I'm sure piracy does cause some economic damage, but not as much as most people and companies make it out to be.
People that can afford to buy all the media they want.... tend to buy it. It's simple, ethical, and easy to purchase something in retail, where it can often be difficult or dangerous to pirate something.
There are a lot of teenagers and college age kids that turn to piracy as an easy way to satisfy their entertainment addiction, but they don't have the money in the first place. If they had money, they probably already spent it on music, movies, games etc. They've got more time than money, and piracy satisfies that route.
Then there are those I like to call collectors. They sit on their PC subscribed to numerous newsgroups, have a bittorrent queue 50 items long every day, and meticulously store it on an ever growing collection of DVDs and external hard drives. They don't even 'consume' 99% of the media they download, they just do it to feel like part of a scene or the obsessive compulsive urge to have it all, even if they never plan to use it.
Next up we have the cautious buyer / reluctant pirate. He's got money to spend, but not a whole lot, and he wants to be sure he's getting his money's worth. He'll download a game to try it out, but only buy it about half as often as he should even if he felt it was worth it. Some economic damage here.
Then we have the cheapskate pirates. The ones with money that won't separate with it to legitimately purchase the products they want. They've got the 4000 dollar cryo-cooled PC, but they refuse to pay for any single player game they can get their grubby, greedy hands on for free. These are the people causing real economic damage to these companies. They are not as common as college kids with no money and the collectors, however.
Overall impact? Not nearly as big as they make it out to be. Still irritating? Hell yes, because we legitimate consumers keep getting punished with stupid bullshit restrictions on the property we bought, that the pirates never even have to worry about >.
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