Microsoft’s Piracy Problem

This week in class we talked about piracy, and whether it is good or bad for society.  Of course, the notion of good or bad is entirely relative; from an economic perspective, it would most certainly be described as a bad thing.  When costs are distributed across the widest platform of consumers, the cost per capita is minimized and consumer surplus is maximized.  When freeloaders join the system, it raises costs for everybody, and even though it seems like a totally victimless crime, other consumers pay the price.

From a societal standpoint, piracy in certain areas seems like an entirely logical solution to systemic problems.  We talked in class about how pirated Microsoft Office is wildly common in Africa, and that small business owners wouldn’t necessarily be able to afford the program, but require it to maintain operations. They are forced into a no-win situation of either buying illegal software or not having a business.  Microsoft is left looking like the bad guy, trying to sell a software package for as much as the annual revenues of said small business.

Microsoft has lost an opportunity to look like a hero here.  They may never regain the lost profits, and software piracy is too easy and too common to fight, especially that far away.  What they should do is give the software away for free, and call it charitable giving.  Microsoft is frequently seen as a villain, and considering the regularity of antitrust law suits, security breaches and complaints about Internet Explorer, they could use good press.  What would be the downside? They aren’t gaining profits from the pirated versions, anyways, and the actual cost of the disc is negligible.  They would be helping to facilitate endogenous growth in impoverished countries (which in the long run may allow them to buy software), they would building relations with growing countries (which would probably lead to the purchases of  more Microsoft products down the line), and most importantly helping their public image.  This is what I would call a “win-win-win.”


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2 Responses to Microsoft’s Piracy Problem

  1. willow says:

    It would be great if Microsoft saw it as an opportunity. Actually, they tried to hire local companies to be Microsoft certified companies. This created a situation where the local companies tried to stop other businesses from using the MS products illegally because it cut into the business. It didn’t work very well though because the people using the MS products illegally (in cybercafes and other businesses) still couldn’t afford the products and the local representatives quickly realized that they wouldn’t make money.

  2. Skylar says:

    You put up a very interesting point here. Actually early this year, Microsoft won its first lawsuit in China over an insurance company which used pirated Windows system. However, the fact is in China, the average price of a cheap laptop is about 3,000 RMB and the price of a legal Windows system is more than 3,000 RMB not included in MS Office which is about 3,000 RMB too. However, according to Chinese people’s philosophy, who will buy software even more expensive than the laptop?! Also, the pirated copy will be 5 RMB each which works well. Everybody knows that piracy is illegal, immoral….. However, I cannot really imagine what Chinese society will be without those illegal copies of software, music, movies, al et. Customers always try to buy something nice and cheap; government always try to stop piracy but actually not effective at all. Now, we leave the solution to the companies, how they can find out a way to satisfy all and benefit themselves, which means “be a hero”.

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