Thursday, December 27, 2007

Piracy is not fair, Neither is Monopoly

Microsoft recently went on an Anti-Piracy drive in Kerala. They have been following a multifaceted policy of learned ignorance, passive warnings and timed & throttled acts of aggression to tackle piracy and to push sales of licenses. I don't condone piracy, neither do I approve monopoly. I would like to explore more on the legality/fairness issues of piracy, monopoly and the relevance of FLOSS in this context.

Let me explain the adjectives used above; Learned ignorance - by allowing piracy to grow in the home user segment and thus use it to open and grow new markets; Passive warnings - by showing funny messages during upgradation or service pack installation; Timed - at reasonably predictable intervals; Throttled - they don't catch everybody.

Developing software is a business. The people employed in the business will have to be paid their due rewards. So software has to be sold and revenues generated from the sales. From this revenue, a share has to be used to pay the salaries, and the rest is rightfully for the owners take. Anybody using a software and not paying for it is effectively denying the right of the producer (the company and its employees) to get a return on their investment(of money and labor). So piracy is not fair. As simple as that.

Piracy is illegal by law in almost all countries. Piracy is equivalent to stealing software and is no different from stealing a bread from a store. Neither can be justified on the basis of the need of the situation. Not only is piracy unfair as discussed above, it is illegal and is not justifiable.

Although I agree theoretically with what is said on simplymalayalees forum, I have reservations about the way the argument is put forward. I run a software company and I agree that people will have to pay for the work done in creating the software. In a normal market when the traded volume of a given product goes up the cost of the product has to come down. It has not happened with Microsoft Windows. The cost has been recovered several times over. What we see here is the effects of the Monopoly Microsoft is enjoying in the market.

Again my opinion is not to legally fight the monopoly or to deny Microsoft the opportunity to make the profit but rather, concerned people should take necessary steps to invigorate the market by introducing alternative options. This is where alternative operating systems like GNU Linux and FreeBSD comes into the picture, and this is precisely what the Linux community is doing.

Microsoft has every right to make a business decision to not reduce the cost of their operating systems below what they are going for currently. If they had perfect competition (in fact any serious competition at all) there wouldn't have been a scenario where they wouldn't have to lower their prices at all. Prices would have been regulated on their own by the free market.

So that must mean that they enjoy some level of monopoly in the market. Microsoft has successfully managed to build their business. They built it so fast and so big that they effectively swamped out all, if any real competition existed, of their competition. Shouldn't they be allowed to reap the rewards of their efforts? Yes. But they should be punished if they had broken any laws of the land along the way.

But monopoly is never good for the market even though it might be very good for the monopolistic company. Monopoly gives the company total control over the prices without any bargaining power for the market. So what should the market do? Demand the monopolistic company to yield to their demands? The market has a much stronger weapon but it has not realized that till now. It is the power of demand. The market has been meekly yielding to the monopoly through cowardly acts of piracy where they promote the monopoly and effectively preventing any kind of competition building up in the market.

So if you feel that Microsoft is manipulating the market and exploiting it using monopoly then rather than complaining, and pirating, you should start using alternative options. As demand builds up for alternatives, companies will spring up to meet this demand and a more vibrant market scenario will appear. Already Linux companies are geared up to take up this challenge, but is the market willing to take the leap?

Gandhiji fought the British East India Company not by raiding their factories or stealing their coffers but by boycotting their products. This is the same strategy that people have to use to revitalize the Operating System market. As a concluding note, if you have the money and you would rather not bear the cost of uncertainty (in the time you have to wait until competition builds up) then you are totally free to go buy your Windows Operating System. Such an act would not be considered an act of cowardice or unfairness


  1. Hi
    You are right. The M$ is like a drug peddling chain where they give the intial sample free and get you hooked. Even I, who is enthusiastic is about GNU platform, am unable to shake off the yoke. The monopoly is really huge and fearsome. It has to be resisted. And your method suggested may be the most effective one.


  2. I was searching for anti-piracy raids and came across this page

    "A recent BSA-IDC study points out the impact of reduction in piracy in India. It states that a reduction from the 70% level in 2002 to 60% by 2006 will add $2 billion to India's economy, increase local industry revenues by around $1.6 billion, generate 48,435 new high-tech, high-wage jobs and generate $92.4 million in tax revenues for the government. The projected IT growth during 2002-06 will stand at 148% if the piracy rate continues at the present level of 70%. However, the 10-percentage point reduction can up that growth to 163%."

