I would imagine that publisher confidence in the platform would increase, though they would still prefer a console title; there would be a small boost to sales (from the pirates of laziness and not 'necessity'), though no real change in market scale; and larger developers wouldn't shift what they're doing too much, except for not bothering with other DRM methods. Indie developers would bounce around with glee for a while and possibly make some more money.

That is my uninformed opinion.

There is little doubt that the value of the industry would increase, game-developers would probably make more money, and therefore, more games and better games could be made. Also, game devs could spend less on protection in software, hardware and on the legal front, which would free up more money to actually make the games. But I don't know by how much the market would shift. I think there are dynamics that can't be easily forecast. Game devs might like us to think that it's all bad, but they don't actually know for sure do they ?

There does seem to me to be an intrinsic fact that human nature will lead us to simply take what is available for free. And if there is a cost, then we balance that cost and pay it if we can afford it. It doesn't matter how much noise the authorities and developers make to stop us taking apples from the 'free' basket or threaten us with possible consequences if we do so, some people will always and other people will occasionally take apples from the 'free' basket. It's kind of a simple equation like that in terms of the current situation.

But consider the following possibility ... The only people that are downloading the cracked games are not even in the market for buying games because they are poor, are children, students or the unemployed, or can't/won't justify the expense even if they can afford them. What I'm suggesting with this scenario is that if cracking were banished, all you might achieve is reduce the distribution of cracked software, ie the overall consumption of games but not really improve the market, ie the games actually purchased. I think there are a lot of people out there who might relate to Scenario A in that they feel like they can't afford it, when they actually can, and they would just rather steal the software because it's easy and use their money for other things. But the industry is so focused on it being just 'Piracy' and simply wrong that it's hard to get real information about how people feel about spending money on games and how much they can actually afford it. There are actually 'shades of gray' that people don't want to talk about because the courts would have us believe in the black and white nature of justice. But the truth is never that simple.

Also, just counting up how many downloads a title has on a torrent site isn't a realistic way of assessing the cost of piracy. Until the industry confronts this reality and admits it, I'm afraid they're just blowing hot air about the real cost of piracy. Because I can absolutely promise you that every cracked title downloaded is not going to translate to a purchase in a piracy-free world. Maybe the industry takes this into account in their figures, but I doubt it. Someone present some evidence that they do please.

Besides any discussion of piracy. Isn't the game industry bigger than Hollywood now ? I'd say that sounds pretty good doesn't it. If I look at what games I've bought in the last year or so compared to what movies I've watched at the cinema, Here's how it tallies out : (and this doesnt include games that have been bought for me, there have been a couple)

Games

Battlefield 3 $78
Diablo 3 $110
ElderScrolls : Skyrim $70
Braid $10
Age of Mythology $12
Assassin's Creed 2 $18
Dungeon Defenders $15
Legend of Grimrock $15
Plants vs Zombies $10
Total $338

Movies :

John Carter $12
The hunger games $12
The avengers $12
Snow White and the Huntsman $12
Prometheus $12
Savages $12
The dark night rises $12
Total $84

I think I have missed one or two in each category, but what is clear is that in the past 12 months or so I have spent significantly more on games than on films. And I haven't pirated any movies from 2012, nor any games from 2012. So from this perspective the games industry shouldn't be doing too badly. I'm a student ! Friends who are earning a lot more than me spend a lot more on games. I have 19 titles on steam, while my friend who has been working during the time I have been studying has 42 titles on steam. Yes there is some piracy but I haven't pirated a game for a while. I have friends who probably still pirate but they also spend a LOT on games. Definitely a lot more than me, and when I say a lot more, I mean they probably spend 3 to 5 times more than me on games. See, some of those people that are pirating are still spending a bucketload on games. So the figures we are getting out of the industry are all screwed up because they don't want to just look at the reality of the situation, it's quite hard to see what's really happening. That's just from my perspective.

I've also read that piracy is particularly high here in Australia, but then we also have en enquiry at the moment about the cost of computer technology/software here compared to the US. Apparently some costs here are outrageously out of sync with US prices. I've known that for a long time, but it's now official ;P That would certainly have an effect on piracy rates.

The only way the industry can be sure about the effect of piracy is to actually make it impossible and see what happens. But I'd say there would be a prohibitive cost with rolling out such protection. I guess it depends how serious or innovative they are. It could be that cooperation between OS vendors and hardware vendors is the only way to combat piracy. But it just seems like they aren't taking it seriously enough. Laws may be influencing their descisions there, or lack there-of.

Speaking for myself, 95% of the time I purchase my music. I have a HUGE collection on amazon mp3, but honestly If my friend gives me a copy of the album I won't buy it so alot of the try before you buy is non-sense to me except for the very uncommon occasion where I think the album is such a master piece that I feel obliged to support the band.

Hypothetically,
if someone invented a way to physically prevent PC applications from being cracked so no pirated copies could be made, do you think it would be a big change or that it wouldn't matter much?
Probably less people would play computer games, but would more or less of them be produced?

OnLive and Gaikai did this with streamed content. Works well, but publishers really don't support them at all really so they've had difficulties staying afloat. That and they don't have exclusive titles. If they did have exclusive titles and the network was there they'd probably thrive as they are truly uncrackable. The problem is that solution requires a lot of capital to create and a lot of cooperation from software creators that want to join into that model of business.

I'd see game and software sales going down a bit - many folks like the "try before you buy" approach.

Yeah this is where OnLive excelled. They'd just let you open the game for 30 minutes with the full version on a timer. That kind of mentality was unseen in the gaming market and really gives people the try before you buy.

I don't think it would change how people play games in the slightest. People are already familiar with not owning physical copies of games since we all use Steam and other services now where updates are more important than a disk with an old version. What this does help is indie game developers to quickly release updates and get their game out there.

I don't want a world where software cannot be cracked anymore than a world where a car cannot be opened up, repaired, rebuilt, and customized. Software is not a tangible thing, and even tangible things usually need to be cracked open.