The end result is that artists get screwed, and this was happening long before the Internet. The music industry is by no means the only place where this happens. It's just a really easy target when looking for examples. In a year or two, computer storage and Internet bandwidth will have increased to the point that video files will be as easy to copy as sound files are now. This is why the MPAA is preemptively up in arms about it.
Corporations tend to get less creative the larger and more stable they are.
This may explain why large corporate studios make so many derivative sequels, while small independent films like Clerks or The Blair Witch Project are becoming increasingly important to the industry even without the Internet. Creativity resides with individuals, not with committees. A system based on charging people for copies they can easily make for themselves for free is not a stable situation. It just doesn't make any sense. More restrictive laws can't substitute for the consent of the governed.