Software piracy - unauthorized use or reproduction of copyrighted patented material
Software piracy is a growing concern for the modern society. It was an issue since the very first day commercial software hit the shelves. Initially it was spread within friends and/or communities via cassette tapes or floppy disks. With the development of the Internet, software piracy has spread exponentially. The phenomenon, in its current form, was not considered a serious problem until the early 1990s. Since them, there are a series of worldwide organizations that deal with software piracy. Mainly Software Publishers Association, Business Software Alliance, Recording Industry Association of America (RIAA), the Motion Picture Association of America (MPAA), as well as American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Incorporated (BMI).
Software piracy impact needs to be judged depending on various factors, such as living standards and geographical zones. Arguably, the industry may benefit from the software piracy process, which is not that bad as they present it, and it represents a good way to test the products a company develops, it leads to increased awareness and contributes to the popularity of various software development companies and, in the long run, results in increased profits for both parties.
A little bit of history
From the cruel and fearless pirates of the seas who attacked empire ships, to the next door neighbour who just gave you a copy of that music CD that drives you crazy, piracy of different kinds exists for a very long time. Software piracy started to develop about the same time as the appearance of personal computers and, in the beginning was not profit oriented. In the early ages of the computers and software there was no specific idea about how and where to fit them, thus there was no protection whatsoever. But things changed with the adoption of the Computer Software Act of 1980 which categorized software as a literary work. From that point on, even the simple act of sharing any piece of software for informational and educational purposes, is considered illegal.
In his book “Hackers, Heroes of the Computer Revolution”, Steven Levy describes the development of computing and software. There is a part dedicated to the Homebrew Computer Club which gathered computer enthusiasts from all over the US to share ideas, schemes, computer parts and all sort of software. The majority of them became big names in the industry (e.g. Steve Wozniak and wonderful Apple computer that he build using information obtained from various members of the above-mentioned club). They all believed in the freedom of information and without it lots of today’s core technologies would not have been at the same level.
Economics, geography and numbers
Software piracy, as a worldwide phenomenon, tends to follow a certain pattern emerged from the geographical and social position of different countries.
An annual study by Business Software Alliance (BSA), one of the leading organizations monitoring and fighting against software piracy, shows a clear mapping of piracy to geopolitical position. The study shows that although the piracy rates decreased in 37 countries, they increased in other 34. A fast examination of the graphs provided in the study (see Appendix) will reveal that the highest rates of piracy (up to 66% in Latin America and 61% in the non-EU Europe) occur in underdeveloped or developing countries, as opposed to much lower rates in economically stable regions.
The way I see it, underdeveloped or developing countries face unstable economy and political processes. The wages and salaries are low, thus the average income per capita is low and, a lot of times, below the minimum consumption basket.
Given the fact that a lot of essential software like Microsoft Windows ®, Office, Visual Studio, Adobe Photoshop, Macromedia Dreamweaver/Flash and so on, cost somewhere between $29.99 and thousands of dollars per copy, it doesn’t take a lot to understand the time and effort needed for the people of those countries to earn the money for a legal copy. For example, in Moldova the average salary is approximately $110.1 while a copy of Windows XP Pro OEM is approximately $135. In this case, using pirated software not only reduces unnecessary expenses, but it also represents the optimal way to reach the greatest happiness.
Using the same approach, one can see that developed countries with decent living standards and a proper functioning system, have continuously decreasing rates of piracy. Continuing the idea, a pirated software user from a developing country, who uses the product and is happy about it, in the moment of having sufficient funds to sustain his living or when moving to a more developed country, will tend to go with the flow and buy a copy of that same software he or she previously had. The best example I can provide to support my theory is… myself. After playing and enjoying StarCraft and Half-Life 2, the two great classics of the gaming industry, this summer, having the funds and the opportunity, I bought legal copies of the games. Yet, lots of other software that I use day by day, is simply illegal only because I cannot afford to buy it, pay for my tuition and live at the same time.
Following my example, which in essence is not unique at all, users of illegal software can contribute in the long-run to the increase in profits of one or another software company.
Us..
