"Prices on new product would have to be lowered to compete with free old product."
I do not believe that this is true at all. Having taught film history classes at a university, where some of the most interesting, significant human artworks were rejected because they were silent, had subtitles, or simply were not in color, I can say with no hesitation that there is little or no demand for things that aren't colorful, animated explosions featuring contemporary stars.
That's not a value judgement: people can watch whatever; that's just the current market as I understand it.
Right, because movie ticket prices and dvd prices are going down in the face of free tv and cheap online streaming. Yes today's content has to compete with yesterday's content. But they do already. A new Robocop is coming out. I'm sure it will do just fine, even though you can find the original for cheap or free.
edit: so you were just restating what you already said. It wasn't persuasive the first time.