the trouble. I'm thinking of something around $1 per movie. (I don't have cable so I have no idea what they actually charge now).
If a business model could be generated where people could easily stream a movie for a buck, I believe the total amount of revenue going back to Hollywood would increase dramatically. People generally want to pay for what they use,
and if the price were reasonable, no one would bother to resort to pirating.
Somehow Hollywood is just not getting the message...