From the point of the illegal user, especially in South-Eastern Europe, I can argue that by massive usage of the software, we contribute to its perfection. “How can that be?” one may wonder. The answer is pretty simple. A big part of the illegal users are people highly skilled in various related areas (as in software development, hardware and so on). This implies a high intellectual coefficient and flexible abilities. Taking this in consideration, along with a massive spread of a certain software, the probability of discovering various imperfections and loopholes increases dramatically. Once discovered, any bug or imperfection is usually spread by word of mouth or via various forums and, in the end, reaches the developer who can address the problem.
Another facet of illegal software users would be the hackers and crackers, who by breaking the law and any possible means of protection, discover and reveal the above mentioned various types of possible errors.
Of course, there always exists the option of open-source software. But this means two learning curves for two pieces of software which can be pretty similar (e.g. Commercial software at work and open-source software at home).
Nonetheless, as a software developer, I would only benefit from using both open-source software and commercial software to improve my skills, thus develop better products. In that sense, I may be using illegal copies of Windows and Visual Studio to develop open-source applications for others to benefit from.
As a result, everybody gets to benefit and reach the greatest happiness – me, by using illegal software; the software company by receiving feedback and test results for its products, plus an increased network of users; and the normal users who, by having legal copies, may receive updates and corrections for the product, enriching his or her experience.
.. and Them
Software is characterized by three effects, as described by Toomas Hinnosaar in ‘Kroon & Economy’, No.3, 2003. They are:
- Increasing returns to scale on the supply side – a large initial investment has to be made to develop the product while its marginal cost, ie the cost per each new copy, is in effect close to zero;
- Increasing returns to scale on the demand side for all consumers – network effect;
- Increasing returns to scale on the demand side for one consumer, which is created due to very high switching costs.
Software piracy has a direct and indirect impact on software companies. On one hand, the existence of pirated software leads to a somewhat smaller demand for the product. On the other hand, the demand for the software and its popularity depends greatly on the number of users of that software, which is greatly increased by illegal users. Thus more users (including the illegal ones) expand the area of software usage and with that, the demand which in the end results in increased profit for the producer.
An interesting effect observed by Hinnosaar is that in the case of several competing software companies, the one tolerating piracy ends up with a larger network of users than those who do not allow piracy.
Also, to support this argument, there comes Chris Anderson’s (editor-in-chief of Wired Magazine) article “Just Enough Piracy” 3, zero-percent piracy is not only unattainable – it’s economically suboptimal. He is giving the example of a former Microsoft manager who revealed that after lots of analysis, Microsoft had “realized that some piracy is not only inevitable, but could actually be economically optimal.“
Imagine a company being heavily pirated. They can then easily start raising prices, motivating this by heavy research for protection schemes and other R&D. By raising prices, the company then aims to high and middle layer of the market, leaving the lower level open for the pirates. By this, it increases the number of people using the software, thus raising awareness and dependency on the product. Next, in the case of economic improvements, using marketing moves, the company can lower its prices a bit and gain a share of the illegal users market. Which, of course, leads to increases in sales and profits for the company.
Conclusion
Software piracy is an extremely controversial topic having two opposing sides, each being right or wrong to some extent. In this paper, I tried to justify software piracy from the point of view of a person who did both (use illegal and legal software) and, in the process of the research, I found enough reasons economic and moral to justify software piracy. Even huge companies like Microsoft believe piracy can only help them.
Yet, every person has the right to question this and decide for themselves whether software piracy is legal or not, moral or not. And it remains everyone’s sole responsibility to use it.
[Sources]
- http://scers.md/view.php?id=553
- http://www.microsoft.com/windowsxp/home/howtobuy/pricing.mspx
- http://www.thelongtail.com/the_long_tail/2005/08/just_enough_pir.html
- http://www.ifpi.org/site-content/press/20060404c.html
- http://www.aplus.co.yu/trends-rants/product-activation/
- http://www.eestipank.info/jump?objId=388497
- http://www.infoworld.com/articles/hn/xml/02/06/10/020610hnopensource.html
- http://www.bsa.org/globalstudy
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