Clearly I don't understand capitalism.
Clearly. Geoblocking is at least partially about market segmentation. The EU is so large that it has extremely major disparities in wealth between its member nations. Consider the difference between Sweden and Romania. If you have a movie and charge a single price to stream it across the entire EU then:
a) Some people will find it incredibly cheap and others will find it still too expensive, just pushing them back towards piracy.
b) You end up having to deal with the tax systems of every single EU country anyway due to the retarded VAT changes they introduced this year, so it doesn't help simplify your business at all, and you theoretically aren't allowed to opt out of serving particular regions due to their horrible paperwork requirements, so being able to geoblock unprofitably complicated regions whilst claiming you have some other reason is quite attractive.