Journal: News & Comment

Thursday, March 28, 2002
# 10:13:00 AM:

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Are you the enemy?

Some companies think so. Some don't. Who will win?

Nearly a year and a half ago, computer sales guy Bob Moriarty wrote an article about failed computer hardware maker Newer Technology that included this piece of wisdom:

You can have truly superior products and unlimited demand and still fail. All you have to do is consider your customers the enemy.

Making enemies

Through courts and lobbying of legislators in the United States, the large conglomerates of the entertainment industry have made it clear that they consider us the enemy.

I think Moriarty was right, and that attempts to lock down music and movies and software and other products will fail -- because anti-"piracy" schemes for digital content always inconvenience legitimate buyers while people who want to get a free ride find ways around the copy protection. But the failure may take some time, and it will get ugly in the meantime.

Ahoy there!

By the way, "piracy" is a lousy word for copying software or movies or music without paying for it. I think it's certainly problematic, but real piracy involves destroying property and hurting or killing people.

I think the term "software piracy" arose both because early software crackers liked the rogue "ahoy there, me hearties" image of pirates, and because many software and media companies wanted -- and still want -- to portray unlicensed users in as bad a light as possible. But using software you don't pay for, while not nice (if the makers want you to pay for it, of course), is different from cutting someone's throat and leaving them to die on the open ocean. That's what actual pirates do.

If a group of maniacs stormed Adobe headquarters, killed the staff, took the entire inventory to Iraq, and somehow started selling Photoshop to the "Axis of Evil," that would be real software piracy.

I only hope no one tries to call people who copy digital media "software terrorists."

Costs and benefits

Stories of the costs of unlicensed use appear all the time. But remember that while the figures are cited (and inevitably reported by media) as "[company] estimates that it loses [some huge number of dollars] every year to piracy," those aren't so much dollars lost as sales that weren't made -- and wild guesses, at that. There are two key things that make a difference between losses and unmade sales:

  1. How many of those "lost" sales would the company have made if there were no way to obtain the products illegally?
  2. What is the cost to the producer of each "lost" unit?

The vast majority of illegal software copying takes place in low-income countries. In some of them, the $400 cost of a piece of typical office software might be a month's (or even a year's) wages. Many other "pirate" users in the industrialized nations don't actually use the products enough to justify their cost, so wouldn't buy them anyway. Still, there is a huge amount of unlicensed use that could be converted into income.

However, is it worthwhile to do so? Once a media or software company has invested in producing something -- a software package, a movie, or an album -- the incremental cost of making each new box, or CD, or DVD, is trivial, from a few cents to a few dollars. Even more important, those who copy such materials don't actually cost the producer anything, since they don't take any media or packaging. They simply don't give the producer any extra money for the data. (Again, these are undefined sales not made, not actual material losses.)

That can work to the producer's advantage. Some theorize, for instance, that Microsoft gained from all the unlicensed copies of Office that floated around and helped it become the standard at the expense of WordPerfect and others. Only once those competitors had been effectively eliminated did Microsoft start trying to prevent copying more actively.

The convert

Here's a personal example. When I was a teenager and poor student, I copied a lot of software. Now I pay for the software I use, because I make a decent living, appreciate the effort behind the products, and like having packaging, manuals, upgrades, and technical support.

But which products do I use? The ones I used to "pirate." I use Adobe PageMaker because I used to use a cracked copy in the late '80s. I never used QuarkXPress because their copy-protection schemes and general attitude towards customers were nasty. So I never learned it. When I could have used it in my business years later, I never bought it either, even though it is the industry standard page layout application. So Quark gets nothing from me.

Similarly, I'm unlikely to get to like any musician whose CDs are copy-protected, because I can't convert tracks to MP3s for my computer, where I listen to most tunes while my CDs sit in a rack upstairs. So I won't buy their CDs, and certainly won't go listen to or buy any new albums from that artist. Imagine if I couldn't even borrow an album from a friend to see if I like it? (That's the way digital "rights management" technology is going.)

Another approach

Back in the early '80s, a company called Beagle Bros. confounded their competitors by not copy-protecting their Apple II computer software -- almost everyone else did -- as well as by charging ridiculously low prices (by the standards of the day), and by including cool manuals, tip sheets, and other goodies with their programs. Guess what? People bought Beagle Bros. software instead of copying it, because it was a better value to pay the money.

Better yet, those customers raved to their friends about Beagle Bros. and what a great company it was. What was that worth, I wonder?


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