It's a great idea, and it could work
if the content providers embraced the globalism of the internet. It'll likely work in the US, but if this were implemented in Australia:
My ISP: "Hi! We've noticed you just downloaded Game of Thrones. Did you know you can view it legally on Hulu.com? Click here to see for yourself now!"
Hulu.com: "We're sorry, but the content you have requested is not available in your country."
Me: "Fine, I'll just activate my VPN and grab it off TV Torrents, even though I'd rather buy it if I could. (And no, I'm not giving Murdoch $120 a month to watch one fucking 3-month show on Foxtel!)"
When these idiots wake up and realise that geo-restriction is the idiocy of an antiquated mindset, they'll solve the piracy problem overnight.