Hollywood's best bet for competing with illegal downloading would have to be the simplicity of it. Now, if you download illegally, half the time you don't know when you'll be inundated with pop-ups, when you'll get a virus or some other malware, and if the version you're downloading is the one that you actually want, or if it'll have terrible quality, laggy sound, or other such issues.

No one that I know of would buy $20+ movies no matter what they are (and I personally wouldn't buy any $10+ movies because I simply don't care), but if a "movie Steam" was created, and movies sold there for about $5, and allowed the user all the same privileges that Steam currently allows with video games, I believe 90% of the internet population would start using that service rather than downloading illegally. Not because it is moral, but because it is simple and reliable and easy.