First of all, to get that out of the way, I am tired of incessant Netflix pedaling. Very narrow selection, uncomparable to the actual selection.
This will happen:
Everybody will pay a fee, much like we pay now to ISPs: it will be one lump fee per month for everything.
ISP will track every click you make and how much time you spend on content (like it or not). It will automatically identify the content as well, whether you are streaming it from HBO, Netflix or free.entertainment.biz
Thus, ISP will have a comprehensive picture of what content is viewed for what time. It will cough up portion of the revenue to the content owner based on that figure.
It is very similar to what is happening on TV right now, except that the measure of popularity of content is determined by rather silly and outdated Nielsen rating system.
There is no way "free" content could be curbed under the current model. The war with pirates is futile.
With the predicted model (note that I am not proposing it, nor advocating it, I just think that things are moving to that direction, I, like any other guy, do not like myself tracked) there will be no reason for PirateBay or VPN to avoid ISP, if I can for the same monthly Internet fee access better quality site on a legal basis.
No shadiness, no copyright infringement, no privacy.