Then what non-ridiculous method of conditional access to video would be acceptable to the companies that fund production of feature films.
Obviously it's hard to say whether or not increasing profits would be acceptable to everyone who funds production. There will be outliers so I shouldn't arrogantly claim that they are all intended to be legitimate profit-seeking businesses.
Nevertheless, you'd think that for the common case (production companies that are trying to get the most money), something like "standard mkv or mp4 files served by HTTP or maybe HTTPS" would be a nearly perfect solution. (I think HTTPS is usually the best way to go, but for large media files it probably makes more sense to be as cache-friendly as possible.) Those are proven techs that already have a wide variety of existing implementations, and can be relatively easily re-implemented if someone has a new idea for an innovative player.
What's the downside of that?
Is the downside that it doesn't give service providers enough of a vertical market, so they can't as easily discourage customers from using multiple providers? That's the only reason I can think of, for using proprietary stuff: if I had a convenient unified user interface that showed content available on Netflix and their competitors (e.g. HBO) then I might shop at Netflix less often. Competition is bad.
But that's just Netflix's point of view; it's not the point of view of a profit-seeking production company or a viewer. Producers and consumers should be on the same page when it comes to making things easier to buy and use. It's just the middlemen who see advantages to putting up barriers and .. *cough* .. adding value. So I think we should ignore Netflix's agenda and concentrate on the production companies, just as you suggested.
If a production company comes back and says "no, DRM-free standard files over a standard protocol is unacceptable" then we should ask them just what the hell their agenda is, if making money isn't it. We tend to think they are trying to make money, so all our proposed solutions (e.g. stop using DRM so that you can sell more copies to more people) are geared toward that. If their agenda is something more obscure, then either we should find out what it is, or just let it go and stop worrying about it. Maybe pirating videos instead of paying Netflix for them, is compatible with everyone's non-profit agenda so we're all getting worked up over a non-problem. (But then what's the copyright for?!)
My guess is that the above paragraph is totally off on a tangent, and the majority actually do want money (and want as much as they can get, where more is better), so switching to standards and losing DRM is going to be the best answer for them.