7 ms·

Same with Windows and Office. It's better to have them pirate your program than run somebody's else.

wting 14y ago
"Although about 3 million computers get sold every year in China, people don't pay for the software. Someday they will, though. 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." -- Bill Gates during speech at University of Washington http://articles.latimes.com/2006/apr/09/business/fi-micropiracy9 http://articles.latimes.com/2006/apr/09/business/fi-micropir...
- jfoster 14y ago
  It's similar to many startups. Free initially to ensure growth, but always with eventual monetization in mind.
- ChuckMcM 14y ago
  Sadly that didn't stop them from claiming that piracy was a $1.5B$ problem because the retail price of Office was $495. Even though even a child would tell you that no sane individual would spend more than 1/2 their annual salary to buy a copy of a buggy, but ubiquitous, set of tools. In fact they were willing to pay $2 for a pirated CD on the streets so the actual "loss to piracy" was $6M ($2 per each of those 3M machines) but that sounds so much less of an actual problem.
  - ciniglio 14y ago
    So, by this logic, BitTorrent piracy is a $0 problem? Doesn't sound right to me. Not that I'm really pushing the $495 figure either, mind you.
    - huggah 14y ago
      If people were selling copies on the street for $2, that suggests that $2 was roughly the right price point (in that area) to maximize profit, and Microsoft couldn't have made more money by selling it for more. 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).
      - ChuckMcM 14y ago
        See previous response, Microsoft actually did change their pricing and captured a huge chunk of value. It was significantly higher than $2/CD. When selling information there is a tail, a few people will pay whatever you ask, a few more will pay less than that, Etc, until you get to all of the people who would obtain a copy if it were zero cost. That defines the "value curve" of the information. It is not a straight line. Because it is "hard" to justify large differences in price for the same product, one of two strategies are used a "steadily decreasing price" or a "fixed but relatively low price". Depending on the product different things make more sense. Games for example benefit from the 'expensive at first but cheaper later' model, reference works benefit by capturing as much market as possible quickly.
    - ChuckMcM 14y ago
      Actually yes, well actually approaching zero, and I realize it doesn't sound right. The cognitive dissonance comes from the economics of information, they work differently than the economics of goods. 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-discount-idUSPEK1362420080923 http://www.reuters.com/article/2008/09/23/microsoft-china-di... [2] http://gigaom.com/2011/05/17/netflix-p2p-traffic/ http://gigaom.com/2011/05/17/netflix-p2p-traffic/
      - napoleond 14y ago
        This is really interesting, thank you. Could you recommend any good books about the economics of information as you've described it here?
- mappu 14y ago
  "Number two market share goes to Windows pirated, or unlicensed ... That's a competitor that's tough to beat, they've got a good price and a heck of a product, but we're working on it." -- Steve Ballmer, 2009 http://www.osnews.com/story/21035 http://www.osnews.com/story/21035
  - ihaveajob 14y ago
    Another quote by Ballmer, heard in person a couple of weeks ago: "In Russia, we have a great market share, but a bit of a problem collecting".
eli 14y ago
Though it'd be better still if they paid something. Microsoft offers special low-cost editions of their products for developing nations, don't they?
- markokocic 14y ago
  No, they don't. I even remember that the prices for legal Microsoft software in one of those "developing nations" were higher than prices in the USA. 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.
  - jiggy2011 14y ago
    Wouldn't the issue be that if they sold Windows for say $10 in china that westerners could just import it for $10 + shipping and then install language packs once they had it?
    - galadriel 14y ago
      There are usually region restricted DRM trying to stop this from happening. For example, a lot of digital distribution gaming companies (like Steam) have cheaper prices of games in Russia compared to US. So there are all kinds of websites that will sell a Russian key and Russian proxy service so that one can get game for cheap. OTOH, the distributors try to monitor and keep disabling accounts if they find that region restricted games are being played.
kmfrk 14y ago
I'm not sure about this with Windows, frankly. "Something else" is not as obvious and accessible the same way one movie or videogame is over the other. I remember getting burnt badly trying to install ... Mandrake was it ... back in the days.
shocks 14y ago
iirc, Microsoft originally uploaded Office to places it could be easily pirated to help it spread and take over the market. It worked.
reidrac 14y ago
Definitely, but I think is just Microsoft investing in their ecosystem. 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).
- takeda64 14y ago
  I agree with you about the last thing somewhat, but not entirely. While RedHat benefits from people switching from CentOS to RHEL, it's not illegal to run CentOS, and the other direction is also available. 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.
  - reidrac 14y ago
    I know it's not illegal, I didn't say that at all. I said it's the same strategy. Although a customer that can move from RHEL to CentOS can be seen as a problem, I think it's just an investment. 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.
- sliverstorm 14y ago
  There are avenues to acquire Office inexpensively. * 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.

