I think they underestimate the acquisitive nature of people. It's one thing to see the show, hear the songs, read the book or watch the movie, it's another to own the physical copy.
For people like me (and there are plenty out there) having your media hoarded on shelves, grouped by genre, in alphabetical order, and available for browsing is an addiction.
Plus, there are times when electronic copies just don't fly. I regret not being more proactive in buying albums after downloading an song or two once my hard drive turned to dust. Thankfully, I have most of it on CDs, and replacing what was lost won't be an insane proposition, when I finally get around to it.
I don't doubt having more and more readily available for free boosts sales on stuff worth buying. I'm also betting Hollyweird doesn't appreciate that sales are going to be more dependent on quality than hype this way.