Yes, the original quote was narrowly directed.

He was making a pitch for Steam in a different time where digital distribution was not a thing.

Now digital distribution is the baseline and availability and ease of use are in favor of not pirating, but his quote is taken out of context to justify piracy anyway.

It is, although I think it can be applied more broadly without corrupting Gabe's original point.

For example, I can think of numerous instances in which people get pushed to piracy by, ironically, anti-piracy DRM software (e.g. Denuvo), which causes such inconvenience and performance degradation to the end-user that even if you have legitimately purchased the game, you will have a much better experience playing a cracked, DRM-free version of the game.

That would be a case where--for example--GOG might put forth their DRM-free versions of games as an example of how to successfully counter the "service" problem.