wting 14y ago

"Although about 3 million computers get sold every year in China, people don't pay for the software. Someday they will, though. 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." -- Bill Gates during speech at University of Washington http://articles.latimes.com/2006/apr/09/business/fi-micropiracy9 http://articles.latimes.com/2006/apr/09/business/fi-micropir...

jfoster 14y ago
It's similar to many startups. Free initially to ensure growth, but always with eventual monetization in mind.
ChuckMcM 14y ago
Sadly that didn't stop them from claiming that piracy was a $1.5B$ problem because the retail price of Office was $495. Even though even a child would tell you that no sane individual would spend more than 1/2 their annual salary to buy a copy of a buggy, but ubiquitous, set of tools. In fact they were willing to pay $2 for a pirated CD on the streets so the actual "loss to piracy" was $6M ($2 per each of those 3M machines) but that sounds so much less of an actual problem.
- ciniglio 14y ago
  So, by this logic, BitTorrent piracy is a $0 problem? Doesn't sound right to me. Not that I'm really pushing the $495 figure either, mind you.
  - huggah 14y ago
    If people were selling copies on the street for $2, that suggests that $2 was roughly the right price point (in that area) to maximize profit, and Microsoft couldn't have made more money by selling it for more. 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).
    - ChuckMcM 14y ago
      See previous response, Microsoft actually did change their pricing and captured a huge chunk of value. It was significantly higher than $2/CD. When selling information there is a tail, a few people will pay whatever you ask, a few more will pay less than that, Etc, until you get to all of the people who would obtain a copy if it were zero cost. That defines the "value curve" of the information. It is not a straight line. Because it is "hard" to justify large differences in price for the same product, one of two strategies are used a "steadily decreasing price" or a "fixed but relatively low price". Depending on the product different things make more sense. Games for example benefit from the 'expensive at first but cheaper later' model, reference works benefit by capturing as much market as possible quickly.
  - ChuckMcM 14y ago
    Actually yes, well actually approaching zero, and I realize it doesn't sound right. The cognitive dissonance comes from the economics of information, they work differently than the economics of goods. 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-discount-idUSPEK1362420080923 http://www.reuters.com/article/2008/09/23/microsoft-china-di... [2] http://gigaom.com/2011/05/17/netflix-p2p-traffic/ http://gigaom.com/2011/05/17/netflix-p2p-traffic/
    - napoleond 14y ago
      This is really interesting, thank you. Could you recommend any good books about the economics of information as you've described it here?
mappu 14y ago
"Number two market share goes to Windows pirated, or unlicensed ... That's a competitor that's tough to beat, they've got a good price and a heck of a product, but we're working on it." -- Steve Ballmer, 2009 http://www.osnews.com/story/21035 http://www.osnews.com/story/21035
- ihaveajob 14y ago
  Another quote by Ballmer, heard in person a couple of weeks ago: "In Russia, we have a great market share, but a bit of a problem collecting".

eli 14y ago

Though it'd be better still if they paid something. Microsoft offers special low-cost editions of their products for developing nations, don't they?

markokocic 14y ago
No, they don't. I even remember that the prices for legal Microsoft software in one of those "developing nations" were higher than prices in the USA. 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.
- jiggy2011 14y ago
  Wouldn't the issue be that if they sold Windows for say $10 in china that westerners could just import it for $10 + shipping and then install language packs once they had it?
  - galadriel 14y ago
    There are usually region restricted DRM trying to stop this from happening. For example, a lot of digital distribution gaming companies (like Steam) have cheaper prices of games in Russia compared to US. So there are all kinds of websites that will sell a Russian key and Russian proxy service so that one can get game for cheap. OTOH, the distributors try to monitor and keep disabling accounts if they find that region restricted games are being played.

kmfrk 14y ago

I'm not sure about this with Windows, frankly. "Something else" is not as obvious and accessible the same way one movie or videogame is over the other. I remember getting burnt badly trying to install ... Mandrake was it ... back in the days.

shocks 14y ago

iirc, Microsoft originally uploaded Office to places it could be easily pirated to help it spread and take over the market. It worked.

reidrac 14y ago

Definitely, but I think is just Microsoft investing in their ecosystem. 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).

takeda64 14y ago
I agree with you about the last thing somewhat, but not entirely. While RedHat benefits from people switching from CentOS to RHEL, it's not illegal to run CentOS, and the other direction is also available. 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.
- reidrac 14y ago
  I know it's not illegal, I didn't say that at all. I said it's the same strategy. Although a customer that can move from RHEL to CentOS can be seen as a problem, I think it's just an investment. 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.
sliverstorm 14y ago
There are avenues to acquire Office inexpensively. * 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.