Charles Piller of the Los Angeles Times reports the novel theory that software piracy in developing nations may actually be good for Microsoft:
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.
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.
The gist of the beneficial piracy argument is that the retail price Microsoft charges for signature products such as Windows and Office — as much as $669, depending on the version — can rival the average annual household income in some developing countries. So the vast majority of those users opt for pirated versions.
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.
A variety of folks of the academic persuasion and even Bill Gates (referring to the Peoples Republic of China) are quoted in support of the theory as well as a few statistics:
Even Vietnam, which at more than 90% has the highest piracy rate in the world, has improved from 100% in 1994. The No. 1 software firm in Vietnam: Microsoft.
Actually the No. 1 software firm in Vietnam must be the pirates, but I digress. There’s much more to the article, but the implication is that Microsoft, unlike the music industry, isn’t doing all it could to eliminate piracy for fear of open source software and because they are intentionally pushing a more nuanced approach in hopes that the Third World locals eventually get converted into paying customers. I’m not sure how well that works with confirmed anticapitalists like Venezuela’s Hugo Chavez, but maybe there’s a play with the state sponsored capitalists in China. It sure gives a different perspective to the announcements from last week:
TCL and Microsoft Join Hands to Promote Intellectual Property Protection in China
TCL Group, one of the leading PC manufacturers in China, today signed a genuine Windows® cooperative engagement agreement with Microsoft Corp. According to the agreement, the two companies are committed to working together to promote the use of validly licensed versions of Microsoft® software products on TCL-branded personal computer products for the Chinese market through joint marketing and other engagement. The agreement will help enhance the use of genuine software, and the respect for and protection of intellectual property in China.
“Starting in June, TCL will pre-install genuine Windows software on all its PC product lines and plans to purchase licenses of Windows worth $60 million for the coming three years,” said Yang Weiqiang, vice president of TCL Group. “TCL is committed to intellectual property rights protection because we understand our customers can benefit from higher quality, security, reliability, product support and a better user experience by using genuine software.”
Tsinghua Tongfang Co. Ltd., China’s third largest PC manufacturer, today signed a genuine Windows® cooperative engagement agreement with Microsoft Corp. According to the agreement, the two companies are committed to working together to promote the use of validly licensed versions of Microsoft® software products on Tongfang-branded personal computer products for the Chinese market through joint marketing and other engagement. The agreement will help enhance the use of genuine software, and the respect for and protection of intellectual property.
“Tongfang intends to purchase licenses of Windows worth $120 million in the next three years for the Chinese market,” Rong said. “The pre-installation of Windows genuine software is not only good for Microsoft’s business, but for Tongfang’s as well by enhancing our branding and overall business development.”
I suppose it’s impolite to ask what the business relationship was before these agreements were signed.