People wouldn't stop producing content because regional restrictions became something that customers don't want to pay for anymore. Any entity that refuses to change those restrictions would leave the market open for another entity who's willing to do business without imposing these terms.

The demand for the fundamental content would remain and if some suppliers are unwilling to provide for the demand, other suppliers would arise.

Did people stop producing music when Spotify hit the market? No, so why would Hollywood stop producing movies?

Music piracy was a huge problem in the 90s, and from what I can tell, that's essentially disappeared with iTunes and Spotify. It should be easy to buy exactly what you want for a reasonable price.

From what I can tell, movie and TV show piracy went way down in areas where Netflix was available, so what does Hollywood do? They lock down their content even more and reduce the content available at any given service.

That's backwards. They have a winning service, they should double down on it and make more content available. Maybe distribute new releases to Netflix customers that have a premium account or something, and have a payment tier with nearly complete access to old content with a single subscription. That's essentially what Spotify does, and it works.