Pirating is not stealing. Stealing is taking a product that belongs to another without the owner's consent. Games, movies, music, and other media are not products. Products are subject to supply and demand. Since there is no limit to how many times a game can be downloaded, supply is infinite. Additionally, once you purchase a product, you are entitled to do whatever you please to it. If I were to buy a car or a doll or a CD player, I could take it apart and put it back together however I please. Obviously, you don't have this option with games, as they only come in precompiled binaries. I would consider the source code to be a product, since supply is generally well-kept within the company that owns the rights to it, and once you've bought the rights to it you can make whatever changes to it you want to.
When you buy a game, especially through a digital download service like Steam, you aren't paying for the game, you're paying for the distribution service and a license to use the software. The latter is the issue that's usually brought up in court, but it's presented as thievery when it's really a breach of contract. In any case, it would be fairly easy for the groups that create the hacks to remove the EULA and therefore any criminal liability for the end user. Razor1911/Skidrow/etc would be criminals then, but not the pirates that download the games.
The other issue is the "lost profits" from the distribution service. This is the one the RIAA is fond of. The problem with crimimalizing this is that it criminalizes competition. When Best Buy sells a product similar to Circuit City's for cheaper and people buy that product from Best Buy, Circuit City just lost the potential profits from the sale of their product. Could Circuit City then turn around and sue Best Buy for damages equal to 10x or more than the value of every product that Best Buy sells? No, that would be ridiculous. But that's basically what we're seeing with these piracy cases that are being brought to court. But they're even more ridiculous, because they try to collect from the customers that chose to buy from Best Buy. They're attempting to punish people for being smart consumers and choosing the service that offers the best value.
So where am I going with this? Should studios just give away their games for free? No. But they should realize what exactly it is they're selling, and they should come up with ways to add value to it. Instead of trying to go to court and use all stick, they should find ways to increase the value of the service they offer. They can reduce the price to something more people would be willing to pay, or make their money through services related to the game other than distribution (microtransation item selling, access to servers, things like WoW's paid character transfers, etc), or use value-adds like the BF3 preorder bonuses (dogtags, skins, early weapon and DLC access) to encourage consumers to choose to buy a new copy of the game, rather than used or pirated copies which don't pay anything to the developer.