"Just enough piracy"

It's not news that the main reason the movie and television industries are wary of BitTorrent is that they're freaked out by the music industry's experience with piracy. Although they see the economic advantages of P2P distribution, they're concerned that once they put their stuff out there, even wrapped in triple layers of kryptonite DRM, it might be cracked and then circulate in unprotected form. For movies, that's lost revenues. For TV shows, that means ads could be stripped out, expiration routines could be removed and  (gasp!) content could be modified or remixed.

All that counts as Very Scary Stuff to industry executives, and as a result they're looking for "strong" DRM before they consider letting their premier content circulate online. This is a mistake, for two reasons:

The first is about the user experience: Any protection technology that is really difficult to crack is probably too cumbersome to be accepted by consumers.

We've seen all sorts of failures of this sort before, from dongles to laborious and confusing registration schemes. Each seems better at annoying consumers than at building markets. The lesson from these examples is that zero-percent piracy is not only unattainable, it's economically suboptimal. If your content is uncrackable, it means you've probably locked the market down so tight that even honest consumers are being inconvenienced.

Instead, efficient software and entertainment markets should exhibit just enough piracy to suggest that the industry has got the balance of control about right: not too loose and not too tight. That number is not zero percent (which requires protection methods so invasive they kill demand), and it's not 100% (which kills the business). It's somewhere in-between.

The second reason the quest for zero-piracy is a mistake is an economic one: piracy can actually let you raise your prices.

I'll give you a surprising example. I was chatting with a former Microsoft manager the other day and he revealed that after much analysis Microsoft had realized that some piracy is not only inevitable, but could actually be economically optimal. The reason is counterintuitive, but intriguing.

The usual price-setting method is to look at the entire potential market, from the many at the economic lower end to the few at the top, and set a price somewhere in between the top and bottom that will maximize total revenues. But if you cede the bottom to piracy, you can set a price between the top and the middle. The result: higher revenues per copy, and potentially higher revenues overall.

(This is, by the way, the opposite of the conventional economic approach to developing-world piracy, which is to lower the cost of a product closer to the pirate version, closing the pricing gap to try to win customers over to the official version. In practice, however, the pirate price is so low that it's rarely possible to close that gap enough to make much of a difference.)

Add to this the familiar (if controversial) argument that piracy helps seed technology markets, and can be a net benefit. Especially in fast-developing countries such as China and India, the ubiquity of pirated Windows and Office have made them de-facto national standards. Few users could have paid for the retail versions at the start, but now that the spread of cheap technology, including free software, has led to an economic boom, Microsoft is finding a nice market for commercial software at the very top, in big companies and government offices.

When all these effects are considered, it appears that there actually is an optimal level of piracy. That right level would vary from industry to industry. Today the estimated piracy rates are 33% for CDs and 15% for DVDs. The industries say that's too high, but most anti-copying technologies they've brought in to lower that figure have proven unpopular. Would even tighter lock-downs help? Probably not. Maybe 15%-30% is simply the market saying that this is the optimal rate of piracy for those industries, and any effort to lower that significantly would either choke demand or push even more people to the dark side.

So the moral for video content holders and others considering DRM: be careful what you ask for, because you just might get it. "Uncrackable" DRM could make the P2P problem worse, by driving more users underground and depressing prices. Don't imagine that if you release content in a relatively weak DRM wrapper (like today's DVDs) and copies get out that the whole market will collapse. Instead, you may find that piracy stays constant at relatively low levels, leaving the rest of the market happier and more profitable.

The lesson is to find a good-enough approach to content protection that is easy, convenient and non-annoying to most people, and then accept that there will be some leakage. Most consumers see the value in paying for something of guaranteed quality and legality, as long as you don't treat them like potential criminals. And the minority of others, who are willing to take the risks and go to the trouble of finding the pirated versions? Well, they probably weren't your best market anyway.

Comments

[Derek Slater]

Chris, interesting post. I think you could/should make an even stronger argument with regard to preventing piracy - DRM, strong or weak, isn't much good at preventing widespread infringing file-sharing in our efficiently networked world.

You note, rightly, that preventing all infringing online distributions is impossible. But you then seem to say that there's Goldilocks DRM that will be not too restrictive, not too light, but just right to prevent SOME piracy.

I contest that DRM can even do that. See, e.g., the MSFT Darknet paper: crypto.stanford.edu/DRM2002/darknet5.doc
See also Fred von Lohmann, "Measuring the DMCA Against the Darknet," http://www.eff.org/IP/DMCA/DMCA_against_the_darknet.pdf

Strong and weak DRM is evadable, and it only takes one unencrypted copy up online to make DRM basically worthless in preventing widespread infringing distribution.

Which is not to say that DRM can't be used for other purposes. Regardless of the inevitable availability of infringing unencrypted copies or circumvention devices, some people will continue to purchase encrypted copies and will not remove the DRM. As such, restrictions on usage or compatible software/hardware WILL impact these users. So business models that monetize those restrictions - e.g., through price discrimination based on usage - can use DRM.

On that score, there is a tricky balance between making the DRM too cumbersome that it encourages people to head to the darknet. But let's not confuse that issue with DRM's ability to prevent widespread infringing file-sharing.

[David Palmer]

Chris, I'm not sure I understand your pyramid approach to pricing as regards piracy. When you look at "the entire potential market, from the many at the economic lower end to the few at the top, and set a price somewhere in between the top and bottom", does the pyramid represent their incomes or the price they'd be willing to pay? I'm not sure there's a direct correlation between income level and piracy, and if you're looking at the pyramid as representing the price someone's willing to pay, the pirates are already at zero.

[chris anderson]

David,

Fair point. The pyramid illustrates that world market in numbers of people, segmented by income. But you're right that the usual economic calculation would to run a normal price elasticity curve, based on the potential revenue pools in each segment. Removing the bottom end of that has the same effect as I've described. But it's confusing, so I'll probably just delete the pyramid reference in the post.

[For those coming to this after the change, I had originally said the market looked like a pyramid, like this:
http://longtail.typepad.com/the_long_tail/2005/03/long_tail_vs_bo.html]

[Abbi Vakil]

Chris
I respect your work but now you are in Fantasy Land. Your quote "Most consumers see the value in paying for something of guaranteed quality and legality" doesn't apply to MOST of this world's population, just visit Phillipines or China and you will see vendors selling software (DVD, CD, Video Games, etc.) for so cheap that I don't know anyone who actually PAYS for content in those countries. If the same street vendors were allowed to operate in the US, most of the morality you are counting on would go out the window. An inverse way of looking at this would be to wonder what would happen if all the hassles involved in file sharing of music CDs were to go away, how much MORE piracy would exist in the US?

[Piotrr]

Interesting idea. But what about legal and moral points of view ?

In your argument, DRM technologies are essential in the process of adjustement : not too complicated, no too easy to circumvent.

