Aside from that, this is a difficult to prove assertion. I'm not sure there's actually been a paid legitimate service that's actually better than the free pirate one overall, when you take out the morality equation.
Netflix, rdio, etc. do seem to be doing quite well at proving that people are still willing to pay for a good service with legitimate content, though. Imagine if they were actually as good as the alternative.
(Note that one person's gem is often another person's crap...)
Yet, vodo.net, even being free -- still has higher friction than The Pirate Bay, less choice in [encoding] quality -- but at least supports offline usage (unlike Netflix).
I don't pirate stuff very often now. Spotify and Netflix usually ensure I have something to watch and listen to. There are a few exceptions. Once every 6 months or so I subscribe to a proxy to catch up on a bunch of TV shows which aren't on Netflix, LoveFilm etc. Realistically I would pay for the things I download if there was a reasonably priced option. I rarely want to own a film or TV show, I just want to watch it once. $30 for a season of something is too expensive..