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Piracy Economics
Reader Anonymous Coward the younger sends in a link to an article up at Mises.org on the market functions of piracy. The argument is that turning a blind eye to piracy can be a cheap way for a company to give away samples — one of the most time-proven tactics in marketing. The article also suggests that pirates creating knock-offs might just be offering companies market feedback that they ought to attend to. (Microsoft, are you listening?)
Or the marker of a market that changes very quickly. And I think that currently the OS market is both.
Once a market is mature and stable, each major supplier within that market will have a product for all market segments. ( With cars, almost every manufacturer has a cheap sedan, a mid-size, an SUV, etc. Books come in limited signed editions, then the hardcover, then the quality size paperback, then the pocket paperback. )
There are some markets that are inherently unstable - like fashion - in which illegal knock-offs will always be practical. But in most mature makets the legitimate sellers fill every niche so well that the marginal costs of piracy are not worth it.
MS will get pirated until they have half a dozen or a dozen versions of their product. It would be practical for them to give away the low end version.
PS: This even applies to labor markets. In that case we call the piracy 'slavery', and the low end versions 'volunteers'.
I've been a member of the Mises Institute for years. It's good to see Slashdot picking up on their articles.
The author's assertion was that the innovator produces the initial, high quality product. Then the pirates produce low quality knock-offs to fulfill a market segment the initial innovator isn't fulfilling. In the case of the record industry, I'm afraid they're well past the point of innovation and the production of high quality products (at least as far as pop music is concerned). In that case they're selling a low end version of their music, but still deluding themselves into thinking it's a quality product.
Either the quality has to go up or the price has to come down.
Don't confuse illegal with shady either. The law can be just as shady, like prohibition, for example, or DMCA... or for that matter, copyright...shady law that steals from the public disguised as "incentive".
What?
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One particularly significant benefit (to the companies being ripped-off) to piracy is lock-in. As you said, Microsoft might not be where it is now, if it were not for piracy. I think the same goes for programs like Photoshop. Teenagers won't/can't pay $600 for Photoshop. Adobe doesn't lose anything by teen pirates who can't afford Photoshop--but they do gain another crop of kids proficient with their software. If any of these kids use Photoshop professionally, they buy a real license.
I think this is the biggest stumbling block to free software. No one wants to use the GIMP because they can get Photoshop. If fewer could get Photoshop, fewer professionals would have Photoshop experience, and more would be willing to contribute to GIMP. Why use Ubuntu when you can get Windows?
But you are right, if any program can be pirated without any repercussions, it WILL hurt both the company and the product's future. It is too costly to stamp out ALL piracy--costly to the produce, the enforcer, and the legitimate customers who will get some spill over--so determining the right amount is tantamount to success.