Buying something increases the velocity of money, it does not create new money.
The whole point of having a market is to allocate scarce resources (via money): inevitably there will be winners and losers. D'oh.
If something is an axiom, that just means means that it is not derived from existing facts, and that it is assumed to be true in the rest of the argument. So the judge's statement that "it is axiomatic that the availability...undermines...the market..." makes some sense on its own, but it seems crazy to introduce your own axioms about the world in a legal ruling.
You actually make a good point, but not the one you think that you're making.
When you boycott a manufacturer of a scarce good, you should not keep buying the same good (or a close substitute), since that would sustain the demand for that good and thus the manufacturer in question (unless the boycott is sufficiently widespread).
However, if you instead violate copyright or patent rights, the (direct) effect on the boycotted party is a loss.
An example is the boycott of western pharmaceutical patent licensors by e.g. India; it led to further price reductions and special considerations for emergency manufacturing.
I don't quite succeed to "take a step back and look at the overall economics of such markets, [and] quickly realize how much bigger they get when you free the content from the constraints and scarcity of physical media."
Why should the size of the (music) market increase when distribution costs decrease?
Unless you mean in units consumed, rather than dollars paid; the latter is what the RIAA and friends are worried about.