Piracy is killing the PSP, actually. Game sales for it are terrible, because anyone can simply download games to their memory stick (most are pretty small if you have broadband, only a few 100 megabytes) and play them. (You need hacked firmware, but that's simple to install and there are instructions on how to install it on the official Sony message boards for the PSP. Really. And Sony banned me from them for complaining about all the talk by pirates on the official boards - since I actually buy my games, it pisses me off).
As an example, the message board for Monster Hunter Portable 2 is among the busest on Gamefaqs, yet the game is not available in the US (and since the game just came out in Japan, they aren't playing imported copies, either).
Piracy is a problem for the 360, but still, games need to be downloaded (which are several gigs) then burned to a dual layer disc, I think, which aren't super-cheap. Counterfeit games are a big problem though in Asia, apparently. Apparently, too, the deterrent for the original Xbox, Xbox live being able to detected a modded Xbox, isn't possible on the 360.
In theory, that will also help the PS3 - having really big games that will have to be burned to a Blu Ray disc. That is, if pirates can't figure out how to play from the hard drive, that is.
I'm not saying it's not a problem for PC games, but it's a problem for everyone. And sales of console games aren't that great, either. Sure, some titles sell really well, but then a lot of titles sell horribly. I think we'll see a lot of developers move towards casual games, not one particular platform, because casual gamers are less likely to pirate, and will buy games that require little effort to make. And more and more PC game makers will use some sort of DRM, like Steam or Stardock's Totalgaming network.
