Of course its wrong, it is very simple. It is not just a case of me lending to my few friends, it is a case of me giving to several thousand other people.
Let's say I buy Uncharted Drake's Fortune, then I lend it to a friend. I don't give him an extra copy, I give it to him for a short period of time, then he buys himself a copy because it is such a good game (that part is true).
Somebody has to pay for the artists to make money. The OP uses the idea that it allows new artists to be heard, but it doesn't allow them to get paid does it? Being heard might benefit the number of people who turn up to live events, but it won't directly put money in their pocket
Let's just look at the PSP, it would be a lot more successful, in terms of profitability, for Sony if people didn't download illegally. So what is happening there is Sony is making a loss because they don't get the royalties that they should, and so the people providing the services are suffering because they don't get the money from the people who are playing it. I don't care about the "they wouldn't actually buy it so they are no losing money," you can't seriously suggest that they are not losing any customers. Even though it may only be 1/5 people, they are still losing money.
I don't see why it is any different to stealing a CD from a shop other than the small price that it costs to actual make and transport those physical items