Well, acting on the premise that artists make most of their money touring and through merchandising than they do with album sales. I can see how that's valid, particularly because people that download music may very well still goto see such and such in concert. Album sales seem to only really help the record company get richer these days.
That said, regarding smaller labels, I think file sharing absolutely can hurt the artist in some ways, but at the same time, it can help them 'get the word out' pretty sufficiently. Which in turn can help them greatly.
At berklee everyone has a powerbook, every powerbook has iTunes, (nearly) every iTunes library is shared, and programs liked myTunes exist to copy music off people's libraries. I've only been on the berklee dormnet a couple times, but there is always at least 100 libraries on, and most of them have 5-10,000 songs(everyone being a music geek) the berklee dorms have got to be the biggest den of file sharing I've ever seen, cause it's all so compatible and easy. But, they're also a bunch of music dorks who fork over hundreds of dollars when their favorite bands come into town buying tickets and merchandise and all that. So does it cancel their file sharing out? I dunno, but I don't think it hurts the artist as much as people make it out to be in the long run.
