Of course, someone out there will go through that and put it on the internet. But Joe's mate is worried that the government will track his downloads, or his computer will get a virus from these dodgy downloads. And every few weeks, the source he's using shuts down and he has to find a new one. Before long, he'll just decide it's worth giving Netflix a few dollars a month to get movies the easy way.
I already outlined precisely how they limit the influence of illegal download sites: ensure that the effort to find them and the perceived risk of prosecution and malware exceeds the cost of getting the movie legally. Once people start working and appreciate the value of their time, it's not actually very hard to tip that equation in their favour.
The problem starts only when "they" decide to mandate in our hardware. (And yep, "they" are already doing it, for several values of "they". We are fighting the wrong war here.)
I have some insider knowledge of how these chips work. First, you get the chips with crypto keys already installed, so having a copy of the firmware source code won't help. Second, the keys are unique to the device, so getting it won't give you much. Third, the firmware is authenticated so modifying the firmware won't help. Fourth, the chip is designed to be resistant to physical attack.
Or, if you want to be lazy, just hook a VGA cable up to a transcoder.
The chip will also not send high-definition output to VGA, so you will need to do better. Basically, you have to hack the hardware.
I'd like to clarify that I'm not defending DRM, just that circumventing DRM is not as easy as people in this thread intimate. I think the reason why DRM will fail is because of economic pressures: the cost of deploying millions of devices designed to protect ubiquitous data against a small number of highly intelligent and motivated cryptography experts and hardware hackers.
And the analog hole can't be closed. If the video is encrypted on the wire, you can just jack into the TV's DSP hardware (at worst).