Lord N said: It didn't hurt the Dreamcast and it hasn't hurt the PSP either. -Im 1998/1999, computers were still shipping with CD-ROM drives, and computer CD writers and recordable CD's were still very expensive. -P2P apps like Kazaa, Limewire, Emule, and Bittorent didn't exist, so isos were a lot harder to find. -Nearly everyone was still using dial-up at that point in time, so even if you did manage to find DC isos, they'd take forever to download. The PSP's poor software sales can be attribute to Sony marketing it as a multimedia device first and a gaming device second, which is why there are so many people using them as portable video players and MP3 players. TBH, the only ones that required no modification were the ones that had FW1.5, which stopped being available at retail 1.5 years ago. To modify later models requires upgrading and downgrading firmware, installing and configuring software, which the average gamer can't be arsed to do.
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You're saying all that is if the internet at that time was the biggest contributer to piracy - I would say from personal experience that the biggest contributer to piracy in the PS / DC days were people.
I don't know about anyone else but I knew so many people who would offer a small charge to chip a machine and then do copies of the games. They'd have a huge printed out list of everything you could get from them. Those same games would be passed on from one person to another - it was one huge vicious cycle of people knowing people.
I don't ever see anything like that now - and I think thats where the internet plays it's part. It's easier to do it yourself now. Back then you had to know someone and finding someone wasn't that hard. Word of mouth played a huge part in PS1 piracy I would say.