I think that people are giving piracy too much credit. While I don't agree with what pirates do, I do NOT think that it affects the industry as much as some make it out to be. Buying used games hurts it much more from the way I can see it. This is probably because compared to piracy, buying used games is much more mainstream. Also with the rise of directly selling products person to person either through something like Ebay or some other service it helps the industry even less when in comparison to buying a used game at the store. Piracy isn't the only answer to why games don't sell, and shouldn't be the only one blamed. This is even if it is considered the most ethically wrong out of these things.
Oh and btw, the thing that is hurting the industry the most is technological leaps. Because as time goes by, it requires a larger leap to get equivalent results in comparison to previous generations, development costs go up, and therefore game prices increase. This makes people buy more Used games or even pirate games as time goes by. Not only that, but you HAVE to sell more copies to make a profit, and when only the big names are doing it you have a problem. So everything isn't as simple 1:1 logic. Even if all piracy was eliminated in video games, the industry wouldn't be in much of a better situation than it is now. There are some exceptions though where achieving piracy is very simple and cheap, such as that found on the PSP and PC. In these cases piracy is a significant challenge, and one that should be overcome. Overall though, it doesn't seem to be a big problem as you guys make it out to be. Games are $60 now because of development costs. There is no piracy on the PS3, and very little on the 360, yet they are priced the highest. The Wii has full-blown homebrew applications that allow you to play any backup you want for free by only using an SD card yet it is thriving and we games sell for $50 new, and sometimes even $40 new.
Edit: Oh and I agree piracy is NOT theft. That doesn't mean it isn't illegal, and to some equally bad.
Edit 2: Oh and btw, I'm talking about Video Game piracy only. It works different in things such as Music.
