Is Piracy Its Own Punishment?

Tim Wu has something interesting going on over at Lessig's Blog:

On Piracy. If it is true, first, that widespread piracy at some point diminishes the incentives for industry to invest in new works;

And if it is true, second, that piracy is limited to a demographic, say, 15-25 year-olds (perhaps because people older than that are lazy or value their time more);

Won’t the eventual response of industry be to simply begin investing in films like “On Golden Pond,” and music like “Air Supply, Greatest Hits part 6?”