If it is really all that illegal, then why can these companies operate, advertise. One search on Google will bring up numerous companies many with brick and mortar store fronts no issue. I personally know of a brick and mortar company in Toronto that will mod your console and supply copies of any game you want. Been in operation for years.
If these laws are really so strong, then why at Pacific mall in Toronto can you walk past stores that have rows and rows of illegal movies for sale. Talk about in your face. Fact is the pirate movement is so big, law can't do anything much about it.
On a lower level. If I buy a computer, I can do anything I want with it. No one is going to stop me. A console is just a computer, that I own. So long as I don't break FCC laws my modifying it, there is nothing the law can do imho.
Now if I play games that I don't have a license for, then they could probably do something, but what are they going to do, break into everybody's house and look around. That requires a search warrant and probable proof of illegal activity for the judge. If you are stupid enough to advertise what you do, then you are just asking for it. Besides, every person playing unlicensed games on a modded console is small potatoes. The law, if they were to strike, strike at the source. They obviously are not doing that, so no problem.
Fact is these corporate types are playing dirty pool and getting mad when people rebel against it.
Music CDs cost about $15-20 for $15 or so tracks. They require art work creation, stamping, silk screening, distribution, retailer cuts, etc... Fact is most artists only make $1.20/CD. So why is it that downloaded music that does not require any of the above still cost $1.00/song? Dirty pool.
It is common knowledge that console developers purposefully lower the cost of their consoles to hook buyers into buying to increase console sales and then make profits back by inflating the cost of accessories and games. Once again dirty pool. Sell the consoles at their actual cost and then the games at a reasonable rate and people will be less likely to pirate $20-$30 games.
The iPod is a very popular item. You can download games for your ipod for $5 each. No one has gone through the trouble of modding or cracking the istore DRM cause it is not worth it.