TV shows are copyrighted works (Salon, view ad to read) . You need express permission (in the US) at least to record stuff – technically that makes VHS recorders illegal! So, from what I’ve researched, reproducing and distributing shows that you receive free-to-air, that you don’t pay anything for is against the law.*
However, once something has been broadcast, what the consumer does with it is out of the broadcaster’s control. A network, production company or union can discourage re-distribution by imposing legal penalties and using anti-piracy technology (NY Times, registration may be required). Discourage it, but not eliminate it.
Why would you download a TV show? For starters: you can’t get a show in the country you’re in or the way it’s translated into a foreign language is terrible. Or the free-to-air TV network doesn’t treat the show you’re interested in (say a genre show like Buffy or a difficult to sell comedy like Arrested Development) with any consistency or they even cancel it. Maybe you want to watch a show back-to-back because the continuity works better that way. You could even be interested in something your free-to-air network will never show.
The biggest reason though: you've heard about something that's on in the States and is great (for instance, Lost) and you want to join in the on-line discussions, be part of that 'global' experience. In that case, there may be an argument that downloaders are the pivotal opinion-influencers that broadcasters want watching their shows. They'll tell their friends, encourage other viewers.
However, to encourage downloading is to shoot myself in the foot as a creator. One of my motivations for the work I do is to make lasting items of intellectual property that can independently generate revenue for me.
But this monopoly-to-one-to-many distribution model means a business can only count on making a profit on IP once (whether its by DVD sales, subscription or advertiser dollars). After that initial broadcast, a show is re-distributable forever. … And only one person needs to fork over money.
Click for Alternate Broadcast Models
The two conventional models for making money that come to mind are:
1) Subscription TV; and
2) Advertiser funded TV.
Advertiser funded TV comes in the form of commercials you must be forced to watch. The effectiveness of advertising has anecdotally been questioned before. It can also look like product placement that's built into the show.
Cable shows have a more interesting kink when it comes to developing new shows. At the moment they’re hiring diverse talents but many of the teams are ‘knowns’. Say you paid on a show-by-show and download-by-download basis. Paying after a show has been created and shot is okay. A show can still become a hit that way*.
Paying before a show has been created and shot is okay – not so much. This is called the Hostage model – only after enough money has been gathered, does the product get shot / released. People might be fine about contributing to a Hostage funded show (or pilot) from known creative teams, but almost certainly not from unknowns.
Therefore a 3rd stream of TV show creation could emerge. No-budget groups of friends and family creating their own stuff, controlling their own distribution and merchandising, developing their own rep. Homestarrunner.com is a great example of this already happening.
I’ve got lots of links for this post. Over the next few days I’ll build them into the article.
* I've found one dissenting opinion so far, but it's anecdotal and without citation (read OmegaHack's comment on this thread)
** I've speculated elsewhere that they might lack the critical mass to break through. See The Death of Pop Culture.