The solution as I see it is for the entire industry to wake up to the fact that they do not need to be structured as they are now in order to be profitable.
You have 4 groups here.
People who make shows.
People who pay for advertising.
People who watch shows.
People who distribute shows.
Thanks to Online Peer to Peer Distribution technology, one of these groups is obsolete.
Companies pay dearly to have their products advertised. The prices they pay are generally enough to fund the making of a television series. Often even a movie.
Lets look back at the early days of television. Commercials were done on the set, by the actors in the show. Product placement was a big deal, as it is now (is it just me or is TV Land some alternate universe where everyone uses a Mac?) In the middle of the show, a short segment would feature an actor or announcer giving the advertising spiel for the product. In return, the sponsor would pay a fee that would enable the show to continue being made.
The problem here is that intermission-style advertisements would not work any more. Anything that interrupted the story would be cut out by people in pirate scene.
What needs to happen is that commercials need to change. They are annoying obnoxious interruptions that people only enjoy once or twice (at best) and then become increasingly less enamoured with as time goes by.
On the other hand, product placement still fits just fine, and would not be cut out. Also, watermarked intermittent messages and logos that decorate screen edges would likely be kept as well... A black bar over them, or blurring them out is just as distracting from the material as the original message likely was. And honestly, it would be healthy for everyone if the "scene" agreed to leave these alone. Taking up the attitude that it is "paid for" space, and without it the show would die, would be a good thing.
Another thing about commercials like this is their longevity. Advertisement embedded this way will last for the life of the show, not just flash in the brainpan of millions of viewers for a forgettable squidgeon of time.
How many people watched Firefly when it came out? Obviously not enough. How many have watched it since then? Millions. If Pepsi or McDonalds had embedded an ad into that show, instead of doing it like they currently do, then all of the millions who have seen the show since it went off the air would have been viewers of the ad as well.
As it stands now, who knows what company was paying for ad time during that show's airing? Definitely not me, the version I watched had the commercials removed.
The torrent model is a distribution dream. The production company does not have to pay for expensive amounts of bandwidth, that fee is paid for collectively by all of us when we pay our monthly Net bill.
"Ok, smarti-pants, back it up" you say.
During the last Superbowl, 2.6 million US Dollars were paid to air a 30 second commercial. with a total U.S. audience estimated to be around 150 million viewers. Curiously enough, that's around the same amount of money it cost to produce an entire season of the HBO show "Carnivale" which was cancelled due to high production costs. Season one averaged 3.54 viewers across 12 episodes (42.48 million views) and Season 2 averaged 1.7 million viewers for 12 more (20.4 million views)
This is JUST the people who watched it on HBO. This doesn't count DVD sales or pirated distribution. Television shows now have a long tail of viewership. Shows can get surges of popularity years after they have left the airwaves.
By this math, Two or three sponsors could have kept this show alive. And this was an abnormally expensive show to produce, yet also a show that won 5 of the 7 Emmys it was nominated for. A sitcom could be done on a shoestring budget.
It comes down to a question of which is better. 150 million ad views by different people, or 20 or 40 million ad views by the same people repeatedly.
Which is better, paying for a distribution model that cost millions to build and maintain, is operated by self-aggrandizing jackasses (Ted Turner, Rupert Murdoch, etc) who think it is their personal vehicle to program you to think and act how they want you to, and is constantly cancelling shows to the disappointment of millions of loyal fans (Firefly, Carnivale, Surface, Heroes)??? Or is it better for production companies to cut out the middleman and put a server in the basement seeding their show on an officially sanctioned torrent with a legitimized tracker whereby they can keep accurate records of how many times the show was downloaded? Include a question before the download link as to how many people are expected to be viewing that copy, and you get accurate numbers with which to shop around to prospective sponsors.
This way of doing things lends itself to web based social networking buzz-building as well.
To the "Industry"
Stop trying to outlaw piracy. It is a part of global culture now. Embrace change and survive. Ignore change or try to legally regulate change and you'll go the way of the dodo. Learn to embed commercials in your web-based offerings in ways that are unobtrusive but effective.. Set up RSS feeds of sanctioned torrents for shows. If a show stops being economically viable on the air, look toward continuing the series via online only distribution. Realize that flash sucks balls. It really does. Streaming is expensive on your end and limits the available quality not to the capabilities of the viewer's home theatre setup, but to the viewer's bandwidth capabilities. Torrents are cheap as the bandwidth cost gets borne by the viewers and you can host different qualities of your product (with corresponding differences in filesize) to further meet the needs of your viewers and hence remove the need for someone in the "scene" to re-encode your product. If you don't embrace this change, it will be the end of you. Also, stop doing cocaine, your family is really worried about you.
To the production houses
Start cutting out the middle man. If the industry doesn't pick up your show, have your agent stop talking to NBC, ABC, FOX and HBO, and instead have them talk to McDonalds, PepsiCo, Sears, FedEx, and Toyota. Get in touch with your fanbase and stay in touch. Be good to your writing staff. Don't sign away your reproduction rights. Keep your options as open as you can. Do not allow a clause in your contract that would prevent you from continuing your show by alternate means should a network decide they no longer wish to carry it.
To the viewers
Get out there and check out the Web based shows. This stuff has already started happening, and you are missing out. There's some good shows already using this model. Google the word "vodcast" and you should be able to find something along these lines.
To the advertisers
Gather a team of people who can judge the viability of script ideas. You are now in a position of greater power than you've ever been before. Don't screw itup.
To the reader of this
Sorry I was so longwinded. It happens.