Whether file sharing is morally bad or not is still open to debate, in my opinion.
So you might think "Well, they are losing money when people don't buy the CDs", but many bands themselves, the ACTUAL artists, not the record companies don't mind. They do object to pirate CDs at a boot sale type thing though.
Does anyone remember the Happy Mondays? Well, the record company wanted to sign them up, but they didn't want to be signed, they were just happy gigging and stuff. When they did get signed, they released an album etc. So eventually the contract ran out and the record company wanted to re-sign them, but again the band just couldn't be bothered. They had legal arguments over it. The band said "They were just doing it for the art". When Metallica got Napster shut down they lost many fans who saw/see them as greedy corporate rock wh*res.
So you see, musicians/artists don't do it for money, they do it for "the art". But then of course everyone needs money, it seems. It is a trap.
And by the way, Napster wasn't illegal when it started.