Bruce Everiss, a UK-based video game industry veteran, and author of the blog Bruce on Games, has penned a comprehensive essay on video game piracy through the years. I recommend you read the entire piece, but here's the take away:

And the game industry continues to grow and prosper, despite the piracy. This is because the proliferation of platforms allows publishers to more easily abandon platforms that are pirated to the point of being uneconomic. Instead they concentrate on platforms where there are windows of opportunity to run a viable business. Either because the anti piracy technology is on top or because there is a sufficient number of honest customers to get a return, even sometimes with a heavily pirated platform. Games with an online element can often be made very pirate proof which has been a major incentive for developers to go down this route.

So for 25 years or so game players have been stealing games in truly massive numbers with zero chance of being caught and punished for their crime. Very often far more copies of a game title have been pirated than have been bought. This self evidently causes harm to the games industry, ultimately leading to less money being invested in games for the pirated platform. So, the game player suffers for his theft by having less games and lower quality games. All pretty obvious to anyone but the pirates who make all sorts of feeble excuses to justify their stealing.

[My own views on video game piracy can be found here and here.]