Valve is one company that realizes you CAN compete with free. People value convenience above all and the ability to preload your purchase, unlock it the minute the game becomes available and start playing along with all their other services makes for a more compelling product than a pirated game.
You can download any of your games on any computer with an internet connection, anywhere. A pirated game you'd have to load to some sort of cloud service or bring with you on a flash drive. They automatically update your games and you don't have to worry about an update breaking your crack. You can of course turn off the automatic updates too. Some get cloud sync which is great most of the time. I can play the same Torchlight characters on my laptop when I travel and on my desktop at home by doing nothing else than playing on Steam. Valve also has a wide range of prices so that even people on very limited budgets can find a game they like, whether regular price or on a special Steam sale.
This is how you compete with a pirate copy of a game. I think Gabe and Valve also realize that different people pirate for different reasons and that every single pirate copy downloaded does not equal a lost sale. I think Ubisoft has approached this from the wrong way. Ubisoft thinks that to sell more PC games they need to stop piracy. They don't seem to understand that you can't stop piracy and moreover the more you try to stop piracy the MORE sales you LOSE. People see the always-on DRM for single player games and it gets them angry. They either don't purchase OR play the game or perhaps they use it as a justification for piracy, which I don't think is right. Whether I think it is right or not it still means less sales for Ubisoft.
It is at the point where Ubisoft is not releasing as many games for the PC platform and even trash talk it in the press but all they are really saying is "Hey, we can't compete in this market". Valve is pretty much printing money at this point and not just with Steam, their own games make them lots of money. Valve knows how to compete in the PC market, in fact no one is doing as well as them right now. Others even want in on this action, namely EA right now, and they are trying to bully their way in. They know there is money to be made. Either Ubisoft is incredibly shortsighted or they just realize that they just can't compete.
Edited by Mygaffer - 11/24/11 at 5:22pm