Deadweight loss exists any time the profit-maximizing price of a unit of something exceeds the cost of producing an extra unit. In a highly competitive market in which many sellers are offering largely undifferentiated goods, profit margins are low and deadweight loss is tiny. But the whole point of copyright is that the owner of the rights to, say, Breaking Bad has a monopoly on sales of new episodes of the show. At the same time, producing an extra copy of a Breaking Bad episode is nearly free. So when the powers that be decide that the profit-maximizing strategy is to charge more than $100 to download all four seasons of Breaking Bad from iTunes, they’re creating a situation in which lots of people who’d gain $15 or $85 worth of enjoyment from watching the show can’t watch it. This is “deadweight loss,” and to the extent that copyright infringement reduces it, infringement is a boon to society.
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