In law, piracy is criminal and that's it. In law, you're guilty or not. Of course, in many cases, illegal activities (such as use of certain drugs, prostitution or speed over) are tolerated depending on circumstances and we can imagine that's the same for piracy.

But who pays the price of adjustment in that case ? Who bears the uncertainty of flexible tolerance according to corporate interests ? Consumers of course, who have to evaluate wether they will or won't be prosecuted because they are on one or other side of the graphic. That's unfair and, in the long term, suboptimal at the global economic level.

Therefore, the next step, if you want to get out of some hypocrisy, is to decriminalize IPR, to withdraw protection of law whose contradiction with economic logic is counterproductive. Well. Many problems ahead.

Oh, by the way. What about DMCA ? It seems very hypocrit to tolerate a limited efficiency of DRMs and to criminalize so harshly every mean to limitate this efficiency.

(sorry for my english ; not my mother tongue)

[chris anderson]

Piotrr,

You raise some interesting points, but I think the drug and prostitution examples are a different sort of case. Some countries have legalized or decriminalized those, mostly on the grounds (whether you agree or not) that they're "victimless crimes". Rights-holders, in contrast, argue that they they are indeed the victims of piracy and generally push hard for crack-downs. So it's hard to imagine the law changing.

The question is how hard those rights-holders should push for enforcement of the law, and how much they should lock up their content to help prevent piracy. I'm arguing that a somewhat loose policy there can actually be beneficial in the long run.

[T J Neville]

Microsoft is selling applications, not content. Moreover, much of the upper and middle part of the MSFT customer base consists of corporations and small-business professionals who get to deduct the expense on their taxes.

Many of these are US and Western European-based knowledge businesses that also rely upon respect for intellectual property rights, (…and have large law departments that specialize in worrying about this stuff.) Also, a large chunk of Microsoft's consumer business comes from middleman PC manufacturers who buy bulk, and treat it as just another manufacturing expense.

Think about it, when was the last time you (as a consumer) ponyed-up for a brand new full price copy of Office?

Ergo, you can solve the piracy problem by marketing music and movies to large corporations and business professionals, and/or bundling it into the hard drives of new PCs. And then all you have to do is get a law passed to make these expenses tax deductible.

[fling93]

But if you cede the bottom to piracy, you can set a price between the top and the middle. The result: higher revenues per copy, and potentially higher revenues overall.

This makes no sense to me. When you pick a price, you are always ceding demand. At a price of free, demand is higher than at whatever price you actually pick. The whole point of picking a price is to cede some demand to increase gross margins. If you can increase your revenues by raising the price with piracy, I don't see why you wouldn't have been able to do the same without piracy.

The only argument I can see is that piracy can increase demand as a form of viral marketing, but you're not making that point here.

[chris anderson]

Fling,

Yes, from an economic perspective you're right. But when Microsoft sets its prices, it's not just thinking about maximizing revenues. It's also thinking about growing its user base, avoiding criticism for price gouging, and driving overall PC penetration. That's why, when considering the bottom of the market, it might set the price lower than a simple price/demand curve would dictate. And why, when it cedes much of that market to the pirates, it can raise prices.

[Ray Lawton]

What's being missed here is the fact that complete piracy of movies already exists, to the point that ANY major movie is online in some format before it leaves the theaters. Interestingly for the long tail, piracy does not and maybe CANNOT support the whole long tail - there's just too much there with too little demand for piracy of it all to exist.

Just look at mp3s. The reason people so readily started using iTunes is consistent quality and ready access to the long tail. Most importantly, iTunes created a legitimate market out of something people wanted. I think that the piracy numbers should actually go DOWN if there's a legal option for DVD or TV downloading. ADDING a legal download option for movies doesn't aid piracy, which is already in full swing, but fulfills an economic need that honest consumers want and have no options for.

[Matt]

At the momnet when I get my Netfilx DVDs I rip them to my Hard drive with DVD Decryptor and send them back the next day .Becuse I can then time shift and burn them to a DVD+RW of if they are for the kids a DVD-R .

I there where a service like Netflix proposes to offer in a few months where you pay a fee for downloads and a solution like Greencines Burn to rent Model I wouldnt have to bother to strip the "encryption' form the DVD becuse I could have Video on Demand .
I wouldnt be waiting on the netflix 3 day turn around the videos would be there in less than 5 mins with 'streaming ' dowloads.
.

[neelakantan]

Great post thats amazingly counter intuitive. I also believe that some amount of piracy might actually be good, but then there are mixed responses to this about what is right and wrong and so on. I had captured this in a post a few weeks back, though not in the context of protection technology and perhaps not as lucidly as you have. http://ecophilo.blogspot.com/2005/07/piracy-why-some-of-it-is-good.html

[Tobias Schmidt]

I also think that your economic argument requires the presence of externalities to work, a theme that has been extensively dealt with in the literature.

If there are no externalities from usage of the pirated good, then there is no reason to believe that a company would be able to extract higher revenue from a market with piracy than from a market without piracy. In this case, piracy simply reduces overall demand for the good and thus decreases profits.

But with network externalities (people value the fact that other people are using the same good, e.g. for reasons of compatibility), for example, the optimal level of piracy is indeed higher than zero. Firms then profit from piracy, because they can extract more money from people with a high willingness to pay than they loose from those people that do not buy the good anymore. The level to which these effects are present in different markets is a subject of much debate though.

There are countless other economic models like this one that all show the potentially positive effects of some piracy. If you're interested, "The Economics of Network Industries" by Oz Shy or the less technical "Information Rules" by Varian and Shapiro might be good places to start

[Cory Doctorow]

Chris, I'm curious to read your response to Derek's excellent comment, especially since this echoes a discussion we've had on many occasions.

A downloader never encounters DRM, because by definition, she is downloading a cracked copy. It may be that too much DRM will *drive* her to download (as you note), but even lesser amounts of DRM can't *prevent* her from downloading.

Now, *uploaders* might be inconvenienced by DRM. But in the real world, uploaders are often possessed of enormous time and resource (even when that resource is clever 15-year-old Norwegians). Moreover, even the most restrictive DRMs are vulnerable to attacks on their analog outputs. Hollywood is trying to pressure tech vendors to eliminate or downrez their analog outputs, but that hasn't been very effective -- somewhere in the chain, there's a wire on which analog waveforms travel, and our uploader is generally only one screwdriver and alligator clip away from that wire.

DRM can potentially raise to cost of making the first copy, but people who make the first copy are very cost-insensitive. However, no amount of DRM can effectively raise the cost of subsequent copies beyond zero.

[chris anderson]

Cory,

I've assumed that no DRM is uncrackable, and thus there will always be some cracked version in the wild. The question is what fraction of users chooses that one vs. the protected version.

It's a simple risk/benefit calculation. You weigh the cost of the commercial product (both in money and DRM inconvenience) against the cost of the cracked version (in quality risk, time spent finding it, and and legal/moral considerations you may feel).

