What do you think happens to the rate of new products being created and innovated if the ability to profit from the idea ceases to exist?
like Tiguar said, they will innovate to be more profitable
but also, check out this post I made on the movie/tv board a while back:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ An example of how no copyright restrictions increases creativity
Granted, this is from the tech world, but the concept it illustrates translates into the art world as well. GNU/Linux Distribution Timeframe
This is a very large SVG graphic file that documents the vast majority of Linux distros put out in the past 20 years or so. If you are unfamiliar with Linux, the basics you should know are that it's free (both in price and license) and that people regularly take one "flavor" of Linux and then add their own style/features/functionality to it and then release it as a new distro/flavor.
This has led to an explosion of innovation and creativity. When one project goes off the reservation, there are always other people to come around and say, "Hey, what you are doing now sucks, we're going to take the source code from when it was good, and fork it into a new project and add some new features and release it as well." A recent example of that can be seen in the GNOME 3 debacle. A lot of people greatly dislike the new direction that GNOME has taken and so the guys that make Linux Mint decided to take the GNOME 3 code and make it look and act like GNOME 2.6 (which was loved very much by the community).
This applies to things like music and movies as well. If we had a robust public domain then artists would have much more source material from which to remix/remake/reimagine/etc. Take for instance the Danger Mouse stuff from back in the early 2000's (but that was illegal because he used copyrighted material). For a more recent (and legal) example of this kind of stuff, look at that "Guy on a Buffalo" stuff. They took footage from a movie in the public domain, wrote a few catchy songs to layer over the footage and put it out on YouTube to much lulz.
Imagine the possibilities and the explosion of creativity we would see if there were a wide selection of public domain works to choose from.