-- Bill Gates during speech at University of Washington
http://articles.latimes.com/2006/apr/09/business/fi-micropir...
That argument ceases to hold in the case of BitTorrent, where the distributors aren't trying to maximize their profit (or make any at all).
Imagine this thought experiment. Imagine there was a 100% fool proof copy protection scheme in China, and the only way to acquire Microsoft Office would be to buy it. Try to imagine how many people, who make $1000 in a year would then cough up the $495 to buy it?
Its not hard to imagine because there is no manufactured good in China that commands a 'half annual salary' value proposition that is not critical to a person's survival. And Microsoft Office isn't that item.
There is an exemplar that there is a $6M value for Word based on the $2 CDs that sell, so its not 'valueless.' And there are benefits to owning a legitimate copy over a pirated copy. Further, the cost of producing a pirated product (box, CD, getting started guide, etc) is less than $2 so there actually a real-goods sort of economic value analysis possible as well.
So all we really know is that the number is >= $2 and < $495. And in information economics this poses an interesting challenge. How do you capture the maximum value for your information? Microsoft later introduced a plan where Office for this market was significantly less expensive than it was for the US and European markets [1]. That increased the value they extracted for office out of those markets tremendously. It was more than 10x that $1.50 price at $29/CD. And they captured a lot of value for it, millions and millions of dollars. But not billions of dollars.
Many have argued that much of NetFlix's streaming revenue has come from previous BitTorrent users [2]. Prior to NetFlix you could say BitTorrent was a "$xB" problem where $x is the money that has been re-captured by offering an alternative with an acceptable price.
But to understand how that works you have to think about what gives information value, its much more market driven that fiat driven. Sony can say "Its worth $X to own this movie" but if nobody buys it and it is heavily pirated they guessed wrong. Since the replication cost is nearly $0 they really are guessing at consumer value. Lots of DVDs sell for $9.99 or $4.99. At that price I won't even bother looking for a torrent, I'll just get the DVD. Its a market, it has different mechanisms that drive it.
[1] http://www.reuters.com/article/2008/09/23/microsoft-china-di...
I started writing my experiences with this up but stopped when I went to work for Google on the advice of my lawyer. Its a discouraging thing to write/talk about because without context people think its crazy, so slowly over time, as context develops, and "real world" examples get played out, the notion that information can have its own set of economic principles becomes less foreign because it sure as heck isn't behaving like it "should" if it was bound by the old rules.
Anyway, three ways I've seen so far to add value to information is that its timely, its rare, or its distilled. An example of timely information would be stock trades, very valuable right at the time they happen to high frequency traders, less and less as it gets older until its basically worthless 15 minutes old. Continuing with the stock market 'rare' or 'precious' information might be insider information about a company, it has value because it creates context that others can't see, which gives it a value proportional to the advantage it conveys, and lastly distilled value. Remember our stock market trades? Well they were very valuable 20 milliseconds after they happened, worthless after 15 minutes, but when kept over the course of time new data can be distilled from that old information (like maybe a stock always rises in the third quarter). I discovered at a conference that the intelligence agencies call this last one the 'Mosaic effect' where any single piece of information is useless but together they allow new data to emerge.
Artistic creation however is always the "best" information in terms of value. It can create value greatly out of proportion to the cost to produce it.
Anyway, like I said, I've been thinking about this stuff for 15 years. :-)
> Since the replication cost is nearly $0
> they really are guessing at consumer value.
The variable costs might be close to $0, but the decision to create the DVD still costs something.
-- Steve Ballmer, 2009 http://www.osnews.com/story/21035
And it's not only Microsoft, some other companies (Audodesk, Adobe, Apple) also keep higher prices and worse quality in some of poor countries than in the USA. It's kinda like they try to punish people that want to buy their software legally.
For me, it's an easy decision, I just don't use their software at all, but some people have to use their software, and I totally understand why some of them decide to pirate it.
I remember getting burnt badly trying to install ... Mandrake was it ... back in the days.
It worked.
In schools students learn "Word" and not "a word processor". I've seen high schools getting software licences with special deals (way cheaper), and thanks to that other solutions are discouraged (ie. "Word" is the standard and it will be required by any future job offer)
Can all students afford a Word licence? (ie. practice at home) It really doesn't matter, piracy it's OK because it is an investment. Companies are the final target (won't run pirated software and all candidates are trained to use that software).
You can find that kind of strategy also in open source (ie. Red Hat benefits from CentOS).
My company is currently using RedHat in a very large number (let say, we pay a lot to them...), but looks like we might end up switching to CentOS. Basically the price vs. amount of support we get from them does not seem to be worth it. And it is very close to what we would get from an Open Source community or by using Google.
But I do agree with the rest what you said.
Look at the consequences of CentOS. There are mailing lists, forums, IRC channels, blog posts, lots of people providing support and training for free.
That rich ecosystem is translated into business for Red Hat.
EDIT: ate a word.
* There was a $60 sale on 2007 for students.
* I was able to get a copy of 2010 for $1 for home use because I also use it at work
* You can always purchase a used copy of 2003 for cheap. It's dated, of course, but not really outdated yet.
But it's definitely not only the goodness of their heart that leads many companies to offer free or cheap software to students. Microsoft BizSpark is all about giving startups free Microsoft software in the hope that they'll build on the MS stack.
Voila: enter a good or bad serial, and it works. A bunch of us under +Fravia came to an agreement that this simplicity was intentional. I think we all can come to the conclusion to why that is...
As to your supposition that no amount of 'junk' would stop pirates, I do beg to differ. Back around '98-2000, there was a CD burning program that was notorious to crack. I don't remember the name offhand. There were over a thousand verify checks built into the program at crazy locations. Many would also attempt to write corrupt CDs and ISOs. And the "best part": if you were using a 'naughty' code, it would silently take it and slowly corrupt everything that program touches.
Most pirates ignored it and went with NERO to crack/distribute. A few of the hardcore crackers took on that program. I knew of 2 successes.
CDRWIN's author's rant and viewpoints against piracy, from March 1998
When all software distribution moves to the Internet (which it will
when high-speed fiberoptic connections because commonplace in the
future), the big developers like Microsoft and Sony are going to come
down hard on the pirates and WAREZ. These big companies are not going
to allow the Internet to become a "candy store" where software can be
stolen with the push of a button from the comfort of your home. If you
think that all of these "bits" are free, then try developing a really
good software product yourself and see how much money and time you have
to invest in it.[0] - Great Grandparent Poster? :D.
http://71.6.196.237/fravia/progcor.htm
It's down in the rabbit hole for you :P
I had links about about bypassing anti-debugging techniques, I'll see if I can get my hands on them again.
Those guys at Ableton are serious business.
Another popular, niche product that has proven difficult to fully crack is a program called Pro Tools, created by DigiDesign, now owned by Avid. It uses a protection called PACE Anti-Piracy[2]. Many expensive pieces of software require unique hardware, either a security dongle or some other external device.
[1] eLicenser.net
[2] paceap.com