In the scenario you describe, if her perception is that that the cost of the DRM version in terms of inconvinience or lost utility is low, she may be willing to shift to that version for the reasons above even though she has access to the cracked version. (I do this all the time in music for reasons as simple as consistent metadata.)

In a sense, lowering the "cost" of DRM by making it less invasive can have the effect of raising the relative "cost" of the cracked version (ie, the "all things being equal I'd rather not take the risk" argument), potentially shifting demand to the commercial product.

So, using "cost" this way, less DRM *can* actually raise the net cost of the cracker version. Less DRM can't *prevent* her from downloading, as you say, but it can encourage her not to by making the alternative more attractive.

Does that answer the question?

[John Thacker]

But if you cede the bottom to piracy, you can set a price between the top and the middle. The result: higher revenues per copy, and potentially higher revenues overall.

Almost certainly not higher revenues overall from a static point of view. If you look at the entire market, then you should price in order to maximize profit (which for software generally means maximize revenues, due to the minimal marginal cost of producing a new copy).

Consider it from the reverse point of view. Suppose we set a price that maximizes revenue considering only the middle and top of the market. Now add in a bunch of people who will only pay some amount lower than that price. Now we take those people into account as well. If it raises revenue to lower the price, then we'll lower the price when we take those people into account. If, however, revenue either stays the same or decreases when we lower the price, then we'll keep the price at the same higher level, even "taking into account" the bottom of the market.

Thus we see that ignoring part of the market cannot cause one to increase total revenue by setting a different price than one would set by considering the entire market. The profit-maximizing price for a portion of the market has to bring in at least that much revenue when considering the entire market.

The distribution effects are real, though. The idea is that each piracy sale produces some small benefit to Microsoft through network effects and standardization. By this argument, it's really a form of price discrimination, with a full price product that produces more profit for Microsoft, and a low price pirated product that produces some value with each "sale" for Microsoft. Price discrimination, selling different customers the product at different prices determined by what they'll pay, does produce benefits for the company.

[Cory Doctorow]

I still don't get it, Chris.

Let's take a for-instance.

1. I am someone who intends to download a song without paying for it. There's a DRMed version I can pay for, too. The way that the DRM works is irrelevant to me, since I'm not planning on buying that version.

2. I am someone who intends to buy a song. It has DRM on it. I find the DRM invasive and switch to scenario 1.

3. I am someone who intends to buy a song. It doesn't have DRM on it. I buy the song. I don't defect to scenario 1.

4. I am someone who intends to buy a song. It has DRM on it. I don't find it invasive. I buy the song and don't defect to scenario 1.

Where does the "strength" of the DRM come into play here? The DRM being more or less crackable is irrelevant, as near as I can work out, to whether I ultimately embrace scenario 1.

The *invasiveness* of the DRM matters. The most invasive of the DRM invasions, in my mind, is the most subtle: less competition and slower innovation. Non-DRM CDs have experienced a slew of innovation (for example, the iPod and every other MP3 player is an offshoot of the fact that DRM-free CD music can be lawfully transcoded to MP3). DVD players have not seen a single substantial new feature in their decade in the market.

So in the case of music, you have people whose "invasiveness" criteria includes things like, "Will this play on my MP3 player?" and "can I make this into a ringtone?"

I think that the factors leading to a scenario-1 defection are inevitable with any DRM system, because all DRM systems restrict which vendor's equipment you can use, and what that vendor's equipment can do.

[Ray Lawton]

Another interesting perspective is that piracy is simply caused by price point. In some instances, a person's price point is $0, and even a price point of $.25 would be unreasonable for the hassle involved for the consumer. But there are other ways to capture the piracy market legally - for example, offer a lower quality streaming video version of movies with TV-like commercials for FREE. You would STILL make sales on the DVDs and the higher quality downloadable versions, but piracy would drop quite a bit. You could make some revenue from the commercials, but that's not the point - most importantly you would prevent people from looking to pirate in the first place.

When they want to watch a movie on the big screen or to "own" it, a service like this would encourage them to buy, put the purchase option in front of their face, allow them to explore the long tail comfortably and easily. Think of the plush chairs at Barnes & Noble. There's certain differences online, but I think the logic of it makes sense. DRM is the opposite of what a company should do to encourage sales and prevent piracy.

[chris anderson]

Cory,

My mistake; I used "stong" ambiguously. What I mean is "invasive"--limiting, awkward, confusing, annoying. Again, I assume it will all be cracked. But the rights-holders, in a misguided hope to avoid that, often construct complicated schemes to make that harder. My point is that this is a mistake, because it just pisses off users. And it's economically unsound, too.

[John "Z-Bo" Zabroski]

Folks, what is "DRM"? Think about it, the term is Digital Rights Management. Just with any genre of corporate governance, there is a branch of managament that handles the incompleteness of corporate control in that area. Considering that, let us try and establish a definition of DRM that fits into the corporate world.

Digital Rights Management, I would define as, managing the incompleteness of digital rights. The operative word is incompleteness because digital rights are not complete, even with laws like DMCA (Chris's post pronounces and powerfully demonstrates that digital rights are not secure even with the DMCA).

So, what Microsoft is effectively doing is, managing the incompleteness of digital rights. That, in itself, is a DRM solution. It's not one you want to necessarily celebrate but I would argue only bad corporations are foolish enough to believe they have total control over any aspect of their business. The thin veil of confidence businesses have in their good times is easily usurped in their bad times -- particularly in a bad economy. What is most intriguing about the Microsoft example of a chaotic DRM solution is Microsoft faired relatively well after The Dot Com Collapse.

[Aaron]

The argument for increasing total revenues in the static model is just wrong. As other posters point out, if raising the price and abandoning the lower segment of the market increases profits, the firm would do just as well if piracy was not available. This simple model indicates that piracy at best will do nothing to profits, but likely lower them.

Some other economic models (see Varian in Journal of Economic Perspectives 2005, for example) discuss some ways in which piracy may actually help and there seems to be a drive among economists to show this. When Betamax came out, the entertainment industries were worried that it would hurt profits - but they were very wrong (not because betamax never caught on, but because the video industry is a huge area of profit).

One example is the "free-sample" model, which says that if consumers are able to taste more variety of downloaded software/music/movies, they acquire a taste for it and will purchase more than without available samples. (Alternatively, consumers may better know which flavors they like and make fewer purchases making less poor purchases).

The most accepted model of sharing is similar to used book markets. Used book sales don't necessarily lower the profit to publishers. If I am willing to pay $50 for a book without sales, I will pay $75 for the book if I know I can sell it for $25 when I am done. The model predicts that sharing will decrease the number of sales, but allow for a higher price since the sharing element adds value.

