This morning, Jeff Atwood wrote a blog post about software piracy entitled My Software Is Being Pirated where he talks about how companies can deal with the fact that the piracy rate among their users could be as high as 90%. He writes

Short of ..

  1. selling custom hardware that is required to run your software, like the Playstation 3 or Wii
  2. writing a completely server-side application like World of Warcraft or Mint

.. you have no recourse. Software piracy is a fact of life, and there's very little you can do about it. The more DRM and anti-piracy devices you pile on, the more likely you are to harm and alienate your paying customers. Use a common third party protection system and it'll probably be cracked along with all the other customers of that system. Nobody wants to leave the front door to their house open, of course, but you should err on the side of simple protection whenever possible. Bear in mind that a certain percentage of the audience simply can't be reached; they'll never pay for your software at any price. Don't penalize the honest people to punish the incorrigible. As my friend Nathan Bowers so aptly noted:

Every time DRM prevents legitimate playback, a pirate gets his wings.

In fact, the most effective anti-piracy software development strategy is the simplest one of all:

  1. Have a great freaking product.
  2. Charge a fair price for it.

(Or, more radically, choose an open source business model where piracy is no longer a problem but a benefit -- the world's most efficient and viral software distribution network. But that's a topic for a very different blog post.)

It is interesting to note that Jeff's recommendation for an effective anti-piracy solution is actually contradicted by the example game from his post; World of Goo. The game is an excellent product and is available for ~$15 yet it is still seeing a 90% piracy rate. In fact, the most effective anti-piracy strategy is simply to route around the problem as Jeff originally stated. Specifically

  • target custom hardware platforms such as the iPhone or XBox 360 which don't have a piracy problem
  • build Web-based software

However if you do decide to go down the shrinkwrapped software route, I'd suggest casting a critical eye on any claims that highlight the benefits of the "Open Source business model" to shrinkwrapped software developers. Open Source software companies have been around for over a decade (e.g. RedHat was founded in 1995) and we now have experience as an industry with regards to what works and what doesn't work as a business model for Open Source software.

There are basically three business models for companies that make money from Open Source software, they are

  1. Selling support, consulting and related services for the "free" software (aka the professional open source business model ) – RedHat
  2. Dual license the code and then sell traditional software licenses to enterprise customers who are scared of the GPL – MySQL AB
  3. Build a proprietary Web application powered by Open Source software – Google

As you scan this list, it should be clear that none of these business models actually involves making money directly from selling only the software. This is problematic for developers of shrinkwrapped, consumer software such as games because none of the aforementioned business models actually works well for them.

For developers of shrinkwrapped software, Open Source only turns piracy from a problem into a benefit if you're willing to forego building consumer software and you have software that is either too complicated to use without handholding OR you can scare a large percentage of your customers into buying traditional software licenses by using the GPL instead of the BSDL.

Either way, the developers of World of Goo are still screwed. Sad

Note Now Playing: The Notorious B.I.G. - Mo Money Mo Problems (feat. Mase & Puff Daddy) Note


Saturday, December 27, 2008 5:35:00 PM (GMT Standard Time, UTC+00:00)
Not screwed, there will just be piracy as well. Hopefully the World of Goo guys are making a comfortable living from selling their software.

One way of reducing the problem of piracy, but still sell shrinkwrapped software, is to increase the benefits of paid registration - without having to alienate and antagonise those who do pay for your software.

Support, online advantages (perhaps a web app that allows remote administration of your app but only to those who register), and so on. This requires imagination.

Of course piracy only becomes a real problem once you reach a certain size - people don't bother to pirate what they haven't heard of. In some senses rampant piracy is a sign of success, and how much money you are already making...
Saturday, December 27, 2008 6:03:04 PM (GMT Standard Time, UTC+00:00)
The 90% piracy figure is 100% bogus. It's impossible to know how many people pirate software. It's in the interest of commercial software companies to inflate these numbers to support various public policy initiatives and litigiousness.

