Microsoft to modify Windows Genuine Advantage anti-piracy scheme

Microsoft is making changes to its Windows Genuine Advantage (WGA) anti-piracy strategy via a couple of modifications it will implement in Vista Service Pack (SP) 1 and Windows Server 2008 next year.

Microsoft is doing away with "reduced functionality mode" for individuals that its WGA activation and validation scheme deems to be running "non-genuine" software. The company also is plugging two WGA loopholes that pirates have been exploiting successfully.

Microsoft is attributing the changes it is making to "feedback from customers and partners."

Microsoft announced plans for its WGA changes on December 4. The Release Candidate build of Windows Vista that is expected to go to testers before the end of this week will not include the changes. But Microsoft will introduce the changes to future test builds of Windows SP 1 before the final version is released in the first quarter of 2008. Ditto with Windows Server 2008 -- the current Windows Server 2008 test builds do not include the WGA changes, but some future builds will. Windows Server 2008 is slated to be released to manufacturing in early 2008.

Microsoft is disabling two of the most common venues via which partners attack Windows Vista and Windows Server 2008: the "OEM BIOS exploit," which involves pirates modifying system files on OEM-pre-installed copies of Vista, as well as and the "Grace Timer exploit," via which pirates reset the "grace time" limit between installation and activation.

At the same time, instead of punishing customers whose copies of Windows are deemed pirated by automatically degrading their functionality, Microsoft is taking a new tack: It will deliver to potential piracy victims "clear and prominent notices about the status of their system and how to get genuine," according to a Microsoft press statement. "(users) won't lose access to functionality or features, but it will be very clear to them that their copy of Window Vista is not genuine and they need to take action." (Microsoft officials said they didn't have a screen shot to share of the new notification system for WGA.)

So what do Microsoft watchers think of these changes?

"I like where (the) WGA (team) is taking it. It's a kind of zen-like compromise," said Roger Kay, President of Endpoint Technologies Associates. "The black screen and continuous notices are annoying enough to get all but the hardcore thieves to true up, and yet Microsoft isn't really taking any overtly draconian measures to enforce its IP. It's as if Solomon divided the baby perfectly down the middle. The company will still use advanced engineering to find the hacks, but is taking a gentler, but probably more effective, approach to enforcement."

Chris Swenson, Director of Software Industry Analysis with the NPD Group, concurred:

"I think the changes are meaningful. I think this shows that Microsoft has learned from the past product activation mistakes of, say, Intuit, and has taken a somewhat 'softer' approach when dealing with potential victims of piracy."

Microsoft also announced two new data points, regarding WGA, this week. First, Microsoft reminded company watchers that five percent of its growth in Windows client during its most recent fiscal quarter is attributable directly to fighting piracy via WGA. Said Endpoint's Kay:

"The big news in that announcement is how much money WGA is contributing to the bottom line. Microsoft's theory is, if piracy is 35 percent overall, but only 10 percent of pirates are hardcore, then it can increase its revenue by, say, 40 percent just by herding in the errant, but not evil, users. It can leave the nasty guys for another day."

The other big claim -- which Microsoft has yet to substantiate via an independent third-party researcher (but which it has unearthed on its own): Vista's piracy rate so far is half of Windows XP's.

"Given the impact that this is going to have on Microsoft's top line -- Microsoft believes that WGA and other efforts have translated into OEM sales that are outpacing overall PC sales growth - I think the Wall treet is going to start paying attention, Swenson said.

What's your take on Microsoft's planned changes? Substantial? Cosmetic? A good start with lots more needed to make WGA more palatable?