[John Brandon]

Yeah, I don't think they are waiting for DRM. I think you are giving them too much credit for being smart enough to even know how the content is cracked and distributed. I think this is a case of the techies coming up with techie issues. Movie studios are waiting until there's an audience, so not just the Movielink.com and Netflix crowd, but my mom, who doesn't even own a computer yet. And, they are waiting until 8 out of 10 TV watchers have an HD hooked up to a laptop.

They already know that Microsoft has DRM, and yes they want to make sure Shrek 3 will be safe. But these are slimy Hollywood marketing types who still use Internet Explorer. They read Variety, not Wired. They want to know that, when they sell Shrek 3 online in digital form, that there will be more people who buy it there than at Target. Otherwise, who gives a flying fudge? Heh, just us guys.

[John "Z-Bo" Zabroski]

@Aaron

You say the arguement is wrong, but what about the conclusions?

@everyone

(I believe as of today), CNet recently wrote an article about 10 real PC games you can download for free. These are classical titles that have historical replay value. Interestingly, CNet is marketing for the companies who give these games away for free -- CNet is suggesting to users that if they like the old version of a game, try the newer version "with better-everything" as the saying goes. This is an example of Digital Rights Management in an obscure sense, but it is an example I think we will see a lot more of in the future.

[dan]

With regard to priracy as a "victimless crime" (Piotrr and Chris comments above) from my experience in South America, it is exactly that. The vast majority of people in Bolivia, for example, make very little money (maybe $1 a day), yet find enough to buy ripped DVDs from vendors at many street corners in Santa Cruz, Cochebamba, or La Paz... In these cases I do not think the entertainment industry (Hollywood) can consider themselves a victim, since these people would never have the money to buy authentic DVDs (about $20US there, a month's wage for some people).

Rather than a victim, Hollywood is actually gaining mindshare with the populace in Latin America, gaining loyal fans of "Hollywood entertainment". As economic development continues in these countries (Chile is a great example), a growing middle class of consumers buy movie theater tickets, authentic DVDs (for the bonus/extras), CDs(for the original artwork), and other media. Piracy is building a market of fans among people who could otherwise not afford such entertainment... a long-term market that Hollywood can sell to with value added authentic products -- a market of people who otherwise would not care about Six Feet Under on Blu-Ray, Shrek 8, or Batman Oblivion.

[Brad]

But if you cede the bottom to piracy, you can set a price between the top and the middle. The result: higher revenues per copy, and potentially higher revenues overall.

As others have pointed out, this is just plain false (see trackback entry: 'Economics, Piracy, Bullshit'). I have argued previously that piracy can be good for software companies due to network externalities. http://panopticologist.blogspot.com/2005/07/why-piracy-is-good-for-microsoft.html
I think some music and movies could benefit from increased word-of-mouth advertising because of piracy.

[sun bin]

DVD consortium is another example.

i also tried to discuss in a bit more detailed in terms of price elasticity.

http://sun-bin.blogspot.com/2005/08/long-tail-on-drm-downloading-and.html

[Jonas]

True, true... If a piece of content, like a movie, is only available in a cumbersome format, I download the transcoded version without DRM instead. There is almost always one.

[chris anderson]

Many thanks for all the insightful comments. To the many of you who remember Econ 101 and are pushing back on the "raising revenues" line, pls note what I wrote above. I said "raising revenues per copy and *possibly* raising revenues overall." The first part of this is indisputeable, but many noted that a usual price optimization curve would do a better job of raising revenues overall. Well yes, but pls note in my comment above that this isn't just about economics:

"When Microsoft sets its prices, it's not just thinking about maximizing revenues. It's also thinking about growing its user base and driving overall PC penetration. That's why, when considering the bottom of the market, it might set the price lower than a simple price/demand curve would dictate. And why, when it cedes much of that market to the pirates, it can raise prices."

From that big picture perspective, Microsoft can potentially charge higher prices per copy while still growwing the entire market (for IT broadly) if it tolerates some piracy at the bottom end. As for the higher revenues overall, that would come over time and with all of Microsoft's products, not necessarily the whose price was raised.

[Eric Prebys]

One of the biggest victims of piracy is not the bigwig content providers but *us*, the people who create low-cost or free, oftentimes bleeding edge versions of coorporate product.

Let me illustrate my point with a shout-out to the soon to be massively influential and always passionately loved band Night Rally. They are located in Boston, MA. You can get a lot of their music online for free, http://www.nightrally.com. It will rock your freaking socks off. As far as I'm concerned, they are better in every conceivable way than the over-produced, coorporate schlock falling off the walls at one of the crappy cookie cutter music stores which has probably polluted a street corner near you. But, of course, we all know that you can get all that coorporate schlock online for free as well.

I ain't no conspiracy theorist, but it is pretty obvious that those on mahogany row know that we are one of their biggest competitors. For most digital content problems in the world, we've produced solutions either locally, through open source or in small start ups. These solutions *compete* with the pirated anti-content on bittorrent.

[sun bin]

I agree with brad@panopticologist that there is one maximum point for revenue, whether one assumes uniforming pricing or tiered pricing. Ceding the lower end means the optimum price will increase, but the total revenue at best remain the same.

however, you are right that a small trade-off of 'optimum piracy tolerance' will help to grow your market in future much faster (and secure virtual monopoly) like Microsoft did. this is analogous to the free trial promotion of P&G, except that the cost is zero for such promo.

The main reason for the failure of DRM is, as you have pointed out, its user-unfriendliness, its lack of 'ownership', and ultimately, the business model associated with how the technology is designed.

http://sun-bin.blogspot.com/2005/08/long-tail-on-drm-downloading-and.html

[Dustin Quasar Sacks]

Excellent post. Piracy is definitely not a black-white issue, instead made up of a variety of shades of grey.

[John Thacker]

As for the higher revenues overall, that would come over time and with all of Microsoft's products, not necessarily the whose price was raised.

OK, yes, that's completely true, and I figured that's what you meant. However, I just posted in the interest of being accurate. Yes, piracy can grow the entire market and lead to more revenues "eventually" due to network effects.

[Brad]

pls note in my comment above that this isn't just about economics [but also]...growing its user base and driving overall PC penetration.

Well, yeah. But this is purely a result of network externalities and has nothing to do with the price charged to paying customers. You are simply extracting value (larger user-base) from people who would otherwise not use your product. I think this is undeniably the case for software, but making the argument that there are strong enough network externalities in music (for example) would seem be a lot harder. The only network type effect is going to be increased hype. But if enough people pirate your work that has a significant effect on reputation, your copy protection is likely too weak and everyone will pirate (notwithstanding the negative side-effects of DRM for paying customers).

[Aaron]

I agree with the suggestion that "voluntary" piracy can be good for a firm - higher profits (which is virtually identical to profits considering the cost per copy is virtually nil). The static effect will be to lower profits (not *maybe*). But considering the network externality effects (more users, more benefit to each user) or just plain old advertising effects might make it profitable. The thought I now have is that if properly embraced, file sharing can be the new fform of advertising - and maybe product placing (such as pop-ups) would support the model.

