I think it's too easy to look at people in these positions and say they just don't get it. This is their industry, they're immersed in it every day. They may not have seen this coming, but it's been in their face for a while now, and even if a few can't see what's going on I simply can't believe that none of them do. At best I would say any "ignorance" could still be tied back to incentives: even if they know the truth, it's inconvenient and not worth acknowledging widely (or perhaps even to themselves). Better to keep on peddling the line that piracy is theft to preserve the status quo as long as possible.
I've mentioned something similarly here before (I think during the SOPA stuff): people simply do economically irrational things to take a principled stand. I've certainly done things that my friends and family thought were batshit crazy just so I could achieve perceived balance in the universe. My take is that's what we're seeing now and have been for a while. The media companies obviously want our money, but more than that, I think they just don't want you to have access to their content if you didn't pay for it, to break this overwhelming sense of entitlement many of us have. I don't condone the methods, but I don't disagree with the rationale either (providing that actually is the case).
I theory you are right. But can you say of a king that he understands his people? Or of a president that he fully understands the country he is ruling? There is a difference between knowing, and understanding/acknowledging. And sometimes, people don't get it, even though it would be in their best interest to understand things.
In this case, I think the people at the top are in an "ivory tower" of righteousness. They know what's going on (you're right on that point), but they don't understand it, that's why they can't act pragmatically on it.
