Your both 100% WRONG!!
Copying video files from DVDs and BluRay discs is only piracy if you don't own a copy of the original DVD or Bluray - or if you distribute said copies to other people who didn't pay for them.
Copying video files from DVDs and Blurays that you already own is NOT Piracy - You are permitted by law to keep your original copies of fims i.e. in a safe and pristine condition by creating a valid "backup" - whether that's as an AVI, MKV or a Dual Layered DVD.
If you were to make a valid backup - you would use a DVD ripping program like Magic DVD Ripper, which can circumvent the encryption on the disc and allow you to rip video files in any number of formats - legally