So if those guys end up being bankrupt would you agree that piracy is bad?
Piracy is basically a cost of doing business. If you're in the field you got to pay for it anyway. People don't pirate you any more or less based on whatever stance you have. I've heard of stories of guys who made some money by letting people pirate, but I also have heard stories of people who got practically nothing doing the same thing. I mean sure you can say if Megaman 1 is for free for anybody to play from a major platform (Steam, Xbox live, whatever), that probably helps more than it harms because you're getting exposure from a game that probably won't sell at all, but then Megaman 9/10 actually sold quite a bit too so you could be wrong even on that. The most profitable games of the last 10 years are MMORPGs, and they're extremely pirate-resistant since most of the cost is tied to recurring payment. The money Blizzard makes from WoW box sales is basically nothing compared to its recurring avenue, and you can't pirate the service very easily since that'd require a lot of infrastructure to emulate the servers. So if success is measured by wealth, the most financially successful games happen to be the ones that are most resistant to piracy.
I think the problem you have is there is a lot of people who are unwilling to pay anything more than free for just about any game, but you also have people who may be inclined to pay some money for a game as long as it's significantly lower than its advertised cost, and it's really hard to figure out how your fanbase is divided up. Daisenrayku Perfect DX 2.0 sells for $150 or something ridiculous like that and it's not even much of an improvement over the original Daisenryaku on the Sega Genesis. On the other hand it's still a decent quality title and maybe it's worth $20 or $50 to a wargamer. At $150 it's pretty much pirated nonstop because there's no way the game is worth that money, but it doesn't mean piracy is good or bad. Maybe the game would be more successful priced at $50, but you can't really know that kind of stuff easily so a lot time you end up with just wild guesses. Maybe the game really isn't going to sell much at $20 anyway because it's too much of a niche game so you might as well just ripoff the hardcore guys who will buy it anyway. Because you're not allowed to load in real life it's basically impossible to say if $150 or $20 was the best price for this game. Sure it's not fair to say at $150 a ton of people pirate this game (probably because they wonder why the game is so expensive) so you lost mega money on sales, but again you're dealing with something that has very little volumes, so maybe if even 100 guys pirated this game that would've bought it otherwise that could be half of your potential sales and you lose out significantly.
I think Steam is a good model as it lets you vary your price significantly so if $150 isn't working out you can lower it to $15 and observe how the market reacts, and it'd be very difficult to do that in a normal retail environment.