Which is why it's ridiculous for developers to worry about it, those 25% would never have bought the game in the first place, just pretend they don't exist. Do you know how much effort it takes to pirate an iPhone app? First you have to find out that pirated binaries even exist, then you have to jailbreak, then you have to fight through mountains of spam and scams until you find the right communities, then you have to spend time learning the technical tricks, then you have to hunt down the pirated app binaries. These people are determined not to pay, they aren't your customers.
Now that I think of it, they're probably in other cultures/economies, where frugality is much more noble and $3 could be a reasonable amount to go through some trouble to avoid it. I imagine Chinese or Russian programmers would take pride in going through some effort to save $3.
So you're right: they're not your audience to begin with.
I agree that those people are not going to buy the game no matter what. What I think might be worrisome is the bandwidth charges that the pirated iPhone apps could use up if they are contacting his server for anything. That adds up. I would imagine that the lions share of the $1000 Bandwidth bill is for hosting the flash game but in other cases the bandwidth bill could be substantial if he is serving images or videos from the phone.
I think that it would be ok for an app to verify that the app is not pirated and then lock the pirated people out of the expensive use case.
It's worth noting that the normal piracy rate for iPhon games is similar to normal software from what I've heard anyways 90%+), and I definitely don't view our lower rate as havig anything to do with our sales!