I'm not really sure what the point of the argument about piracy raising price is. A firm could raise its price regardless of piracy, but I'm not sure what that would accomplish but fewer sales.

BTW, you might know that the price of brand name drugs typically rises after the drug patent expires and new generics become available. The theory is similar to the argument before: only those customers who have a high demand and percieve a difference in drugs will remain with the brand name. Thus, the name brand can raise price cause it is left with those with a high demand.

[John "Z-Bo" Zabroski]

I agree with Eric Prebys and think Eric's points compliment Chris's quite well. I really love Eric's point though: "the biggest victims of piracy is not [shareholders or employees of for-profit] content providers but [..] the people who create low-cost or free, oftentimes bleeding edge versions of coorporate product." Eric so eloquently phrases the truth here.

There is no denying that, because so many people steal Microsoft Windows and Office, Microsoft has not only brand name recognition but cognitive pattern recognition, or to dumb things down to layman's terms, familiarity and comfortability. If someone steals Windows at home, and uses it at home, they will easily adjust to using it at work. However, if they use Ubuntu Linux and Open Office(for free) at home and then have to use Windows and MS Office at work, they now have not only two learning curves, but two different habits for two very similar products.

Why is this such a keen point to make? Technically, the user can become familiar with both products, however no matter how familiar they are with each, they are likely to forget which they are using while they are absorbed in typing a document or doing some other task. So, if the shortcut to underline something is control+u for Office but something totally different for another similar application, the user might press the shortcut associated with the other application. Often the mistakes is a subconcious one. Once a mistake like this happens, it is very hard to get your subconcious to tell you where you went wrong. A mistake like this can waste 30 minutes trying to figure out where you went wrong.

In Jef Raskin's book, The Humane Interface, he talks about a number of challenges with redesigning interfaces. It's a great book and one that a famous poster on this blog (Jakob Nielsen) is on the back cover of endorsing it. :-) In section 2-3-5, Raskin writes about the "exploitation of the single locus of attention" common to all humans:

That people have a single locus of attention is not always a drawback. Magicians exploit this characteristic shamelessly. A good magician can fix the attention of an entire audience on one hand so that not a single spectator will see what the other hand is doing, although that hand is in no way concealed.

Raskin also makes other great points like: (1) The inevitability of habit formation has implications in interface design (and, if I may suggest as an add-in, implications for filter design); (2) Habit formation is both helpful and injurious (both good and bad habits can be injurious, and even seemingly good habits can become bad in the wrong context); (3) Users become "trapped in the pitfall of automaticity" because they only have a singular locus of attention and therefore depend upon nonattentive, "automatic" behaviors to due tasks (this is a quote I think you need to borrow from Mr. Raskin, Chris, it aligns so eloquently with your thoughts)

Let me know if this is of more interest, because Raskin's book is one of those select-few I read every few months and have furious amounts of post-its attached to various pages. It is the bible of human-computer interaction.

[John "Z-Bo" Zabroski]

@Aaron

I think the point of "the argument about piracy raising price" is that through piracy people can become familiar with something, either by being introduced to a new style or substance. Yes, you are right - "A firm could raise its price regardless of piracy, but I'm not sure what that would accomplish but fewer sales." The caveat is that, through mass acceptance of a product via popularity, corporations may become forced to use MS Office because it is the defacto standard used by its workers at home. There is less training costs to teach people how to use MS Office than OpenOffice. Corporations also do not want to be sued by Microsoft for pirating software. It is much easier to audit a business than a home user with regards to piracy. Also usually deeper pockets. There is also easier automaticity for the worker, and therefore assumed increased productivity -- although I am sure you could find an argument against this statement I would suggest it is an exception rather than a rule. Exceptions are exceptional because they reinforce the rule by showing odd behavior only occurs rarely. Corporations want stability and are more concerned about predicting what will happen 95% of the time. Whoever the beneficiaries of catastrophe (the minority 5%) are, are also usually assumed to not be stable enough to be real businesses.

[Arun D]

Hi all,

Chris’s contention : “Any protection technology that is really difficult to crack is probably too cumbersome to be accepted by consumers.” Makes sense. But is the key how the cumbersome the experience is to use the DRMed material natively and how cumbersome cracking the DRMed material is to use it illegally. Of course once it is cracked once this factor is irrelevant. So the real equation is ‘Cumbersomeness DRMed material’ < ‘Cumbersomeness of process for obtaining pirated version’.

I think Abbi Vakil is pretty right – if the availability of pirated DVDs etc. were the same in the US/Europe as it is in China and South East Asia, Chris’s scenario of "Most consumers see the value in paying for something of guaranteed quality and legality" would not come to pass. The number of western tourists and expats that indulge in this trade shows that it is not an inherently ‘cultural’ problem. (Although to really crack down on piracy in these countries would be a culture shock for many locals)

With this in mind, I would say the best way for Hollywood/’5 Music Majors’ etc. to go would be to follow Chris’s advice on point one – allow the easy availability of their product, and then concentrate on making the process of obtaining the pirated content cumbersome by playing the spoiler tactics on the P2P guys and the street vendors in Asia.

[pheloxi]

cds just released will be cheaper within 3 months. more buyers are aware so they find a copy until they might buy it. the word "might" is very important, because I think that will not.

most dvds sales add to the "ticket sales" profits of movie companies. movie companies are afriad of illegal copies, but still sell dvds about 3 times above movie ticket. I know of extra costs to design a great dvd.

both record and movie industry have great posibitiy in hands: the quality of cds and dvds are a lot better. I hear you say quality is good reason for higher prices, but what if you sell a lot more for a lower prices. it not better to sell closer to 100% legal, than closer 50% illegal.

note to record companies:
I am music lover who waits 3 months now, before buying, but I refuse to listen to bad illegal copies. record companies, can you see I am goldmine if lower the prices?

note to reader:
I bought recently Gorillaz cd/dvd on line I paid less than Euro 15 (US$18,50), but in record stores in The Netherland the same cd/dvd was Euro 30 (US$ 32.90). (the online one was 0% V.A.T. and the other 19.5 % V.A.T.).

[pheloxi]

Euro 30 is US$ 32.90, US$ 36.90

sorry...

[Roger]

I think the relative piracy depends on two perceptions:

1. The perceived cost of the content. Is it worth it?
2. The perceived awkwardness or invasivness of the encryption. Can I do what I want with it?

A fairly-priced, easily found content item will have lower piracy. An item that people think is overpriced or difficult to legally find will be pirated.

An example from the book industry: Authors/Publishers who price the digital versions of their books high have them pirated. In most cases, the encryption is NOT broken, it is instead sidestepped by creating a new digital version (scan from print and OCR - and thus with a new set of errors). The cost of a legal digital version of Harry Potter is infinite, and therefore the book was pirated within hours. If there had been a legal digital version available, I think it would have broken every sales record for ebooks with the possible exception of the Bible.

