Some random thoughts on this:
WoW isn't a problem for the industry: it's a benchmark! World of Warcraft is simply a good standard to go by. It doesn't restrict other good MMOs, but it will snuff out the bad ones.
I will say this: there are small gaming companies doing just fine, like CCP (EVE Online: go ahead, duplicate THAT on the damn consoles) or Introversion (Darwinia: runs on Windows/Mac/Linux - NOT on a console) or Nexon (think Combat Arms, a free online shooter). All these companies do well in PCs, and not one of them designs for consoles. DRM? Not at all. The difference is that these guys found new ways to make their games interesting.
EVE Online is an MMO that attracts both thinking gamers and WoW burnouts. Some people would assume that as an MMO, it wouldn't work on a console because of the typing requirement but that would be incorrect. It wouldn't work on a console because it's not intended for the kids. WoWkids don't survive more than 2 weeks (the free trial period) in EVE because it's too complex and too deep for them. So yes, it's vastly more intellectually stimulating than any console game I've seen yet. CCP is making money with no fear that their userbase will be attracted away to WoW or gravitate to some new console game.
Darwinia is the coolest little (less than 100MB) game made in a decade, and Introversion did it on a shoestring budget and no big publisher. If it's pirated, they don't notice it much, since they've made a huge profit on it already.
Nexon has their free shooter, Combat Arms, and it makes money not from upfront fees or box sales, but from in-game item sales. Want that newer, cooler uniform? Or a SCAR-L in RealTree camo? Break out the credit card!
The point I'm trying to make is that PC game business is healthy, despite the calls for DRM.