Will cracking down on piracy boost Microsoft's profits?

Will cracking down on piracy boost Microsoft's profits?

Summary: Last week Microsoft CEO Steve Ballmer told Wall Street analysts that "piracy reduction can be a source of Windows revenue growth." Can it?

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TOPICS: Windows
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Last week Microsoft CEO Steve Ballmer told Wall Street analysts that "piracy reduction can be a source of Windows revenue growth."  Can it?

There’s a certain logic to Ballmer’s statement.  Pull the plug on a pirated copy of Windows and that person then goes out and buys a license.  Multiply that by millions and that’s a lot of extra cash in the pot for Microsoft.  In fact, this technique has already worked for some companies.  Here’s an excerpt from a recent post by Brian Krebs of the Washington Post:

Earlier this month while out at the RSA Security conference in San Francisco, I had the opportunity to sit down with Eugene Kaspersky, head of anti-virus research at Kaspersky Lab. He told me a very interesting story about how an anti-piracy effort at Kaspersky netted the company a huge windfall in sales.

The company was seeing millions and millions of computers running pirated copies of its software, most of them in the Asia Pacific region and in Eastern Europe. The problem with multiple users running anti-virus software with the same license key, Kaspersky said, is that it is sometimes unclear which user is the legitimate one. So the company decided to cut off updates to just the top two most-used, pirated Kaspersky Anti-Virus license keys. In so doing, it shut off updates to more than 3.5 million computers. At $50 per license, the company had just cut off $175 million worth of software freeloaders.

Amazingly enough, Kaspersky's move paid off handsomely: many of those freeloaders decided it was time to legitimately purchase the software they'd been stealing.

[poll id=90]

But I’m not so sure that the same trick will work with Windows.  First, there’s a huge price difference between an anti-virus program and Windows.  $50 is a long way off the price of a copy of Windows Vista. 

Another problem for Microsoft is that it no longer exists in a world without competition.  Anyone can easily find and download a free operating system.  A pirate who’s not made an investment in Windows can walk away from it as soon as WGA kicks in and make the leap to a different platform.  While I’m sure that there will be a certain percentage of people using pirated copies of Windows who will then choose to pay for it, I think that this would be the exception and not the rule.

What steps would be acceptable for Microsoft to take to protect their intellectual property? 

Topic: Windows

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4 comments
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  • You know what will REALLY increase their profits?

    Better software.
    Michael Kelly
  • Stare Decisis

    [i]What steps would be acceptable for Microsoft to take to protect their intellectual property?[/i]

    Given that courts have already upheld click-wrap licenses such as Microsoft's EULA to be binding, MS is pretty much on solid ground with anything they do as long as it's covered by the EULA.

    In other words, MS could sign each installed image with a unique key and only activate that key once, and only in conjunction with a unique Fritz chip. Attempts at reuse with any other Fritz would fail.

    The license is only good for the computer that it was sold on anyway, so they'd be on safe legal ground. Yes, motherboard failures would require the user to purchase a new license. That falls under "additional revenue" anyway, which is a beneficial side effect.

    This approach wouldn't have a measurable sales downside because every OEM would still pay MS for each unit out the door and a good bit besides to get to the next volume tier.

    Even aside from the point that all we have is speculation, as opposed to Ballmer's hard facts, I strongly suspect that he's right.
    Yagotta B. Kidding
    • Re: Stare Decisis

      [i]Given that courts have already upheld click-wrap licenses such as Microsoft's EULA to be binding, MS is pretty much on solid ground with anything they do as long as it's covered by the EULA.[/i]

      The courts still frown on self-help, or taking the law into your own hands if another party breaches a contract. I would say kill switches and WGA reduced functionality mode fall under self-help.

      They frown on self-help because it means one party is unilaterally deciding a contract has been breached which really should be the determination of a court.

      If the user feels MS has violated the contract he's got to take it to court in Redmond and prevail. If MS feels the user violated to contract then MS acts like it's the court.

      I don't think a court has ever upheld that.




      :)
      none none
  • Of course it will

    It only stands to reason, whether you, me or anyone else likes it or not. Maybe not to the extent that MS would ultimately hope for, but something is better than nothing -- and "something" is precisely what they're going after.

    If Vista can truly detect "cracks" to its core, and shut itself down (or into reduced mode) time and again with successful persistence, the game will be up for most pirates. The bigger shame is that Redmond has cornered the market so successfully with their swiss cheese brick, the hapless rats caught in the maze now have little choice but to 'ante-up' their precious keep to meet their ridiculous OS prices, or jump ship to Linux or Mac. Needless to say, many won't be prepared to handle that large a curve, and will duly fork over their coins and plastic IOUs.

    I may not like any of these restrictive measures as they snake into ever murkier waters but that matters not one iota to Micro$oft, which is in business to make as much money as possible any way they can. In that regard, ANY curb on piracy equates to dividends rolling directly into their already oversized pockets, from at least a percentage of present-day deadbeats and resisters.
    klumper