On the other hand, if the digital version is perceived to be fairly priced, then the piracy rate is much lower. The stereotypical example is Baen Books (www.baen.com) which releases digital copies of all their new hardback books with NO encryption, and essentially no piracy occurs. In this case, it appears more costly to find and download a pirate copy than to pay for the easily obtained legal copy. Fictionwise also releases some books w/o encryption, and appears to have no significant problems.

Encryption, on the other hand is fundamentally limiting. If I can't use the content the way I want to, then it's less valuable to me, and the balance between legal w/encryption or illegal w/o encryption changes. Prevent me from watching it on the player in the car, or six months later when I think of it again? Now why did I buy this in the first place? If the cost is low enough, I might put up with the limits. But at some point, I'm just going to send my entertainment time and money somewhere less annoying.

I'm not sure about a fair price for a DVD movie. An awful lot of people seem to think that iTunes is fair, but I'd like it better if there were fewer limits on what I can do with the content once I've bought my copy.

[Roger]

Piracy is viral marketing. For most content (as opposed to application software), one of (if not the) most important advertising sources is buzz or word of mouth. Telling your friend about it. Buzz depends on ALL the users, not just the users who bought legal copies. Now admitedly, some of those buzz-generated new buyers will find pirated copies, but some will buy legal copies. And that buzz also effects the next piece of content, the next book in the series, the next album or new chart, or the next movie by that actor/director - or the last one if you haven't tried it yet (to keep pointing in the direction of the long tail.)

If there is someone who WANTS to use your content but will never buy it, then it is in your interest to have "pirated" copies around. If they're not going to buy it, at least they can help generate the buzz. And maybe they'll buy one later when they can.

[Kythe]

There are fundamental differences between software (Microsoft's case) and content (e.g. MPAA and RIAA's interests) as noted above. But these differences are more profound than the issue of piracy, and they spell potential doom for content providers, though simple, legal market forces.

Music content producers (i.e. artists), in particular, make their money on tours, and enter into agreements with record companies to make recordings that serve to promote the tours. It's the record companies that make their money on the recordings themselves. Thus far, this has been a symbiotic, contractual relationship.

Now, what happens when you have a new way (e.g. the Internet, using p2p technologies) to promote the artists directly? No more need for a middleman. In other words, no more need for the record companies. It's a clear-cut example of market forces phasing out an obsolete market niche and serving to return things to a condition closer to their constitutional roots -- the promotion of science and useful arts directly. No more middleman.

The companies represented by the RIAA know this. They know that they no longer have a monopoly on the means to get artists' content into the hands of consumers, thereby promoting the artists' real money-making activities (again, tours). They've been dealt out of the game by technology, and are responding by attempting to legislate their business model. They desperately want p2p to go away completely, before its legal uses make them irrelevant completely. And it's not going to happen. The RIAA is headed directly for obsolescence, which is likely one reason why they've been on the leading edge of fighting piracy so ferociously.

Movie production is a more troubling issue, since the availability of home theatre equipment makes it possible for people to enjoy movies as they're meant to be enjoyed. I'm not sure what the solution is for that; it's pretty clear that movie producers and distributors will need to come up with additional ways to get people into theatres. I suppose IMAX is one idea (screens much too large for home users to ever compete with).

As for TV, I would suggest that television production shops should explicitly differentiate between online-traded content that includes commercials and content that doesn't. Sure, the consumer can still fast-forward over the commercials (just as they do at home with VCR's). But at least the commercials would still be there and still serve as a revenue stream. It would also promote the shows themselves, and promote goodwill between TV producers and consumers simply looking for their favorite shows in the most convenient form available. P2P offers real advantages for television producers if and when they grasp the potential. Perhaps movie producers could also learn from this and develop ways to maintain, or even increase, revenue through the same process.

[Matt McIrvin]

Cory Doctorow said:

"Non-DRM CDs have experienced a slew of innovation[...] DVD players have not seen a single substantial new feature in their decade in the market."

They have seen some, but it actually supports your point, since the most interesting new features aren't about playing commercial DVDs, but about DRM-less or DRM-stripped content (e.g. CDs holding video files using popular codecs like DivX and XviD; there's a Philips player that is particularly good with these, and the thing is selling like hotcakes).

[Shiv Mahajan]

shiv mahajan
"shivsadan" infront of
natraj hotel LATUR

[Aaron]

A large group of you advocate piracy on the grounds that it ha a high chance of helping the companies being pirated against. I steal MS Word to use at home and end up getting hooked and having my boss buy it for me a work.

There is nothing wrong with this argument and is correct from a theoretical standpoint - it is possible. But if this was empirically viable for companies, I would expect them to pursue legal forms of free distribution of their product, not impose an additional "ethical" cost (yes, economists recognize these) on those who get pirated software.

In fact, isn't this the purpose of offering demo or non-Pro versions of software? Get a person hooked, their value increases and they purchase the additional features of the Pro version.

I find it tough to swallow that companies are that much inthe dark to fail to recognize if piracy were potentially profitable. But, they were wrong before...

[John "Z-Bo" Zabroski]

@Aaron

Personally, I am not sure you accurately frame my views. On the face of things, I may come across as an "advocate for piracy," but I am not.

I used to be an advocate for convenience - the luxury that is intended to save a consumer time or frustration.

Luxuries are driven by the decisions business make and their goals. Businesses ultimately care about shareholder value.

When I came to this view, I ultimately decided I was an advocate for CONVENIENCE WITHOUT LUXURY. In other words, convenience should not be an indulgence but a necessity.

In today's world, I would argue almost nothing can be considered an indulgence any more because, oddly enough, everything has the appearance of being indulging. Much is made of the effects of globalization and how competitive factors are more equal. I think that means something: Distribution is more important than ever. There is also the "Economics of Abundance," which touts many goods and services have a hyperabundancy and are easily distributed, which I would say is a corollary to distribution being more important than ever. i.e., "If there is lots of it, I should have some of it."

Would you say that is a politician's answer or a good reply?.. or simply confusing? ;)

[John "Z-Bo" Zabroski]

I was reading an old blog entry from another blogger, titled Mark Pesce on BitTorrent. Seems like it could be worth (another?) look, Chris. It coincides well with your reason talk with Bram Cohen and thoughts about piracy. Mark does a fine job of a Call To Action for "Just Enough Piracy", but approaches it in a different way and more clear reasons. He looks at it as a pirate, not a business. Here is the article in a nutshell:

1. Suppression of a method of piracy only leads to the profusion of alternatives (i.e., Napster shutting down led to Kazaa, Gnutella, LimeWire, etc.)

