If people are dissuaded from producing CDs or other digital artifacts, they will also be dissuaded from creating art that is best rendered via CD, etc.
While on the surface this is sad, I'm not so sure this is much different than if CDs had never been invented. No one laments the lack of music generated with an instrument that doesn't exist.
Markets are a fact of life. The question is, what sort of (economic) system best deals with that? No matter what you do, people will be trading, and that will include art.
Just to be clear, this was my point (I was trying to head off claims that art shouldn't be subjected to capitalism because it's art). I definitely agree it's a good thing that it's part of the human condition, and that's the basis for my point that art will be created anyway, even without the protections of copyright.