How about the third option: Make good games and sell what PC gamers want?
PC gaming has been increasing well, and right now there are more game developers on PC than in all consoles combined. Indie games (which are mostly single-player) are rising extremely fast on PC.
You dont really believe that do you? No matter how good a game is, if people can get it for free by pirating it most of them will.
And again this kind of system could eventually work. If they program PC version to get tiny parts of the game online during gameplay, it would be as piracy proof as WoW.