    Funny how they came up with the exact number of IT jobs :).
    Also interesting the way they have estimated IT growth if piracy is reduced.
    Here is a brief analysis about the numbers
    Number of PC users ~ 25/1000 Indians = 25Million PCs
    10% decrease in piracy = 2.5 Million PCs
    Cost of (office + xp/vista) licenses = 2.5Million * 16000 = 40 Billion Rupees ~ 1 Billion USD
    For every XP sold only a small percentage of the cost remains in India.
    Let us take the upper limit of the upper limit of this and safely assume that around 30% remains in India. That would leave only 300 Million USD in India.
    For their projections to be true they need another 1.7 Billion USD.
    Again considering the 30% retention that would mean another 5.7 Billion USD in sales.
    So this has to come from their server sales - SQL server, Windows Servers, Exchange servers etc.
    That is ~ 1:6 ratio. So for every rupee an Indian spends on XP/Vista he will have to pay 6 more rupees
    for the server software. In all that is ~100,000 Rupees per PC per head.
    There is no mention of the fact that MS will get a clean 4 Billion USD.
    Also interesting is the fact that they mention only $92.4 million in tax revenues.
    Of the 4 Billion that Microsoft will make they are bound to pay atleast 160 Million USD as taxes at 4% sales tax.
    So what happened to the remaining taxes? :)
    Also the realistic retention percentage would be much less than 30% which would in turn inflate the ration 1:6 to a much smaller value resulting in much more than Rupees 100,000 per PC. So either they have to eat their claim or we have to take this as proof for why GOI should support FLOSS.

  3. DEar Anoop,

    While "Googling for my name (ego trip?) I came across a letter way back in 2001.

    I wrote to "The BUsiness line" in 2001 regarding piracy and my take on the problem which was that pricing of the products to the indian user should be according to the indian market and indians' earning capacity.

    I will just paste below what I wrote in november 2001.

    In defence of the Indian software user

    N.S. Srikanth, Thiruvananthapuram

    Dear Sir,

    This is with regard to ''A pirate's best friend,'' by Kripa Raman in eWorld dated November 14.

    At the outset let me clearly state that I do not in any way endorse software piracy.

    But let us consider a few things. It is no use for software people to complain that the Indian user is not willing to pay even Rs 500 for the software when the average American worker earns 10 to 12 times the salary of the Indian worker of comparable skill sets.

    Recently, a computer magazine carried a report about a person who wanted to buy image-editing software for his son. He found that it cost upward of Rs 40,000. He contacted a friend in the Gulf who bought it there $280 - one-fourth of the Indian price.

    Why do these people have to charge the Indian customer four times the price they charge others when his earning capacity is only 1/12th of that of an American?

    Apple offered its iMac for $1100, but Indian consumers were charged Rs 81,000 for the same configuration. Would you call this fair? Till Linux came along there was no alternative for us other than MS products.

    So let the software people grow up to Indian conditions, unlike the American auto conglomerates who jumped into India thinking about the 300-million-strong middle class, when the middle class, as such, cannot be compared between India and the US in terms of purchasing power and disposable income.

    Even in other areas Indians are short-changed. When I was chatting with a cousin about a year ago, I told him I did not buy a cell-phone because the cheapest handset at that time was Rs 4,000. He told me that the same handset, along with activation charges for three months, was being offered for $45 in Azerbaijan. So why blame Indian users?

    Pl give your comments on it.



  4. I think one reason for such bloated prices (at least in the case of hardware) in those days were because of the exorbitant margins charged by the few vendors on top of the high duties charged by our govt. I think the same applies to software too. I am not sure of the margins earned in the software vending business currently.

  5. piracy is illegal but monopoly ? it is usually control by some gian company..

  6. Monopoly is usually illegal and always unfair :) irrespective of who does it.

  7. I just posted a review of this blog at
    feel free to stop in and check it out.

  8. My main concerns are not with piracy vs monopoly, but practical ones. I finish my studies soon and I would like to set up a small freelance graphic design company. Buying propriety software is not an option, as I would rather save on software and get better hardware.

    The other consideration is I am a music passionate. All the CDs I buy go straight onto my hard drive. Since the music industry has employed dirty tactics like SonyBMG's rootkits and EMI, Universal and Warner's protection software, I took to Linux to protect my privacy and my computer. Haven't had any problems yet.

  9. @Garg I presume you are using - inkscape, blender, gimp, xara xtreme etc.

  10. news:
    'Free software' centre in Kerala

    Thiruvananthapuram (PTI): In accordance with its policy of promoting 'free software' in Kerala, the state cabinet on Wednesday decided in principle to set up an International Standard Study Centre for 'Free Software and Free Knowledge.'