Piracy is about as old as copyright; it's possible that the first time some caveman poet said 'no copying my work', someone would have gone home and tried to write a particularly pleasant poem in pictures.† Denying it exists is just naive.†
For the sake of this discussion, I'll focus on videogame piracy - that's the industry I'm in, so it's the one I feel most passionately about - but I think the theories will be applicable to many other media.† Even a play can be captured by the camera on a mobile phone, just as a book can be either re-typed or scanned into a PDF.†
Right now, any gamer will be aware of the typical solutions.† The three most popular ones right now appear to be:
Each of these tries to combat piracy by preventing users from simply copying a game to a re-writable disc or uploading a ROM to the internet.† They all have mixed success, but they are considered a necessity.
Defective By Design
Each of these solutions has its drawbacks; disc validation doesn't often like obscure hardware or multiple drives, online activation is annoying for those whose internet is expensive or unstable, validation apps can't always tell if other running programs are being used legitimately or not.†
The issue is that legitimate users can find themselves unable to play the game they bought and paid for.† Very few of us have never been irritated by DRM, even if it is just the huge number of accounts we end up creating to validate our games.
When a new CD drive or an operating system upgrade stop you from playing a game, it hurts.†
Some companies remove the original DRM from their games, with both Neverwinter Nights and The Witcher replacing disc-checks with online accounts.† The former effectively had no DRM, since the account serial number was only ever used for multiplayer games.
In other cases, the official version of the game is not updated.† Sometimes, brand new games are unplayable. Legitimate players run to the internet to look for solutions.
The Grey Area
When an older game stops working, I have seen developers actually recommend downloading cracked executable files.† Technically, it is illegal to circumvent DRM, but many consider that the user's moral right to play the game they just paid £40 for is more important.
Those cracked versions are freely available and almost-inevitable, so it makes sense.†
The Losing Battle
Some crackers might be legitimate owners who wanted to remove the oppressive DRM and share the 'big-fix' with users, others will be pirates, but the files will be available to everyone.† More importantly, these files will often come out within days of the game's release if the game is sufficiently desirable.†
Some games, such as Assassin's Creed 2 and Spore, have been boycotted because of their DRM.† In the case of Assassin's Creed 2, hackers actually overloaded the Ubisoft authentication servers so that the only players who could use the game were those with pirated copies.†
We have lost the technology battle.† Some pirates are even compiling leaked copies of the developer's source code without the DRM.† There are even cases of pirated games being released before the official version, as happened with Batman Arkham Asylum. (though in this case, the developers added a little surprise)
So What Now?
If there is no way to prevent piracy, what can we do?
You may note that I never said that we could not prevent piracy, just that I think we have lost the technology battle.† We have been treating piracy as a technology issue for about three decades and we have always been on the losing side.†
The Social Problem
Here's where we get to the crux of the issue.† I think the major part of piracy is not technological in nature; 99% of pirates don't know how to crack an executable, nor have they even seen a C++ file in their lives.† Most pirates download a torrent file and then (if they have any sense) run a virus-scan before using it to patch or replace a game's executable.
The major issue is social.† Pirates happily confess to their crimes, saying it is a victimless crime or that big publishers had it coming for their rip-off prices.† They download their films, their music, their games, then say that it's all okay because it's not really stealing when you make a copy.
Some of them even say that piracy is no worse than buying pre-owned games because the developer makes no money either way.
It is not a victimless crime; publishers survive worse than this, even if they (justifiably) compain about it, but studios wither and die because they work with much less of a financial buffer.†
One failed game can sink a development studio, think about that.† I hesitate to name and shame, but look at Daikatana and what it did to Ion Storm or how APB (which was not even a bad game) managed to sink Realtime Worlds.
There are more persuasive arguments; some major publishers are talking about pulling out of PC development citing piracy, while others are making consoles their lead platforms and making PC ports afterwards.†† In the end, I doubt we will lose AAA PC games entirely, but there already exists a question-mark over the profitability of developing for a platform with such a high piracy-rate.
Piracy hurts developers, has the power to put them out of business considering the pretty-awful profit margins, and may reduce both the quality and quantity of new PC titles, not to mention raising the prices as end-users end up paying the DRM licensing and development costs.
Don't Copy That Floppy
Yes...† I went there...
Piracy is a part of our lives.† Most people don't really think about it as a crime, certainly no more than speeding on the motorway or underage drinking.† On some level, they know it is wrong, but it ranks low on the hierarchy of sins.†
Worse, they look at only the smaller picture - what is my £30 compared to the £30 million sales-figures on the last game? (even if the developer gets only a small cut of that and it won't stretch far in a studio of 100 employees) - and forget that a 90% piracy rate (the cited rate for both 'World of Goo' and 'Machinarium') is actually equivalent to £270 million in lost revenue.† If even 10% of those people would have bought the game then the developers would have almost doubled their profits.
Interestingly, games without DRM are often quoted as having no more issues with piracy than those without.
Is There A Solution?
I don't know...† All I know is that technology cannot save us from the pirates, so we need to try something else.† Enforcement is doomed to fail if 90% of all games are pirate copies, since you can't arrest 90% of all gamers without repercussions...†
All I can think is that we need to educate people.† Guilt and shame might help, but we may lose the PC gaming community we all enjoy if something does not change soon.