Extortion is profitable for them and they aren't concerned about their public image really. At one point someone in their company ran the numbers and determined sending threatening letters demanding a few thousand dollars from random people would be a good revenue generator. The money is a lot to most people, but they will often just pay it or put it on their credit card so the problem will just go away. They've never been in any legal trouble in their life so they get scared and pay.
Large studios tend to go after the sources and sites, and not the people downloading.
