oye, another piracy thread, so here is the short of it on the business. (I'm address China type of piracy, but all types are bad if it doesn't result in a sales.)
Where as it doesn't effect the bigger companies. It does put some stress on them, it could become the straw the broke the camel's back eventually. Especially when $1.25 becomes the determining factor on whether or not a game get released or finished.
What it does hurt is the smaller developers, who usally need the cash to pay off the bills they incurred making their first game, etc. Because there is little chance a company like Microsoft will offer to pay the entire development cost on the history of one game especially if that game didn't sell well even though it could be a contendor of a GoTY. And when the smaller companies go out of business that is when fresh ideas are lost, which hurts the industry as a whole.