Beating piracy

The case for cheaper ‘knowledge goods’

Here’s a letter that appeared in today’s Straits Times. It makes a very neat argument for MNCs to drop their one-price-fits-all policy when selling their software, drugs or music in the developing world.

Beat piracy with cheaper software

I REFER to the article, ‘Illegal: 43% of software in PCs here are pirated copies’ (ST, July 8).

Piracy stunts the growth of the software industry and leads to lower-quality releases and fewer new programs. If software piracy were eradicated, more jobs would be created and prospects for wealth creation improved.

Except that the situation is not that simple. There’s no arguing against the fact that a lot of people, here and abroad, are using software they haven’t paid for.

Obviously, the software industry would make a lot more money if all those people handed software vendors the full retail price. Statistics about ‘lost’ revenues arising from piracy seem to be based on the assumption that if people couldn’t, or just didn’t, pirate the software, they would turn around and buy it from a legitimate source. This assumption is flawed.

The countries in which piracy is most rampant – Vietnam and China, for example – also happen to be poor. Does one really think that if the average computer user in these countries couldn’t get his hands on a pirated copy of a certain software, he would turn around and drop a year’s wages to buy one? More likely, he would just have to find a way to do without it.

It must, however, be stressed that software piracy is neither acceptable nor justified. Put simply, we live in a capitalist society where goods and services are exchanged for cold, hard cash. If a product is beyond your means, then it is beyond your means and you don’t have any ownership rights over it.

The real issue is that the one-size-fits-all pricing model of the software industry makes legitimate software simply too expensive for most. That is why pirated software is so popular in the developing world. And, not coincidental-ly, it’s also why open-source software is gaining popularity in these parts. It is heartening to note that software companies are beginning to see the value of cutting a deal for people in emerging econo-mies who want their software but can’t pay top dollar. Getting people to use their products has long-term bene-fits, even if they have to practically give them away for a while.

Take, for example, the costly drugs created to fight Aids. Expensive to develop but cheap to make, they are sold at premium prices in rich countries. But poor countries couldn’t afford them, so their citizens died.

Now the international community is rightly getting the drug companies to make these products available in developing nations at low prices. And enlightened drug companies are going along, partly for humanitarian reasons, but mainly because they realised they were never going to get the full retail price from these impoverished Central African nations – no matter how desperate the Aids victims were.

Let’s hope the software industry will see the economic benefit of following suit.

ALVIN HARVEY KAM SIEW WAH (DR)      [Straits Times]

3 thoughts on “Beating piracy”

  1. I disagree. The problem is not the price of the software. If you sell cheaper, you still can’t match the 20 RMB price tag. People will still buy such things. The funniest part is that pirates are even pirating low cost Linux distributions and I have seen people buy it.

    Do you think people will stop sharing such CDs?

    What needs to be done is that from an early age, a person has to recognize and respect intellectual property. If your kid picks up a chocolate bar from the supermarket, you will scold him but you are more than happy to rush to nearby pirate shop with your kid. The young kid sees his father/older brother buying pirate stuff; he will grow up thinking there is nothing wrong in it.

  2. The software companies’ problem is globalization + reimportation. Sell Windows for a lower price in one country, and soon the neighboring countries will be buying those copies at the lower cost. That’s why they have one global price.

  3. Preetam,

    The piracy industry has already been created – it will try to sustain itself; even if it means pirating the cheap linux distributions. What got them started in the first place were the high prices that the ‘knowledge’ industry was charging. Its not easy to stop it now.

    You are right about inculcating a respect for intellectual property in the young. But that again has to be tempered with realism: a $1000 software package will remain a distant shrink-wrapped dream if it really cannot be purchased.

    Prices for genuine CDs may not fall as low as those for pirated goods. But the lower it falls, the more it allows people to make a legal purchase.

    The existence of a booming pirated CD industry indicates that the gap between list price and perceived value is immense. As that gap closes, pirates will naturally go out of business. If they do not, enforcement can be exercised with very little impact on consumers.

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