2. The suppression of "seductive technology" giving rise to a profusion of alternatives also gives way to more efficient piracy. (i.e., BitTorrent is a better P2P network than Napster, but would BitTorrent have caught on as easily if Napster was never shut down, forcing "leachers" to look elsewhere? Hypothetical, yes, but worth wondering). Attacking a "single point of failure" with piracy technology only lead to piracy becoming a more pervasive network - with many points needing to fail for there to be a network failure.

3. BitTorrent was possible when Bram "Cohen realized that popularity is a good thing, and designed BitTorrent to take advantage of it. When a file (movie, music, computer program, it's all just bits) is published on BitTorrent, everyone who wants the file is required to share what they have with everyone else." As I see it BitTorrent is actually the antithesis of the Long Tail, then, since it works better with hits than it does with "misses."

[Brad]

Aaron said:I would expect them to pursue legal forms of free distribution of their product, not impose an additional "ethical" cost (yes, economists recognize these) on those who get pirated software...

I find it tough to swallow that companies are that much inthe dark to fail to recognize if piracy were potentially profitable. But, they were wrong before..

The company itself, though, doesn't pay the 'ethical' (I prefer 'psychic') cost of piracy and so will not consider it in making decisions.

I think software companies are well aware that a bit of piracy is good for them, but they still need to make it a bit more difficult to pirate than to buy, lest they lose all their customers to piracy.

The software company is effectively price discriminating in allowing piracy. They make some people pay while letting others (those who don't mind going to a bit of trouble downloading a cracked copy and are willing to bear the psychic cost of being an evil pirate) have it for free, but benefit from the network effects - your boss buying word at work - of an increased user base.

They ideally want to make the lock heavy enough that it puts people off piracy, but not too heavy that anyone not willing to pay the retail price goes to a competitor or leaves the market altogether.

Of course, Chris's argument that DRM and other forms of copy-protection pisses off your paying customers complicates things somewhat.

[Aaron]

Brad says: The company itself, though, doesn't pay the 'ethical' (I prefer 'psychic') cost of piracy and so will not consider it in making decisions.

That's just plain wrong. Its like saying a company doesn't lose when its customers have to wait in line. If the customers bear an additional cost from purchasing the product, it lowers how much a customer is willing to pay for the good. The company must charge less than if the customer did not bear the discomfort.

If price discrimination is the goal, then perhaps it is worth the "psychological cost" as a means of ensuring everyone doesn't pirate.

I doubt that there aren't better ways of distributing to a select segment of the market - e.g. promotional giveaways, download one song free (like amazon)...

[Brad]

If the customers bear an additional cost from purchasing the product, it lowers how much a customer is willing to pay for the good. The company must charge less than if the customer did not bear the discomfort.

Yeah, you're right, I obviously didn't think that statement through.

If a software company could find a way of distributing its product free to people who wouldn't be willing to pay for it while charging others, without imposing the psychic cost of piracy (though I dare say many people don't feel at all guilty - I don't)then that would be preferable.

Free but stripped-down versions of commercial software is a way of doing this, but there is still the cost of giving users a crippled version, which would lower demand in much the same way as piracy-guilt(tm). I guess offering a fully-functional free version to non-business users is a pretty good way, as long as you can prevent businesses from using it.I'm not sure about promotional giveaways, they don't really discriminate as to who is willing to pay what.

It probably depends on the individual product as to which method of free distribution is likely to be best. With Windows, for example, ability to pirate is probably quite inversely related to willingness to pay. It takes some (perhaps small) degree of technical-savvy to find and get a pirated version of windows working with updates and whatnot. The tech-savvy are also the most likely to switch to linux if they were forced to pay. Most people probably don't lose much sleep stealing from Microsoft either.

[Karmakin]

Chris:I'm not sure if you really get this. I usually agree with you, but I'm kinda off here. DRM, is designed not to stop the pirate groups. Oh that's what they say it's for, but it's not. It's to prevent casual copying. It's to provide enough annoyance, and enough of a technical problem to prevent people from ripping a CD for a friend, or sending an MP3 over IM.

It's things that people, to be honest, don't think twice about. In our cuulture, it's seen as fine and dany. Always has been. But it's still REALLY illegal. And that's a huge problem.

The real problem is the whole concept of copyright is out of control, and needs to be put back in place. The public domain needs to be restored, and brought up to date for a digital world.

[chris anderson]

Karmakin,

Yes, copyright is out of control and our entire system of intellectual property rights protection needs to be rethought for the digital age. Indeed, I'm a huge fan of Larry Lessig's work on this (which is why he's one of our columnists). But I'm also a realist. We can't wait for Congress to solve this problem because A) they probably won't and B) anything they do will take years.

So the pragmatic solution is to advocate for technology solutions that offer the bare minimum of protection necessary to encourage rights holders to release more content legally, while miminizing the inconvinience to consumers.

Don't get me wrong: I *hate* DRM. Case in point: I just bought some albums from Rhapsody, but when I transfer them to my Treo it says it can't play them because the rights didn't transfer. So I have to burn them to a CD and rip them simply to strip off the DRM. That's just badly implemented technology. But I love being able to download and listen to music and supporting the services that let me do this well (a category that does not include the p2p networks, which are too much trouble for me).

These are early days yet, and I suspect that the business world will solve this problem before the political world does. What I'm saying is that a miminum-fuss solution to DRM is best, even if it allows some piracy. Better laws would be better, but I doubt that's going to happen. Better technology actually might.

[fakir005]

IT is a shame that it is very long blog with contribytions by many authors who have expressed several ideas in relation to the music piracy. I'm impressed by the auuthor at the beginning of this blog who blamed thed microsoft and cheap software for the existence of the piracy. I think the RIAA would be very impressed by those thoughts simply because MIcrosoft is a force behind the resistence to the RIAA lobby in the US Congress for the enacting of anti-piracy laws. Actually the said author is very misguided as to the Microsoft Software being responsible for the piracy. If anythging it is the way Internet vservice is delievered for which Microsoft is not at all responsible. really. If anything it is the RIAA itself wsho is responsinle. Not directly in that RIAA is not the one is or was respomnsible for the creation of that method of the delivery of the internet service. It was created by folks who were very misguided but more misinformed than being misguided. One of those folks was Steve Case of AOL. These folks did not know themselves that this method would lead to the piracy and loss of livelihood of the musicians who are the members of RIAA. But now RIAA is fighting Piracy but on wrong front. RIAA can help to correct the situation. The situation can be corrected by RIAA lending its financial support for the ceveloment of an alternate method of the dlivery of the internet service. I call it the server side processing of the data. Presently all the tasks are performed by the client. The server merely performs the clerical work of storing the documents and providing them to the clients when they ask for the documents.

Now people are using one system of surfing the net. There is no way they can even think of using an alternative method of surfing the net. THey could think of using the alternet method of surfing the net if it existed.

That is why it is paramount for the RIAA to lend its financial muscle to provide seed capital to develop this method of surfing the bet and then for the advertising needed to get people to use this method of using the net.

