This is actually great news.
While it is true that Phish is not mainstream enough for this initiative to make a huge impact, the nature of the Phish fan (not the pothead, I mean the computer savvy one) maybe will make the effect of this grow.
Maybe some other fan-listening bands like Radiohead will follow. And Radiohead IS mainstream!
Anyway you look at this is a great thing.
More power to Phish.
Altough, now that I think of it...FLAC is probably not a natural choice for a band called "Phish" (maybe they should chose the Ogg version of FLAC)