I think Epic has it right to some extent and they are very conspicuously not alone with their complaints. I think piracy plays a part significant enough to be mentioned along with publishers rushing developers (or buying them and producing endless sequels), high hardware costs, DRM and poor games.
Basically, it all results in less of a cushion for developers and occasionally a poorly received (or plain poor) game will ruin a developer that may still have potential (Troika, Ion Storm etc.)
I think there are enough people addicted to 'free' to make a difference in developer's profit margin, which is already slim if they are controlled by a large publisher. Taking the attitude of "fuck [dev|publisher]" and the piracy route winds up with me seeing less games, and potentially missing the next gem that will occupy far too much of my time. I'll stress again that I don't think it's *all* piracy.
I'd love to see more large distribution models like Steam that developers can use directly and maximize profits. As we move closer to a complete online distribution system we can lose the publisher parasites, and imho that will make a huge difference--as long as the Valves of the world don't get too greedy.
Publishers are required to fund the games as well. Do you really think most developers can afford the budget of a big title? They have to borrow money from publishers to do it.