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?)

Comments

As I recall...

[AKAImBatman]

...wasn't there some sort of memo that was leaked from Microsoft that basically said the only reason why Windows 3.1 became popular was because it was the most pirated software ever?

As it so happens, I used to sell a product which required a simple registration key to upgrade to the full version. (The free version never shut off, but it had fewer features.) After noticing a few Google searches for " crackz", I thought about seeding a few reg numbers to promote the product. Alas, I never got around to it, but it would have been a cool marketing trick.

That being said, I don't agree with piracy in general. Only that it can fullfill certain market needs. If it gets too out of hand, though, it can become a serious problem to the producer. (e.g. Napster) Of course, you don't get in that position unless you're failing to meet your customer's needs in the first place. (e.g. lack of legal MP3s)

Re:As I recall...

[Tuoqui]

Thats because the software simply isnt worth $600+. It is more than the market is willing to bear under normal circumstances.

Do you think Photoshop would be one of the most pirated software in existence if they sold it for $60-80 instead of $600? Probably not, and they'd likely make more than 10x the $$$ off of sales than they do now.

Re:As I recall...

[Brickwall]

Thats why MS won in the end. Now, most people associate a PC and Windows. MS was just better managed, held a reasonable amount of respect within the general populace, and was able to sustain life into near monopoly.

I have to disagree. MS won because of their relationship with IBM. I worked in IT during the 80's, and IBM's market share was huge. So when employees started requesting PC's, IT managers bought IBM PC's which came bundled with DOS. IBM helped considerably by creating FUD that using "clones" would destroy the network, and that connecting them to the mainframe would cause compatibility problems. MS won their market share by piggy-backing on IBM's market power.

After that, it was simply the "network effect" - it was easier to share information, programs, etc., if everyone in the organization was using the same software. So even the the Mac was considerably more advanced - Christ, I am the only one who remembers the problems with getting past the 640k barrier, or "TSR" programs instead of true multi-tasking? - no IT manager would OK one for use outside of areas where its graphics abilities were needed.

Of course, if by "better managed", you mean used illegal anti-competitive methods, then I do agree with you.

Re:Piracy is marker of immature market

[zappepcs]

"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.
"

hmmmm I was under the impression that they *ALREADY* have a dozen versions of their product on the market, none of which are being given away... unless you want to run it for an education institute on cheap (OLPC type) hardware, for which you can pay a meager $3 or so.

The practicality of giving away the low end version won't make sense to MS as they would still have to support updates, security patches etc. I doubt they want to be known around the world as the makers of the least secure OS on the market. While they may have that reputation now, it would be solidified if they were to give away products and not support them.... oh wait, sorry, that model seems to be working if you support the product.

Now, just to figure out the steps to getting MS to do this...

1. design OS
2. support OS
3. give it away for free
4. pay lawmakers to make this legal (not sure about this step or how it might work)
5. ????
6. Profit !!!!

Re:Piracy is marker of immature market

[Khaed]

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.

They have quite a few versions of Vista.

MS will always be pirated. If they give away the low end, people will pirate the high end because that's what they want. Paint is given away for free with every Windows computer, Gimp is free, yet Photoshop is probably one of the most pirated programs in existence, after Windows and possibly Office.

While the car and book analogies make sense, Microsoft isn't actually hurt by people pirating Windows. Windows has always been pirated and they're a billion dollar company. One of the reasons for this is that you can pirate all you want at home, but if you're a business caught pirating, you are going to get screwed. In an uncomfortable place. (and not like in a station wagon)

Short of giving all versions of Windows away, MS will be pirated. They might as well make the best of it and work it to their advantage.

easy distribution get you market shares

[Atreide]

I remember the time of Windows 95.

When you installed that operating system
            there was no activation.

There was also no
            serial number verification
                        since you could just enter
                                    an empty number and the system would install.

That was still not corrected with Windows 98.

When it is so easy to install
            an operating system,
                        it helps to get of market shares.

What about piracy psycology though?

[niceone]

Thing that worries me about piracy is that people get used to it. Maybe MS can get market share through piracy. Maybe the RIAA can get viral marketing through piracy...

...but I know a guy who makes a living by creating drum and other sounds that people use to make electronic music. It's not a big operation, just him and one other guy. When you order a DVD he burns one by hand and mails it to you. Anyway, someone just uploaded ALL their products to Bittorrent, and he can see all these people posting about how cool they are and how they can't wait to download them. Needless to say he's pretty despondent.

And before people start with the 'information wants to be free' and 'find a new business model' - why should he? This is what he's good at, people want his stuff, why shouldn't they pay him for it? I mean, I have written free software... while earning a fat salary working on other stuff at a hitech corp. It's not so easy in other areas though.

</RANT>

Re:copyrights

[bky1701]

You seem to totally miss the simple fact that art has existed far longer than copyright. Care to explain that?

Sure we may not have 100 mil movies... but do we NEED 100 mil movies? Do we need all this FX-saturated tripe? Sure, sometimes something good comes around... but almost always in addition to, not because of, that 100 mil FX.

And as an "artist" (though this term I think is used far too liberally) I can say that nothing can be made without copying or at least seeming similar to something else. Copyright and patents in the end will stifle art and invention. What if the use of dwarves and elves similar to those in LOTR was strictly controlled? It would have been unlikely to promote any new creations, but it would have caused the stillbirth of whole genres of books, movies and games. What if the mouse was patented and they company refused to license it? This is where our idea-control focused society is quickly spiraling to.

Have you ever created anything? If you truly think what you say is true, I am guessing you haven't.