Pirating does make the artist/company lose money. If one person spends $1 on a song, they get $1. Now, if they share that with ten people, guess what, the record company/artist just lost $10. Obviously those numbers are much higher, causing a big drop in profits.
And on sites like YouTube, Youtube specifically says they should not be violating copyright, etc. After they say that, it's not their fault what is uploaded and who makes $ off of it. YouTube does police to an extent, because of audio matching. They're a hub for uploading videos, they police to an extent even AFTER stating in the rules that it can't be violating copyright laws, etc. That is pretty fair.
I'm not gonna say I'm above everyone else, i've downloaded "free" music before. I don't do it regularly, though. I've done it a few times - I just listen to pandora/grooveshark.
Radio stations should be paying the most. Think about it, they provide free music to a potential of millions of people. Radio stations in NYC can be broadcasted to NYC, NJ, NY, etc. Paying a fee for the licensing is (almost) generous, considering the potential for listeners.
I will agree the MPAA/RIAA can go overboard sometimes, but they should be there. If they feel the need to close down sites that have free music on them, I guess we can say bye to mediafire, youtube, 4shared, etc. If they need to go after someone, go after the people distributing it. Going after a few downloaders and the websites isn't gonna make a difference.
That's my 2 cents