But the damages are still done. By having a library where people can get a book for free instead of buying it, even though there is some throughput limits, they still make it so that the media is no longer consumed.

Imagine a pirating service which ensures that a given file is only being consumed by one machine at a time. So if I want to watch the newest blockbuster, I have to wait my turn, and once watched, I cannot watch it again (without getting in line). In effect, the movie is checked out a single instance at a time, just like how a library checks out a single book at a time.