When I look at console history I see no correlation between piracy and software sales at all.
Systems that were/are difficult to mod for piracy (N64, Gamecube, PS3) tend to have low software attach ratios, while easy to mod systems (PSX, PS2, Xbox, 360, Wii) tend to have high software attach ratios.
AFAIK, Dreamcast software sales did not drop at all when it was hacked. And I've never seen any trustworthy independent scientific research that suggests piracy has any impact on sales at all.
"Music sharing doesn't kill CD sales, study says"
http://news.cnet.com/2100-1027_3-5181562.html
It's also interesting to see how the massive success of DVD happened at the same time as movie piracy on the internet exploded. I think it's safe to say that if DVD had failed, "everyone" today would agree that DivX was to blame...
What really is hurting the game industry today, is the commercial (re)selling of used games. A game store buying and selling the same game 10 times means 10 different people get to play the game, but the developers only get paid once. Retailers selling used games are in my opinion the real pirates.