It's interesting that you used diablo 3 as an example. Are you aware of how many records it broke in terms of sales? It has passed 400 million in revenue. That is more than twice the revenue of Diablo 2, which generated around 200 million in sales. History will say diablo 3 sold a gabillion copies because of piracy. Right. The internet shut it down. Right. I don't like or play Diablo 3 but if you're going to use this as your argument, you should search for better examples perhaps?
The market is substantially bigger now, and the cost of games has increased dramatically. A better point would have been if Diablo 3 didnt sell as well. Then it could have been blamed on piracy. Doesnt mean it would be necessarily true, but the argument could be made. What could they argue now...piracy meant it didn't sell even more than it did, even though its an inferior to Diable 2? But I guess one could always tweak the numbers to say what you want them to say. One thing to consider is that pirates still have computers. They are buying hardware, and the potential to convert them to paying customers is still there.
You will always have people who are not going to pay no matter what. You have to court the paying customers. Just because a developer makes a product doesnt mean they are guaranteed sales. You dont make a product for people who dont buy, you make it for people who do.
Unfortunately, publishers are developing products for people who do not buy. Paying customers are being inconvenienced, and are less willing to buy because its not a product for them. I think thats about the extent of piracy's effect on the PC market. You can't know if piracy is effecting sales, but you know DRM inconveniences paying customers, leading to less of them. I think the publishers are finally coming around on this and backing off on super restrictive DRM.
They need to just let it go. Just have enough DRM so that a layman can't do a simple direct copy and call it a day. You can't make someone pay, so focus on those that do. If the absolute only way to play a game on PC was to pay, I dont think the market would be significantly bigger. Steam sales would probably do a little bit more money, but thats about it. There are reasons to think that consoles would benefit more, because its cheaper and you have used and rental markets. Piracy is about cost, so if a pirate is to be converted I would think the lowest priced option would win.
Microsoft has had more of a negative effect on PC gaming than piracy. With piracy, much of it is perception. IMHO of course.