The problem also tends not to be the copying of the games or cracking the copy protection, it's getting the gaming platforms to play the pirated copies and it's the hardware not the copied games themselves that creates the problem for pirates. Not so much of an issue with PC games as blocking such content is much harder and there are more ways around it.
PC gaming died a long time ago though because of that very reason.. piracy helped kill it off... some companies wont even make PC games or create PC ports anymore for the fear of losing money because pc games are so easy to pirate... and as soon as companies start putting DRM into their PC games in an attempt to protect profits, their game gets targeted even more by pirates.. its ridiculous... and your trying to convince me that piracy as a whole is good for an industry, really? 
In regards to console gaming.. if you have any interest in IT whatsoever, its pretty easy to find and follow guides all over the internet that take you in a step by step process in how to flash your firmware on your dvd drive to play backed up games...it might take a short while to do so and you'll probably have to spend some money on stuff in the process.. so in that regard, yes you have to do more than just download a file and find something to play it on... however once you have done it.. thats it.. you just download and burn the games you want to play... just ask harv how easy it is.... the DS didnt need any hardware changes for it to play backed up roms.. The PSP is probably the most hacked console/handheld of all time and that required flashing the firmware... so I dont really share your views on the hardware being the only thing that stops people hacking games...
What you will find that does differ from video game and movie pirates is that your typical video game pirate usually does hold a big interest in the video game industry and will contribute to it even if they download....take harv, the biggest knockoff nigel going.. still pays for some video games and has had to pay for his hardware.. I wonder what the last tv boxset he bought was though... ? 
I didn't say that hardware is the ONLY thing that stops people pirating games.
Some forms of PC gaming died but there are some very strong areas of pc gaming. For instance games such as world of warcraft, where the purchase of the game can actually be a loss leader as subscription fees for playing online are what bring the money.
As for online gaming, it has also had an effect on sales with internet gaming getting more and more sophisticated, which has lead to some resurgence in the use of PC's as a gaming platform, though online games have also contributed to a decline in sales.
Some companies didn't stop making games for PCs because of Piracy, it's because their biggest profits come from platforms such as the playstation now, so games are developed for those platforms first and then converted for PCs. A couple of friends (one of was the manager/owner) worked at a company that used to do the PC conversions but it got to the point where the split in sales between PCs and other platforms made it undesirable to bother with the conversions because it was the loss of sales to other platforms as well as to piracy that rendered it an unprofitable excercise.
Video gaming is the one industry where I do believe piracy has had a fairly major impact on sales though. But that's largely because most people will buy less games in a year than CDs/DVDs. Hardcore gamers might buy more. There is also a rental market for games that has hit sales too, plus a huge second hand market. For some reason, people who play games are less fussy about owning the physical product, which a lot of people who download films/music/TV are. A lot of games lose their appeal once they have been played once and don't seem to have the permanence that other forms of entertainment have. Which also fuels the secondhand market. There aren't any where as near as many people who would consider themselves a games collector as, say, those who collect music or have large collections of film and tv.
Most of the major games companies are still doing pretty well for themselves though.
In none of my previous posts where I have been discussing the effects of downloading have I mentioned games. I have focused purely on tv, film and music. Not just games either but software in general, because the prices are so high for many high end software packages.
In truth though, although they do make efforts to stop it, companies such as Microsoft aren't overly worried about home users or in heavy handed policing because they are happy with the fact that somebody using the software at home is more likely to be using it at work and corporate sales is where their income is.
It's why so many of the large companies are more than happy to give massive discounts, or even free software, to educational establishments. Capture their customers early on.
For small software companies it's a bigger problem where their profits are relatively small and they don't have a huge corporate market.
In regards to console gaming.. if you have any interest in IT whatsoever, its pretty easy to find and follow guides all over the internet that take you in a step by step process in how to flash your firmware on your dvd drive to play backed up games
Lots of gamers have limited interest in I.T, you don't need an interest in I.T to play games on a Playstation, XBOX or WII. Some gamers will inveitably be I.T savvy, but by no means all.
I have a friend who makes a very nice living fixing (or in many cases just trying to fix) devices people have tried to flash them unsuccessfuly (and then making more money by flashing them properly for them or chipping devices).
Online games have an effect here. I've known some pretty clued up people have various games hardware blocked by games sites for running copied games. It's mainly the effect on the multiplayer online games I was referring to when I mentioned hardware being responsible and what I meant by things being blocked.
