Well, there's a strong possibility that kids are beaten or otherwise abused if they decline to participate in such activity, which is one reason to undermine the market and make it unprofitable. Also, you're overlooking the possibility of significant psychological damage. Being a stripper doesn't seem like a healthy occupation for a ten year old.

The quote from their director was "Our worst scenario is that the same thing will happen with this as has happened with child pornography that is now a multibillion dollar industry in the hands of criminal gangs."

Also there was an article about cam girls the other day showing some/many are poorly paid in studios in 3rd world countries.

Where there is demand, there is always someone there to make money – in this case it's clear that attempting to curtail demand will stop commercialisation of this sort of thing.

A child (who does not legally have a capacity to consent) 'performing' for strangers?

You're going on a bit of a limb to suggest there's no possibility for physical harm here.

The article mentions that the "webcam sex" involves people paying to watch, via webcam, actual sex. Very different situation.

So, if you had a daughter, it would be ok if she made a little extra money on the side?

It's kind of strange that anyone would have to explain why this is a problem. Wonder what just happened to your Google, Facebook, and NSA social graph profile? :-)

what about emotional/psychological damage? I would imagine that physical rape is also mostly an emotional/psychological thing.

disclaimer: I'm not a girl, I have not been raped, I have not known of anyone close to me who has been raped, nor am I a psychologist.

There are examples of people actually killing themselves after webcam sex. Some of those people are blackmailed and asked to pay money in order to prevent release if the images. Some people just have the images released anyway, and are bullied to death.

I was unaware the only way someone can be harmed is physically.