I think you might be able to argue that these consoles being hacked wasn't the only reason the had poor(er) software sales, or (possibly) that the consoles being hacked wasn't the main reason they had poor(er) software sales but the fact is that piracy will impact software sales.

If your system is difficult enough to hack that it requires some sort of hardware modification that will void the waranty 75% (or greater) of people who might consider stealing a game won't because they don't want to risk the money they spent on their system. On the other hand, if your console can easily be hacked using a 'softmod' (like the PSP), or no modification at all (like the Dreamcast), then many consumers who would normally buy games will end up stealing games and (potentially worse) many of the consumers who end up buying your system do so because it is easy to steal games ...

Now the PSP has other reasons software sales are so poor (mainly that its media functionality attracts people who buy the system with no intention of playing games on it) but when you have sold more units than the PS3 and XBox 360 combined and sell approximately 1/2 the software of either system (and the system has a reputation for rampant piracy) it is fair to conclude that piracy is having some impact on software sales.

Sorry but....are you saying piracy is a good thing? Naughty naughty!

I'll introduce you to a few moral ways to reduce your game costs:

• Don't fixate on the latest and greatest systems; the PS2 is very affordable new (or even more so used) and has a massive quantity of budget priced and used games that are also very affordable.
• Rent games or trade-in games; most of the games people buy are played for a couple of days (or a couple of weeks) and then "Stored" to never be played again. Renting games can be done at a fraction of the cost of buying a game, and offers the same value to a consumer.
• Buy the same system as your friends and trade games. It may not seem natural to some people, but the cost of buying a is greatly reduced if you're constantly trading games with your friends.
  

Yes, but the downloads AREN'T 25GB!!!

More like 10GB in general, for comparison most 360 games are around 6GB

Plenty of people would bother downloading the games even if they were 50GB.

...I don't think a lot of people have a clue about what people will\won't pirate.

Also, BD-R discs do NOT COST $15....nearer $10 or less in bulk.

Finally the PS3 has NOT been hacked.

A downloaded title will likely be smaller than the BR equivalent because large BR titles require redundant data to keep loading down.

lol, kergeten what a load of bs.

The downloaded titles are images of the original BR disc, like you said there's data that gets copied 2 or 3 times for some games due to the slow transfer of BR disc.

To be honest though very few games actually need a BR disc on the PS3...

Anyway, to answer the question of the OP...

The reason the PS3 hasn't been hacked is because Sony has allowed some freedom by allowing Linux to be installed...This has meant that the hardcore hackers have not made any serious attempts to hack the console because they feel Sony is doing the right thing.

Bloody moralistic hackers...can't stand them! They're all over 40 and wear glasses and check shits and look like lumberjacks. They tell us when they've hacked something, but not how they did it...They then report back to Sony\Ms\Nintendo with their findings so they can patch up the exploits they discover.

Complete tossers in my opinion, well their actions are in complete contravention to what the public at large desire, and generally that is who the audience is...

Let's look at the Dreamcast first....

1) When it launched in 1998/1999, the vast majority of people were still on dial-up. This was a time when it could take several hours to download a 3MB mp3 file, and several days to download a Dreamcast game.

2) File sharing apps like Kazaa, Limewire, Emule, Bittorent, etc didn't exist at the time, so in addition to Dreamcast isos taking longer to download, they'd have been harder to find.

3) As is with the price of Blu-Ray recordable drives and Blu-Ray media, CD burners and recordable CDs were rather expensive at that point in time. Most PCs shipped with just a CD-ROM or maybe a DVD-ROM, and an 8X CD burner at that point in time cost in upwards of $300, and the media wasn't cheap either.

The Dreamcast itself never sold that well to begin with after launch, and neither the system nor the games had any chance at all once the PS2 was announced, which immediately killed them.

The PSP....

1) You've already mentioned this, but it was marketed more as a multimedia device than it was as a portable gaming device, and that's exactly how people bought it. I wouldn't be surprised if half of all PSP owners are using them as MP3 players and portable video players.

2) It also didn't help that there was a rather large game drought until mid-2006. Even I, a proud PSP owner, have to admit that all the banter on the internet regarding "THE PSP HAS NO GAMES!!!!" was not entirely unfounded, and rather true.

3)It had(and still does, to an extent) too many PS2 ports and other such games that would have been much more appropriate if they were on a home console. It looks to me as though Sony and third parties, in an attempt to exploit the technical specs of the PSP, failed to take into account what kind of games work best with a handheld.

4) The PSP, while having a lot of good games, doesn't have a lot of "must have" titles. It doesn't really have a Brain Age, Nintendogs, Mario Kart, NSMB, Pokemon, etc.

5) The cost of the games themselves. $40 is quite steep when compared to the $30 launch price of most DS games.

Yes, people have and are still buying the PSP because it's rather easy to get games without paying for them, but that has no effect because if this weren't the case, then these people wouldn't have bought the PSP at all, much less the games. Having to mess with the hardware isn't a deterrent either as the mod scenes for both the PS2 and the Xbox were rather large and neither of those saw such low software sales. Finally, it's even easier to play games for free on the DS considering that flash carts have been available on Amazon for the bleedin' longest.

To sum things up, "piracy" is just a scape goat that the industry, analysts, and other people who follow sales data use to explain poor sales. I'm not denying at all that there are people who were going to buy a game, downloaded them, and then didn't buy them because they, in effect, already had them, but when you look at the big picture, this is de minimus.

If the effect on the industry was even the least bit serious, then nearly every record label would be filing for bankruptcy considering that it's possible to download an artist's entire discography in mere hours at the most. Itunes should have also crashed and burned, because why would people buy mp3's when they can use P2P to get them for free?

just let you know, when you getting 1MB/s download speed from RoadRunner and Earthlink's newsgroup. That 25 gig or 50 gig of data only take couple hours to download.  If you calculating time with open public bittorrent sites then that download will take days to finish, but all the closed private torrent site will force a upload ratio which main a healthy max download speed on all its seeds.  Those private site will max out most people's download speed.  The only cache here is does general leechers know how to get access to newsgroup and private torrent site.

Last time I checked the music industry was in big trouble, massive restructuring all around, fusion after fusion, labels vanishing left and right, CD sales dropping like mad, etc.

All this started before iTunes started I might add.

Coincedentaly, DVD sales started dropping just around the time it became economical and simple to burn copies and still haven't recovered.

I think you are vastly underestimating the effects of piracy on developers (of any form of entertainment).