I think it'd be more embarrassing if someone were paying for a Rob Schneider movie. 

In all honesty though this is the same thing that happened with music, it took a few years for record companies to figure out how to make money off of downloading and now they're raking in the dough like never before, so shall it be with cinema as hard drives get larger and larger, HD formats become more widespread. 

I don't see any real damage to film as a whole and this is far from a crisis. Just as a point of reference an estimated 60 "adult" features are released on DVD every week and no matter how popular Cloverfield might be it'll probably never be downloaded as much as the films from the other side. 

The history of the internet will be marked by tremendous freedom being stomped out and ruined by greedy corporations and lawyers.