I am a pirate, I have been pirating since the Playstation days and before that I mostly rented games since my late super nintendo days (this also included my nintendo 64 days). I bought a Dreamcast second hand and all it's games second hand or pirated and although all my gamecube games are original, I bought them after the cube was dead, and as such, second hand market again. I'm a developers worst nightmare and the only thing that could make me even worse is if I cracked games myself.
Having left that clear. Piracy exists and it will continue to exist, so I'd recommend people to stop pretending like magically people will stop doing it, they are useless in this discussion. To put things bluntly, the industry has not learned yet that it is in the internet age, the same way most media hasn't got it either.
Today, the moment something hits the net, no matter how little you like it, it stops being yours. This isn't me exaggerating, this has been proved time and time again. This has also happened to films and music, and now comes the catch 22, films and music can live with it because a lot of their income from the cinemas and concerts. The losses generated by piracy are acceptable on those terms because their money comes from other sources. Videogames don't have this privilege, it's not like they put games half a year earlier in Arcades and they rock peoples worlds, they go directly to the platform outlet, be it PC, X-box or DS, all of them have been pirated and are pirated constantly.
Another sector that suffers a similar fate to videogames are television series, but some of them have understood that they are playing with new rules. South Park are my peak example here; I used to see their episodes in south park zone, but now that they host them in their own page, I go there to see them, my benefit being that I get to see them in better quality and with extras, their benefit, that they can show for real that people are watching.
The key for videogames is not to threat people like thieves, because thieves like me don't give a damn about their tricks. Last games I paid were MMOs and Team Fortress because I wanted good internet service, but what do you do with single player games, those that don't have any reason to force you into a server?
Here it all comes down to where I want to get to. The publishers should reward those that devotedly still support them, not make them feel like crooks. Screw the DRM, after the spore fiasco it became very clear that with just the minimum money wasted on it, you are golden. But here comes the thing, what benefit do you get, compared to me, who will probably just download it? This is where the incentives come, like for example, each game comes with a key that allows you to subscribe to the official support page of game X, there you can get content that only you can access, along with support, services and other stuff.
I know this idea is halfassed because I don't really know what stuff could be added or how it can be assure that only the paying costumer will benefit. I even have my doubts that the market would increase much thanks to something like this, I know I wouldn't have played most of the games I have if I had to pay for them, but at least you are making your player base feel appreciated, and that right there is a lot.