Neil Gaiman talks sense about online "piracy". It hasn't hurt his sales at all. In fact in several cases, that he can clearly identify, it has helped.

He also makes an interesting point about how people discover authors. It tends to be through people lending eachother books they love. Online distribution is an abstracted form of this. If I don't know your work I'm not going to be a fan of yours, but if you can get your work under my nose and I like it I will buy more.

It would probably be prudent to look for ways to use this mechanism of sharing more effectively. Perhaps making it easier to share books, music, film and other arts would help spread ideas?