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Software Piracy Due to Expensive Hardware, Says Ballmer
frdmfghtr writes "ZDNet is running a story where Steve Ballmer tries to pin the blame of software copyright infringement on expensive hardware: 'One way to stem piracy is to offer consumers in emerging countries a low-cost PC, Ballmer said. "There has to be...a $100 computer to go down-market in some of these countries. We have to engineer (PCs) to be lighter and cheaper," he said.' Does he think that cheaper hardware will make copying software harder to do?"
When Google integrates an OS as their service. Imagine that one-day a Google like service where you turn on your computer and it connects to Google without any local OS (other than a BIOS and hopefully the BIOS is the Open Source one). Your files, settings and information are stored on the service. Sure you could have USB drives locally to store private info if you desire. But I wonder what Mr. Ballmer would say to that lowest of low price cheap hardware? You could take the money that would have been spent on the OS and allocate that to help pay for the service. At $100/12 = $8 a month; even at $300/12 = $25 per month - not bad having a use anywhere service whereby you don't have to maintain the OS or the Hardware.
When you can buy a pretty good OS-less computer at Walmart.com for around $250us, that's pretty good. No, BALDmer, we need cheaper software.
I'm sorry, but less than 24 hours after a story here discussed the pirate industry in Russia, and made the point that the average monthly wage is $240, and some software licences cost $600, comes this?
Please. Cheaper hardware is going to exacerbate the situation by providing even more poor people with the desire for new software that the can't affoard. The only solution is to take computers from poor people. I'm joking, but I hope you can see my point...
He's a funny guy. How are they going to justify to customers that some general purpose software on $0.20 media costs more than a physical piece of hardware?
It's not an accident. Microsoft has been trying for a long time now to convince consumers that software is more valuable than hardware. The problem is that I don't think Microsoft understands the issue of tangibility. Even the greenest user understands that hardware is tangible (they can touch it, see it, pitch it out the window, etc.) while software is intangible (can't do much other that look at it and interact with it).
When you take into account how natural it is to place more value on a physical object vs. an intangible (e.g. a service rendered such as plumbing), is it any wonder why consumers are ignoring Microsoft's mind-bender campaign?
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is because Microsoft now has cheaper versions of the software available to put on these cheaper PCs. The stripped down versions of Windows, for instance. It would certainly be hypocritical to say PCs should cost $100 when the OS itself costs more.
And the reason for this, after all, is to open up the low-end market so that Microsoft can tap that revenue source. After all, if they offer something for $200 normally, and offer a strip down version for $50 such that people can afford it, it's still better than getting $0 because people can't afford to pay for it and end up pirating it.
The funny thing is, from a certain standpoint, Microsoft is actually NOT trying to stop piracy (the official line is always to be anti-piracy, of course), but Microsoft probably realized that their software will be pirated, and in some ways, this loss leader in the emerging markets should strategically be allowed. Because then, Microsoft will dominate even more, especially where Linux is popular. On the other hand, Microsoft can't grow that market if the people cannot afford to pay for the hardware. Keep in mind that Windows is as dominant as it is today partly because it was easy to copy Windows. They could have put really difficult schemes to prevent piracy, but they didn't, because ultimately, that's not how they make their money anyway. They make their money by having dominance and then sell software based on it (Office, for instance).
And in the future, Microsoft want DRM and they want to do transactions. They want more people on the internet using windows, and the way they can get that is to have as many people as possible with little cheap boxes that run some form of Windows that can at the very least access the internet so they can spend money through Microsoft channels.
Even If these countries bought $100 PCs they still won't be running Windows, because system requirements would be way under suggested requirement for Microsoft's software. Thus they will either have to run Linux, or pirate the windows software to see if they will even work on these systems.
Around here (and I'm sure in most big cities) you can buy decent off-lease computers that are only a couple years old for cheap cheap cheap (like under $200), without an OS (well, they sometimes give you Freedos or something with it).
M$ undoubtedly suspects that those machines are targets for pirated copies of Windows, and most likely they are largely right about that. At least in my case, I have installed FC2, but I'm sure I'm in the minority.
The point remains that with hardware so cheap, the cost of the OS can easily be more than the computer itself, if you go with a commercial OS.
Intel should produce a $100 PC and it should be very Linux friendly and preinstalled with Linux even. In fact it should specifically not be windows hardware compliant. Microsoft would have fits. I'd pay to watch that show.
> a $100 computer to go down-market in some of these
> countries. We have to engineer (PCs) to be lighter
> and cheaper,
How much cheaper can Microsoft expect hardware to get? It's almost costless as it is now.
