Ahoy! Mateys

Reading the last chapter of Click, I was struck by how important filesharing has become integral to the way in which music was consumed. The example he used about the Arctic monkeys just proved what some artists (Radiohead) have been saying all along. Who's going to take a chance on new music when you have to pay $18 for a single CD? It's become clear that free mp3s are now integral to promoting new bands or even new albums by established ones (Thom Yorke claims that the popularity of Kid A was mainly due to napster).
As a musician, I would like to weigh in on this. David Weinberger talked about how data is becoming so cheap that soon it will be essentially free. This is an extremely important development. Existing intellectual property law is based on the assumption that distributing content ois not free. Manufacturing books and LPs takes a lot of resources, and its only reasonable to expect some sort of financial compensation for them. However, when you can just post your ebook, or mp3s online, it costs next to nothing (or in some cases actually nothing). I'm not saying that there should be no form of compensation at all, but, using existing copyright laws to regulate online content is like using laws about horse-drawn carriages to regulate the auto industry. They just are not applicable.
The record industry has been enormously short-sighted, and has essentially ensured that the future innovations in music (since I believe that content ultimately will always have to adapt to its form) will happen without them.
In Europe, there is an increasingly powerful movement of pirate parties, arguing these exact points. in Swedish parliament, the Green, left, and even the moderate parties have adopted this position.
But if everything is free, how can artists survive? Well, in the short term, alternative means of compensation can be provided. This has already happened in classical music in the 1940s. Since living composers were no longer able to live off of the revenue from publishing their works (largely due to the popularity of recordings) ASCAP worked out a system where registered composers would get paid a certain amount of money determined by how frequently their works were performed. This system could easily be adapted to other forms of music, especially if revenue was generated by advertising (like Hulu).
Or maybe web 2.0 will lead to many more drastic changes in how we view art. In some ways (with mash-ups) we are seeing the rebirth of a genuine folk culture, where the public produces its own art, music, and discourse, rather than relying on the big media conglomerates to tell them what to listen to.
Either way file-sharing is so common, that simply due to volume, it will continue to spread regardless of what governments or content providers do.