M
MICHAEL
http://www.techdirt.com/articles/20070312/165448.shtml
For some time, big software companies have tried to make the argument that a copy of pirated
software is equivalent to a lost sale This is pretty ridiculous for a couple reasons. For one
thing, there's no reason to think that a given user of pirated software would have actually
purchased a legitimate copy. Furthermore, the argument ignores the fact that companies actually
benefit in some ways from piracy, because a user of pirated software is likely to purchase
software from the same maker at some point down the road. This latter point is something that
even Bill Gates has admitted, even while Microsoft continues to talk tough about cracking down
on piracy. Now the company is stating more clearly that it knows there are some benefits to
piracy. Jeff Raikes, head of the company's business group, said at a recent investor conference
that while the company is against piracy, if you are going to pirate software, it hopes you
pirate Microsoft software. He cited the above reasoning, noting that users of pirated Microsoft
software are likely to purchase from the company later on. He said the company wants to push
for legal licensing, but doesn't want to push so hard so as to destroy a valuable part of its
user base. The company recently got a stark reminder of this lesson when a school in Russia
said it would switch to Linux to avoid future hassles with the pirate police. Of course, this
moderate stance seems at odds with the company's recent hyper-aggressive anti-piracy push,
which resulted in many mistaken piracy accusations. Either way, Raikes' comments completely
destroy the line about pirated software being equivalent to lost sales; if it actually were,
Raikes would be telling people to pirate the software of Microsoft's competitors.
http://www.informationweek.com/story/showArticle.jhtml?articleID=198000211&cid=RSSfeed_IWK_All
http://msl1.mit.edu/furdlog/docs/latimes/2006-04-09_latimes_piracy_or_promotion.pdf
Piracy also prevents free, open-source alternatives such as Linux from chipping away at
Microsoft's monopolies, especially in developing nations.
China, for instance, promotes Red Flag Linux - a local, open-source competitor to Windows. As
Gates concluded in 1998, piracy may be the only way Microsoft can stay in that market,
embracing the opportunity to gradually convert pirates to payers. If Microsoft launched a
draconian crackdown, UC Berkeley's Varian said, it would provoke the obvious reaction: "People
would just switch to open source."
In China, pirated versions of Windows are easy to find on the street for 5 yuan, or about 62
cents. Why doesn't Microsoft put the thieves out of business by giving away or deeply
discounting local-language versions of its products? The strategy would offer network benefits
while providing better data on users.
Consistent global pricing reduces confusion for multinational buyers, Hartje said.
Experts believe high prices encourage piracy but offer the company offsetting advantages. If
Microsoft sold Windows for, say, $10, it would lose money on every copy because of
manufacturing, distribution and support costs. At zero cost to Microsoft, piracy enhances
network effects by getting Windows out to users who can't or won't pay, without undercutting
normal prices.
"Microsoft benefits from piracy, then says, 'If you think prices are high, blame the Chinese,
because they are the thieves,' " said Ariel Katz, a law professor at the University of Toronto
and an expert on the economics of piracy.
"They like us to feel guilty - to think that piracy is wrong and immoral. Economically, it's
not necessarily true, but it resonates with the public."
For some time, big software companies have tried to make the argument that a copy of pirated
software is equivalent to a lost sale This is pretty ridiculous for a couple reasons. For one
thing, there's no reason to think that a given user of pirated software would have actually
purchased a legitimate copy. Furthermore, the argument ignores the fact that companies actually
benefit in some ways from piracy, because a user of pirated software is likely to purchase
software from the same maker at some point down the road. This latter point is something that
even Bill Gates has admitted, even while Microsoft continues to talk tough about cracking down
on piracy. Now the company is stating more clearly that it knows there are some benefits to
piracy. Jeff Raikes, head of the company's business group, said at a recent investor conference
that while the company is against piracy, if you are going to pirate software, it hopes you
pirate Microsoft software. He cited the above reasoning, noting that users of pirated Microsoft
software are likely to purchase from the company later on. He said the company wants to push
for legal licensing, but doesn't want to push so hard so as to destroy a valuable part of its
user base. The company recently got a stark reminder of this lesson when a school in Russia
said it would switch to Linux to avoid future hassles with the pirate police. Of course, this
moderate stance seems at odds with the company's recent hyper-aggressive anti-piracy push,
which resulted in many mistaken piracy accusations. Either way, Raikes' comments completely
destroy the line about pirated software being equivalent to lost sales; if it actually were,
Raikes would be telling people to pirate the software of Microsoft's competitors.
http://www.informationweek.com/story/showArticle.jhtml?articleID=198000211&cid=RSSfeed_IWK_All
http://msl1.mit.edu/furdlog/docs/latimes/2006-04-09_latimes_piracy_or_promotion.pdf
Piracy also prevents free, open-source alternatives such as Linux from chipping away at
Microsoft's monopolies, especially in developing nations.
China, for instance, promotes Red Flag Linux - a local, open-source competitor to Windows. As
Gates concluded in 1998, piracy may be the only way Microsoft can stay in that market,
embracing the opportunity to gradually convert pirates to payers. If Microsoft launched a
draconian crackdown, UC Berkeley's Varian said, it would provoke the obvious reaction: "People
would just switch to open source."
In China, pirated versions of Windows are easy to find on the street for 5 yuan, or about 62
cents. Why doesn't Microsoft put the thieves out of business by giving away or deeply
discounting local-language versions of its products? The strategy would offer network benefits
while providing better data on users.
Consistent global pricing reduces confusion for multinational buyers, Hartje said.
Experts believe high prices encourage piracy but offer the company offsetting advantages. If
Microsoft sold Windows for, say, $10, it would lose money on every copy because of
manufacturing, distribution and support costs. At zero cost to Microsoft, piracy enhances
network effects by getting Windows out to users who can't or won't pay, without undercutting
normal prices.
"Microsoft benefits from piracy, then says, 'If you think prices are high, blame the Chinese,
because they are the thieves,' " said Ariel Katz, a law professor at the University of Toronto
and an expert on the economics of piracy.
"They like us to feel guilty - to think that piracy is wrong and immoral. Economically, it's
not necessarily true, but it resonates with the public."