The Microsoft OS is the real cost barrier. The cheaper hardware gets; the more folks will want an OS just as cheap. Microsoft will have to lower their prices.
When Microsoft lowers their prices then they will have to partition their market into full/higher cost solutions and chopped/lower cost solutions; this will give Linux a clear advantage because Linux can offer a fully appointed OS with no cost differential.
I expect Microsoft's momentum to carry it a few more years yet... but after that the energy will have bled off and people will begin to see the benefits of Linux more clearly.
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Exactly. A rational response to piracy would be to lower prices. The hidden problem here is Microsoft is loath to lower prices, because doing so would hammer its stock price and lead to an inevtiable downward stock price spiral.
Microsoft is stuck between a rock and a hard place. High prices in the third world inevitably lead to piracy and an added incentive to move to Open Source software. Lowering prices means lower margins and a drastic reduction in market capitalization.
But I've ALWAYS found that I spend MORE for software than I do hardware. The machine I'm typing this posting with is a dual Athlon system that I spent about $1000 to build. The software (OS, office suite, compiler, and several other apps), however, set me back nearly $3000. I wonder what Mr. Ballmer has been smoking if he believes that "expensive" hardware is the reason people pirate software. I also wonder where I might be able to get some of what he's been smoking ;)
I don't pirate the software I use; I believe in paying for software so I have the legal right to use it. I'm currently in the process of moving away from expensive software and to using more open source software.
If "disco" means "I learn" in Latin, does "discothèque" mean "I learn technology"?
With the advent of cross-platform toolkits like GTK+, OpenGL, and OpenAL, it's becoming much easier to write an application and make it cross-platform with minimal effort AND have it perform excellently. (As opposed to Java, which is a great way to piss off your user by hogging 250M of memory for a freaking IM client... God those were painful days before the TOC protocol and later gAIM. Anyone remember the nightmare that the Java AIM client was?)
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My long term prediction is that both hardware and software will sell at marginal cost. Most hardware is there, but until about 4 years ago I always wondered how software would sell at marginal cost (near zero) now I know and can go back to thinking about other issues.
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That's why the best approach from a business perspective seems to be bundling or packaging fancy software with hardware, services or both. The software may be the hook to get people in, and you might even give it away (and while you're at it, make it Open Source, it makes your customers happy). But tie it to your expensive hardware. Or just convince companies that it works best with your expensive hardware. Or that your expensive services personnel are best equipped to customize or build value-added functions on top of it.
This is the whole reason that quite a few tech businesses have embraced Open Source. It's not a function of their love of the community.
Heh. I won't rag on you for not understanding what 'marginal cost' means.
I will rag on you for somehow forgetting that hardware also has a large development cost. You have to pay someone to develop the hardware, and in the case of Intel, AMD, Via, NVidia, ATI, that's a lot of someones over a long period of time. I would imagine it cost Intel billions to develop the current version of the Pentium 4. Intel probably has as many testing engineers on the project as MS has programmers on XP.
And THEN you have to add on the marginal cost. The real, substantial, physical cost of producing each part. And, of course, all the engineers involved in manufacturing and developing the manufacturing processes.
And STILL hardware sells with margins drastically below that of software. Hardware STILL has been going down in price while software has not.
This isn't an attempt to justify software piracy; it's still copyright violation. This is rather simply pointing out the fact that because software is such a high price compared to the hardware despite have basically no marginal cost and not going down in price like basically every other part of the computer, THAT is why people pirate. And THAT is why the parent of your post was marked insightful.
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Only problem I see with that is open source solutions tend to be less user friendly. For example, compare the Gimp and Photoshop. Photoshop is by far an easier one to learn, though I don't think there's much doubt that the Gimp is at least as powerful an image manipulator. So it's not just when open source solutions match their closed source counterparts in uses, but user-friendliness too.
My thoughts exactly, this would create an indefinite cash flow stream, whether the service is used or not. It would force 'Upgrades'. Need to access that spreadsheet, pay up! Need to retrieve that old invoice, pay up! No way in hell would I pay for a subscription service for critical software, unless I at least had the ability to use (at least a certain version) it offline, and forever.
Imagine that you did some work in excel 5 years ago, and really no longer need to use it. Assume this was done under a subscription software/os model. Now, five years later: you have to subscribe just to manipulate that file. let's say you only need to use it for 30 minutes - sorry minimum subscription term is 1 month @ 9.95. Bahh.
Look at Netflix, although there is pending competition from Amazon, as well as Blockbuster and Wal-Mart. Their subscription model was a cash cow (or at least very profitable). If people were paying 40 bucks a month, but did not rrent movies that month - what return do you think that is. With software, it would be more proprietary (i.e. Office Documents), making competition harder.
