Pirate logic seems to know no bounds. Let's clarify a key fact. "Widespread growth of illegal free alternatives" was a massive problem all the way back into the 1990's. The music industry couldn't start embracing iTunes as the legal pay alternative until the iTunes Store was actually launched... in 2003.
I think you have a valid point about the music industry not having an iTunes store to put their content on till 2003 (though Napster was created in 1999 (though it didn't pick up steam till the early 2000's), but I'd argue that if there existed a good legal alternative early in the process, you wouldn't see as much of a proliferation of illegal file trading.
That said, surely there's a valid question to ask in the early days of iTunes which is: if a record label didn't have their songs on iTunes and you preferred digital downloads, where are you going to get them? I recall back in the day liking some European techno song that wasn't on iTunes, and if I wanted it, the only way to get it was via Amazon.com which let you buy an imported album for $30! In that situation, I downloaded the song from Kazaa!
Now it seems like virtually every song imaginable is on iTunes which are available on high quality files with no DRM! There's no excuse to steal music anymore.
For TV shows and movies, however, things need to improve. TV show selection isn't super comprehensive and I think it would be awesome to have a subscription service. For movies, the purchase experience is okay for almost all new movies, but I wish there were a better selection of good classics (Goonies, Star Wars, Neverending Story, etc.), and the rental policy is silly (specifically the delay in availability vs. physical rentals and the 24-hour expiration period after starting a movie).
Even Apple cites such restrictions as one of the roadblocks to broader adoption of their Apple TV product!
I'm not surprised, then, that some people resort to torrents. I don't personally use them; in fact I've managed to buy $1000+ of iTunes video in the past couple of years (I watch a lot of TV/movies), but if you offer a shoddy annoyingly restricted product when there's an easily accessible free illegal alternative, it's no surprise that so many users rip off the industries' work!
The proper industry approach, in my opinion, is not to sue individuals into oblivion and put an anti-piracy warning video (you know the one) at the beginning of every legal DVD, but to quickly respond to consumers' digital wants and come up with a good legal model.
That's why it's frustrating to continue to read stories about how the TV industry, for example, resists the move to iTunes because they're afraid of the same impact to profits the music industry faced. Rest assured, if they drag their feet too much, the industry certainly will see the same fate. The longer they resist the move to good digital (read: iTunes), the more torrent pirates are going to proliferate.