>Externality seems to describe it best. The individual never directly touched anything and never had malicious intent however I was affected by their actions.
>Is there a better term for this?
Based on the rest of what you've written, the best way I can describe it is "undercutting". Normally that term is used where one seller prices their items much lower than everyone else in the market, resulting in every buyer flocking to him and leaving every other seller without customers.

You brought up "AI artstyle scraping models". I would say this is quite similar to (though not exactly like): an "online artist" capable of "changing" their "artstyle" (that is, they are not locked into one artsyle) opens up a million "commission slots", each with a price point set at 0.01 cents. Why do they set the price so low? Literally any reason can be given (social experiment, crashing the online "art" market, for the lolz). In this situation, the event you mentioned would likely happen (replace "free" with miniscule charge):
>He used to commission and give money but now he doesn't have to, now he can print away his anime waifu without waiting, without needing to go back and forth with artist to get the character just right and for free!

I picked the word "undercutting" because it closely describes the act, but it does have some flaws: the major one being that undercutting assumes a malicious intent to "remove competitors" and "gain a market share". Although there are indeed people using AI models to create drawings for money, I'm guessing your friend isn't one of them.

>Is it wrong to copy files and artstyles? In basic morality it harms another.
What is "right" and "wrong" depends on who you ask; to me it is much more useful to ask "what do they want?" To your friend, they want an image of their waifu designed to their specifications/taste (color, setting, subject matter) at the lowest cost possible (free).

For the "artists", each one has slightly different reasons for drawing. One thing that often gets lost is the idea that the "artists" you see in online communities are not a monolith (though this has some exceptions), and a single person claiming to speak on behalf of the "entire community" is not to be fully trusted. The wants I've thought of so far are:
-they aspire for a career in "drawing images for people online", similar to how furries pay thousands for images of their OC
-they want to "feel validated" by having the number of "followers, likes, shares etc.) increase (no judgement on whether this is good or bad)
-they place their identity in being a part of an "online artist community" and anything they want is based on the "values" held by that community.

If two parties have wants that oppose each other, who decides whether one is "right" and the other is "wrong"? Or rather how do you decide which of these wants is more important to meet than the other?