Basically what Steve is saying: "The [hardware] cost of computers is hurting our margin". Right Steve, you are an idiot.
Computers have never been cheaper.
In fact, most people wonder why the cost of the software has remained the same when the computers that they buy have continued to increase in performance and decrease in size.
The only true justification for the cost of the software, especially in light of its commoditizing competitors is that the not free software offers more value, performance, and a higher level of reliability than its free counterparts. I think small business server offers a pretty good value for the money - SQL Server, Exchange, and a file server all on one box.
XP is a bit high especially with the price gouging Professional edition that offers "features" such as remote access. In general, MS is going to need to offer more, for less. Office is also overpriced, and getting into a $600 commitment for XP+Office is pretty much outrageous. There needs to be a "correction" in the MS market place.
My thoughts to MS: Stop whining deliver more for less.
Considering that your average PC is just about one of the worst things you can toss into a landfill, should we really be encouraging people to toss them out even more rapidly than they already do, by making them cheaper?
The main driving force behind waste is making the (sticker) price of everything we consume trivial.
Then again, this is a slightly different issue.
For those not RTFAing:
"PCs are not selling to the lower end of the population in China and India. People buying machines there are relatively affluent. So...should the prices be lower? Not really. Until government and situational factors reduce piracy...those affluent people cannot pay, so they don't pay," Ballmer said.
Everyone seems not to be reading what he said. Does this not seem perfectly rational/reasonable?
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And by user-friendliness, I believe the parent means UI. It's easy to find programmers who are willing to contribute to OSS, because that's part of our mindset - most of us are damn near obsessive with computing because we love it so much. However, to find a graphic designer or a UI designer willing to give his or her time to an OSS project, that's a little tougher to find. Consequentially, you end up with extremely powerful software that has a steep learning curve and an oftentimes frustrating interfce.
The parent gave a perfect example - GIMP and Photoshop, but you can extend this analogy even farther into Windows vs. *nix in general.
Maybe the way for OSS to be successful is to be cheap instead of free - the backends, done by the people for whom coding 9-5 just isn't enough, released under some free public license (not sure if GPL would work), and the frontends done by graphic and UI specialists, who charge for the software, but not nearly as much as regular commercial software (because the developments cost are so much less).
Oh, and Denile is a river in Egypt. "Denial" is a bitter surprise.
I've noticed for a lot of people there's a sense of pride that they managed to "swindle" the system and trick their way into an illegal copy of a program. "It's good to be bad" and things of that ilk.
I blame a society that takes away opportunity to misbehave in safe ways. By trying to lock down people's need to be an ass it comes out in all kinds of unexpected ways; piracy, drunk driving, republicanism, and sometimes even public nosepicking. We really need to encourage some kind of emotional cleansing rite, possibly involving ritual combat to the death, or glowsticks. Everyone loves glowsticks.
Face it folks.
You can get a descent PC for $899 including an lcd monitor.
Add $300 for Windows and $499 for office and half the price of the pc is for Microsoft sofware!
Balmer is soooo full of shit and he is trying to make a lie become a truth.
If I can not afford more than $900 for a new pc do you think I am going to pay these outrageous fee's for software? I am just going to install BSD or if I need Windows, pirate it. Plain and simple.
In 1995 MS office cost $175 while the average cost of a pc was around $1800. Do the math with costs?
Now the percentage is approaching 50%!
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More than that. The GBA down to $70 or $80 now, the games are cheaper than PS2/Xbox/Gamecube/PC games, and look how popular GBA ROM sites still are.
To run a $299 Windows?
These folks pirate Windows because the version they can afford is crap, crap that they were already forced to pay $50 for despite not wanting it.
For those people, who's yearly wages are a fraction of that made by Americans, stealing windows is like stealing a $300/pill prescription drug that costs pennies to make.
I'd honestly like them all to switch to Linux, because piracy should not be condoned, but Microsoft brings it on themselves, and then passes the blame.
What I suspect Microsoft is eventually planning to do is to partially cover the price of hardware, under terms that require manufacturers to only produce drivers for Windows, protected by software patents wherever possible. Complying manufacturers will win in the marketplace, and Microsoft will have strengthened its hold on the market. Windows will further advertise Microsoft products and services, and undermine free alternatives for security reasons. MSN Explorer will be the default browser. Users will be able to order or rent and install software much more easily than if they walked to a store, but the software will either come from Microsoft or there will be a Microsoft tax (listing and certification fees) included. blah blah blah.