Though in response to the original post, no I don't think social networking sites should pay royalties to artists. However, they shouldn't be offering music for download without the artists permission; and they should be monitoring pages regularly to avoid this; and they should respect requests for removal.

On myspace, you do frequently see broken links with the message "Song removed by artist" or suchlike. Plus I have never seen a 'tribute' page where you actually could download the music in question – they basically function like listening booths in record stores.

Granted, a musician could object to their music being broadcast without their consent for principles other than copyright-infringemment. But myspace, being corporate and very advertising-sensitive, seem to me to be better than most about removing things. (Certainly better than some self-described well-meaning blog sites run by supposed fans!)

I would say that, as Faustian pacts go, social networking sites do more good for musicians than harm.