Most of the profit from high-profile games, I'm told, is made soon after the release. I'm also told that often warez versions are available soon after, or even before, the game's public release. These propositions suggest that leakage is a big problem. In this case, it seems to me that a good idea would be to devise a way to uniquely watermark each build, and that every pre-release issue (to a tester or reviewer) be of a seperate build for each recipient. Then the most important part: make sure that everyone knows.

I do feel, though, that the issue of cracking and piracy is rather overrated. Generally, people who crack games without buying them first fall into two groups: those who pay for games when they can and obtain them otherwise when they can't, and those who wouldn't pay even if it was the only way to play it. Clearly no one is losing money to these groups (in fact, there's probably an incredibly large profit from group 1 because of 'piracy'). Obviously, those people who crack games after buying them aren't a problem, so let's not worry too much about them.

This theory falls short when one considers that there is actually a third group consisting of the mass-production and public distibution if counterfeit games. It is neccessarily true that these games are bought by people who buy games, and this fact messes up the entire system. That they make a large profit despite frequent raids speaks of the volumes in which they deal, so you can imagine how much money the industry is losing to them. Experience has shown that protection doesn't slow them down, and with their ability to replicate an exploit further than any individual, they would be inhibited by DRM less than anyone else in the world.

My conclusion is that the grey-market is the real problem, and the solution lies in physical law enforcement in that area and penalties which do not leave offenders still making a profit. Every other approach to combatting piracy seems to do more harm than good.

Or you could just drop a couple nuclear warheads on China (96-98% piracy rate), and that would
clear up the problem. :)

The economy of buying games is not an issue here. The issue is the violation of software rights.
When countries who have no regard for rights like this connects to the Internet, it becomes
all of our problems, as we are all connected.

And I'm not implying that one country is the root of all evil on the Internet. Other countries
take advantage of their situation. Crackers know the fastest way to distribute their 'works'
is to upload it to the usernet newsgroups. These newsgroups are like a big river flowing downstream,
and guess who's at the bottom collecting all of this garbage? Happy happy joy joy.

I think Valve made the right step towards the protection of the game. Many people say that Valve is doing the wrong thing but in the end, most people have bought their copy of HL2 and if you want to play CS Source you MUST purchase a legal copy.

So I think in future we will either have DRM or Services like Steam.

StarForce works extremely well.