I remember when the DS Lite came out, and everyone - even me - rushed to buy one. It was a far superior design to the original DS. Then, Nintendo brought out the DSi. This one has a camera in it, online store and memory cards to store everything, as well as a longer battery life. The DSi, however, was also regionally restricted. I didn't buy one. If I'm remembering correctly, the DSi has the same, or greater, install base as the DS Lite.
After the DSi came out, the piracy on the Nintendo DS platform shot into the stratisphere. People will claim it was the memory cards, which allowed for more easily created homebrew stuff. Truth is, as a longtime DS owner, the platform has always had the same level homebrew stuff - the DSi simply made it easier. After the DSi came out, however, titles were no longer easy to get. Chrono Trigger, for example, received an extremely small release. It was also regionally restricted, and thus there were entire countires of people who simply never got a chance to buy the game. Chrono Trigger on the DS is one of the systems more pirated titles. And it has nothing to do with "entitlement"; they wanted to pay money for a game that no one was willing to sell to them.
When hackers hack something, they do it because they can. They're interested in these types of things, and their curiosity to see "if they can" drives them. They also do it to add functionality that is missing and desired enough to warrant the effort to create it themselves. Removing the Regional Restrictions on the DSi is an example of this. Instead of coming down like fucking meteor on them, the best solution is to work with them, and use their opinions and expertise to develop solutions to the problems that the hackers solve for every-day users.
Strangely enough, Microsoft are leading the charge. When Kinect was hacked, and enabled for PC use - and it wasn't difficult - Microsoft's EULA allows them the legal right to do what Sony is attempting to do; kill the hacks and everything and every one connected to them. Microsoft, however, did the best thing possible: they invited the hackers to help them make Kinect more open, and they used alot of their information in the development of the offical Kinect PC SDK, which is releasing soon.
They realised that people want to mess around with their cool new technology, and instead of locking it down, they've opend it up significantly more than they're required to. Microsoft also allow Indie Devs to develop for the Xbox with their XNA Development software; they encourage people to mess around with their product. It's not as open as the PC Platform, but it's a step in the right direction.
Sony really need to ask themselves: what exactly are the hackers attmepting to do. I can promise you the main reason the PS3 was cracked had nothing to do with piracy. At all. Sony need to work with the hackers, so meet them in the middleground, and say "Ok, we'll do this, so you guys can do that, and piracy is still locked down."
Of course, Sony also believed that the PS3 would sell a million consoles on launch day even if they had no games available to play. They're so far behind the times that they simply don't understand how it can work.