How Microsoft benefits from rampant piracy

“Microsoft Corp. estimates it lost about $14 billion last year to software piracy — and those may prove to be the most lucrative sales never made,” Charles Piller reports for the Los Angeles Times. “Although the world’s largest software maker spends millions of dollars annually to combat illegal copying and distribution of its products, critics allege — and Microsoft acknowledges — that piracy sometimes helps the company establish itself in emerging markets and fend off threats from free open-source programs.”

Piller reports, “The proliferation of pirated copies nevertheless establishes Microsoft products — particularly Windows and Office — as the software standard. As economies mature and flourish and people and companies begin buying legitimate versions, they usually buy Microsoft because most others already use it. It’s called the network effect. ‘The first dose is free,’ said Hal Varian, a professor of information management at UC Berkeley, facetiously comparing Microsoft’s anti-piracy policy to street-corner marketing of illicit drugs. ‘Once you start using a product, you keep using it.'”

Piller reports, “Of course, Microsoft executives prefer that people buy, but theft can build market share more quickly, as company co-founder and Chairman Bill Gates acknowledged in an unguarded moment in 1998. ‘Although about 3 million computers get sold every year in China, people don’t pay for the software. Someday they will, though,’ Gates told an audience at the University of Washington. ‘And as long as they’re going to steal it, we want them to steal ours. They’ll get sort of addicted, and then we’ll somehow figure out how to collect sometime in the next decade.'”

“Microsoft’s public posture on piracy is one of zero tolerance,” Piller reports. “Microsoft has cut pragmatic deals to convert institutional piracy into standard sales. Instead of suing, it asks organizations found to use illicit copies to replace them with licensed, paid versions. Microsoft wares become entrenched without competitive bidding, via piracy, and formal forgiveness cements the commercial relationship. Microsoft declined to comment on how often it uses this approach.”

Full article here.

[Thanks to MacDailyNews Reader “Wade” for the heads up.]

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  1. Enderly was right. I put XP on my Mac and now I’m hooked! It was pirated too, so I guess I’m a pawn of MS. I can’t WAIT to buy a full copy of XP Pro! Then my transformation will be complete.

    I wonder if it’ll come with Mac OS X 10.5…

  2. Microsh&t is insult to our intelect and humanity as a whole.


    The time is not far. OS X rules! Go Steve!

    Magic word often: Too often in life criminals succeed…at least for a moment!

  3. Apple, too. I buy my own copy of every Apple OS, but don’t feel too bad about getting my friends hooked on the previous version to spur them to buy the current one. Call me whatever you want, but if Apple knows this is part of the game.

  4. The whole claim by these multi billion dollar software/media companies about how they lose SO MUCH revenue to piracy is just rediculous. They only lose the sale if each individual person who was going to buy the legit software goes, but gets a pirated one instead. I don’t think that happens often, ESPECIALLY in emerging markets. The average income in China is $1000 a year. M$ expect them to pay $200 for Windows XP? C’mon! AND, there’s no way M$ would be willing to sell it at a price most price most people there could afford. I think that most of the time, people can’t afford to get the legit product, so they get a pirated version instead, which they can afford. If the co. couldn’t sell X product to Y individual because Y individual can’t afford it, then the co. COULD NOT make a sale, and therefore it did not LOSE the sale.

    The bottom line is that the lose figures put out by those co. is grossly inflated for the above reason, and the benefit actually outweighs the loss, especially in emerging markets.

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