Simultaneously RIAA could then lobby the Congress to ban the present method of surfing the net.

This method of surfing the net is described at

http://www.newerawisp.blogspot.com/

Various authors in the blog have expressed various ideas that will never be able to wipe out the piracy since they don't attack the root cause of the existence of the piracy which the method of surfing the net now existing.

My name is Satish Bhardwaj and I'll risk spammers by giving my email address as fakir005@aim.com in case RIAA would be interested in rooting out piracy.

[Igor]

It’s not right to consider digital piracy as marketing advantage. Firstly it contradicts to most international laws. Secondly it brings companies to lost revenues. However an “enough piracy” can help in a digital product PR and distribution. But it mostly depends on digital product type. For example it might be useful for such a things like CD/DVD containing music, films, e-books, but not for PC software. If we talk about potential entertainment products customers in this case we can imagine that by example some music album having unbeatable DRM will not reach all its target audience and risks to remain relatively unknown. But with more accessibility it will come to all potential customers and among them can be many people who will bye its licensed version for full price having known and fully tried it from unofficial sources like pirates. But software cracks and piracy can bring developers and vendors only for lost revenues by the next reasons:
- Most software products have specialized direction and limited target audience. In this case marketing people of such a companies set the reasonable prices for their users that need this solution and ready to pay for it. Otherwise if the application cracked and available to free use the big part of these potential customers will prefer to use free or low cost illegal copies to save their money.
- Where an application has wide targeted audience and many competitor products its cracking and piracy is the shortest way to large volume lost revenues. And in this case we cannot consider free application availability through cracked versions and piracy channels as a promotion opportunity. The best marketing solution for such a products is a wide range of free evaluation versions with flexible limitations legally available, additional freeware distribution, differentiation on light, Std and Pro versions. And it gives possibility to all real potential users to try software before bye it. Then to avoid illegal use and make a large part of users to pay the software has to be strongly protected. As a result all who need the program and ready to pay for it will buy it for full price that really will raise revenues of application vendor. An ‘uncrackable’ software protection cannot negatively influence to sales because it will differentiate people who cannot and in all cases won’t buy an application copy from target customers who really need the solution.

As a software developer and vendor I can say my opinion is based in practice. Having weak protection I found my program cracks and keygens in several days after software release. And among users who really needed my software solution paid for it only most honest people and a large part of ready-to pay people used its illegal copies. Having found and using in my product one of today’s strongest software protection tool EXECryptor from strongbit.com made my application new updates uncracked during about 2 years. I have significant sales raise. In addition to supply most possible customers with solution they need by cannot to pay full price my company has flexible pricing such as great discounts for educational and non-profit organizations and all people who is able to contribute a reason to get discount so they pay money they can.

[GSD]

Ha! You actually hit it right on the head, although there is a little more to it than p[ricing policy alone. Why would software manufacturers produce NFR (Not for Resale) Software otherwise than to have it bought and illegally redistibuted. Why would MS allow their own staff to buy COA's and then introduce activation technologies many years after they could have eradicated the piracy issue usinmg the self-same? USAGE is built on familiarity is why. PROFIT is built on 'THE ALGEBRA of NEED!' MS actively encouraged the distribution and production of pirate versions of their software and still do and here is how and why and whilst I am at it, lets name some names...

a) By doing deals with companies who are allowed to continue distribution of illegal COAs and products PROVIDING they inform MS of their pirate suppliers ( Atomic Park allegedly)

b) By not prosecuting the distributors of online pirate versions, CDshop.com anyone?

c) By allowing offshore companies, like Vertex (allegedly under a loom anyways), in the carribean to actually sell versions of server and exchange 2003 with xeroxed manuals and beautifully laser printed boxes (although they are a US MS DSP!)

But why?

Well if you destabilize your reseller market by allowing it to be dominated by illegal product and illicit grey market practices, all of which have a very negative impact on the end user, at no cost to your reputation, where is an end user going to come to buy. Yup. The software manufacturer. AND the most successful manufacturers of software, ie MS and symantec, encourage just that! So what about the law? Well try suing them under the RICO act. You will have to get through the federal judges they pay off with branded duffle bags of cash left on the door-steps of their sealed hi-sec condo buildings. THEN you gotta get through the panel that sits on the 9th Circuit court once they judges who refuse you a jury trial, even though its against the law to do it, do, then yup, you guessed it, you have to post an enormous bond which can be taken and siposed of at the will of the 9th circuit, which is, yup, composed by federal judges. Sound like a conspiracy theory. Yes it does. But...MS has done this for YEARS, they have, for example litigated against the most succesful of their resellers out of business. The software industry is dirty because where it isn't AHEAD of the law, it buys it off. I am a software developer, heavily involved in the industry for many years. My wife is a DA. Her father is a PI. I am saying this because I have tried, with their help and several million dollars, to achieve exactly that which I have spoken about, to be met with the response of a 20 year federal prosecutor who stated 'TODAY IS THE DAY I HAVE LOST MY FAITH IN THE JUSTICE SYSTEM'

Software companies have not only encouraged piracy, but foster in their business strategies to destabilize and manipulate the market, not just their prices! And worse than that they 'hack' the law, which is ultimately no more than an instruction language, to their own ends. BEST software, for example, is an MS clean-up operation, that buys the competition that MS cannot hold for anti-trust reasons. You just have to do the research. Anyone?

[Engr. 'Wale K.]

To Long Tailers,

Sometimes I don’t know what to say concerning battle between Crackers and Programmers. I have heard a lot of consumers clamoring for return of product and money back because of a complex security built into a product. In the other hand I have heard a lame shareware Programmer that is selling his software for $5 dollars, with a wife and two kids in school, he was not making much, so on the release of his next game, he decided to talk to me, I analyzed his little copy protection based on date technique that is common around.

When I compiled and ran the game, alas! The game was fantastic, I told him to let me see some of his released games, the two I tested proved that his game is quite good and the reason he was not making much was because the protection he was using is weak and known to most young crackers. He was auguring with me on the basis that nobody can pirate a $5 dollar game. Immediately in his presence in my office, we searched the net and found pirated copies of his $5 dollar games littered on most crackme sites. How about that?

I think if any Programmer has developed a kind of new hot in demand software, such Programmer should go a long way to protect it. So that if crackers won’t stop using free software, they will have a long way to crack it too, and if all Programmers adopt embedding protection in their product crackers can be reduce to a balanced percentage. But I will never advise any Programmer to release a product without any protection; I am even suggesting that all Programmers should learn cracking, just like I did.

I am about to finish my own software too. I am still considering applying EXEcyptor on top of my own security; after all I came into programming to make money.

Regards
Engr. ‘Wale K.
walesys@yahoo.com
Lagos, Nigeria.

[maria martinez]

i want free music

[John]

Sue the pirates and screw them, I'm sure they won't dare it again.

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