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Software Piracy as Price Control

Software Piracy as Price Control is a school of thought that says that Software Piracy in moderation is a good thing, as it keeps prices down by providing a rival product (i.e. a pirated copy) to compete with the official version provided by the software company in question.

Given that every piece of software is unique (e.g. you wouldn't want a game that was roughly like Tomb Raider - you would want Tomb Raider itself) it could be the case that each piece of software is a Monopoly, as the only method of getting the game is buying it from the publisher - apart from Software Piracy. Piracy therefore prevents a monopoly and hence stops software publishers from charging too much for their software.

There is evidence to back up this school of thought:

  1. Back in the early 90s, the game Street Fighter 2 was released on the SNES, a fairly unpiratable format, for 65 (an unimaginable price by today's standards). No cartridge manufacturing prices (and certainly not before 10 years of inflation) could account for this cost.
  2. Early in 2003, the game Metal Gear Solid 2:Substance was released for the PC, XBox and Playstation 2. On the XBox and Playstation 2, where games are not yet easily piratable, the cost of the game is 40. On the PC, where the game can easily be pirated, it is 30.
  3. In July 2003, Tomb Raider: Angel of Darkness was released for the PC and Playstation 2. On Playstation 2, still fairly unpiratable as of July 2003, the game costs 40. On the PC, just as easily piratable in July 2003, it costs 30. The extra costs involved in producing the Playstation 2 version (programmers who can program efficiently in the console's more difficult architecture and Sony's licensing fees for producing copies of the game) do not amount to an extra 10, plus there are some things that appear or are needed on the PC version of the game (for example the installer) which weren't needed or implemented in the Playstation 2 version.
  4. In December 2003, XIII was released for the PC, Playstation 2 and XBox. The piratability of each platform remains as above, and the PC version costs 35, whereas the two console versions each cost 40.

However, when a piece of software is not by its nature unique (such as an Office suite application like Microsoft Office) piracy may be keeping prices high, as it inhibits take up of free software (in this case, OpenOffice or KOffice) because people will use pirate copies of proprietary software instead of free alternatives, meaning that the seller of the proprietary software can charge more to the customers, safe in the knowledge that their software is so widely used that the paying customers need to buy it.