I think this was handled in the wrong way.
Good products, better accessibility, better service. The internet has changed everything. The decline in physical media isn't going to be bolstered by eliminating file sharing.
Give this interesting article read:
But like all DRM schemes legitimate users are the ones burnt. You have to wonder at the collective value of legitimate content that has been cut off from copyright holders as a result of this one for all action.
If you own content and send a form to youtube saying that somebody uploaded it illegally then youtube will remove that content. Megaupload would simply ignore those requests- and that's why they are going to jail.
I follow several bands that have had their uploaded videos and music tracks removed and accounts deleted from youtube multiple times because of false copyright infringement notices. I would say from the volume of videos they get it would be very hard to verify these things in a timely manner, if at all.