It's also impossible to know how many people who pirate software would have done without the software if they were somehow forced to pay for it. If millions of people pirate my software, does that mean I just lost a billion dollars? Of course not.
Saturday, December 27, 2008 11:39:32 PM (GMT Standard Time, UTC+00:00)
I'd put money on it that Jeff just wrote that to stop all the linux/google/open source fanboys taking over his blog with hundreds of comments to just do it open source - without providing anything of a model for business that way.

I've seen posts of his like when he mentioned he had troubles with wordpress on a Windows environment, where he specifically stated in the post that he wanted WP, and he wanted Windows - and the comments were thousands of "use linux instead!", or "use X blog engine instead!"

I totally agree with your point though.
Sunday, December 28, 2008 12:58:01 AM (GMT Standard Time, UTC+00:00)
"There are basically three business models..."

The Magic Cauldron lists 7 indirect sale-value business models for open-source. What about Intel? What about Apple? What about O'Reilly? What about idSoftware? What about Zope, or Aladdin? All of these companies are making good money with open-source, and each in a unique way.

In fact, virtually all of the top software companies are releasing open-source software all the time. In 10 years it's gone from being "a cancer" to being an integral part of a business strategy. What's the biggest software company you can think of that *doesn't* release any open-source software?
not esr
Sunday, December 28, 2008 2:33:48 AM (GMT Standard Time, UTC+00:00)
not esr,
I explicitly didn't count non-software companies in the business model list since that is even further removed from the original discussion (i.e. that O'Reilly can make money writing instructional books about proprietary or Open Source software seems neither here nor there relative to the current discussion).

However there are software related business models I didn't cover like using Open Soure for some parts and keeping your differentiated bits proprietary (Apple) or building a service where the software is useless without a subscription (Tivo).
Sunday, December 28, 2008 11:33:52 AM (GMT Standard Time, UTC+00:00)
I find it interesting that building a "Web Based" application should be suggested as an effective option.

The reason being, i recently saw what could be constituted as a pirated web app. Basically, someone had directly copied the HTML & JavaScript from a certain popular web-based application, tweaked the layout a bit, and re-writ the backend. As far as a know, they were pretty much going to sell it as their own service.

Sure, the costs may be higher. But if they can pull it off and get some customers they can get a nice monthly income, for a fraction of the cost paid to develop the real app.
Sunday, December 28, 2008 10:44:10 PM (GMT Standard Time, UTC+00:00)
From what I understand 90% piracy rate is pretty much the same as everyone else so they're no worse off than anyone else.
Monday, December 29, 2008 12:51:59 AM (GMT Standard Time, UTC+00:00)
Open source advocates: "In the open source model, developers make money off of services instead of the software itself."

You: "Look, none of these open source business models involve selling the software directly! The open source model is a myth!"

Joseph Garvin
Monday, December 29, 2008 3:32:37 PM (GMT Standard Time, UTC+00:00)
There are plenty of hacked iPhones, Wiis, XBox 360s out there that play pirated software. Just check out the major P2P sites. So, even the hardware route isn't safe. Web based services are definitely something that are hard to pirate (but not impossible), so if your business can go that route, it is something to consider.

I've spent the last year deep in the peer to peer world.
Tuesday, December 30, 2008 1:42:36 PM (GMT Standard Time, UTC+00:00)
I think you missed a business model. Business Model 4 would be distribute the software for free, without commercial support contracts or any option for commercial licensing, but have that software employ an online service in rev-share deal - for example Mozilla Foundation's Firefox. They make a healthy living this way courtesy of the search functionality being a revenue share deal with Google.
Tuesday, December 30, 2008 9:34:24 PM (GMT Standard Time, UTC+00:00)
I think, there so much business models, please don't believe at only ONE. You need several Models to get success in the internet and earn static money...
Happy New Year
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