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From: kho@hou2a.UUCP (S.KHO)
Newsgroups: net.micro
Subject: Software Piracy - Marketing Persipective
Message-ID: <326@hou2a.UUCP>
Date: Fri, 13-Apr-84 17:31:35 EST
Article-I.D.: hou2a.326
Posted: Fri Apr 13 17:31:35 1984
Date-Received: Sun, 15-Apr-84 01:27:48 EST
Organization: AT&T Bell Labs, Holmdel NJ
Lines: 99


The Software Piracy problem is basically a marketing problem.
It is caused by the  interplay of various factors such as:
price of the product, market size of the product, product appeal,
market audience profile and alternative available source.

Market audience is the set of people who are interested in the product.
These people can be rich or poor, high self-esteem or low self-esteem
(e.g., like to borrow tools from the neighbor),
ethical or unethical, aware or unaware of alternative source of this
product at a lower price, ...etc.
However, each person posseses a certain level of each characteristics.
The aggregate of these characteristics within a market audience
makes up the market profile.

Without considering the cost, the price of a product can influence and
is usually influenced by the market size, market profile and the
alternative available source.

Take the computer software product.
The price is very high (relative to other software such as music,
video).  The market is therefore small.  However, if we lower the price of
the software product, the question becomes, will the market size grow
enough so that the resulting aggregate revenue is more.  It may not
because there may not have enough machines to run the software.
In other words, how big is the "potential market size."

The potential market size of a product is usually measured by
marketing research.  But in software case, the answer is availalble.
The potential size is very big.  In fact, Ashton-Tate president David Cole
in defending the establishment of a Software Protection Fund claimed
that there are two to ten times more unauthorized disks than
authorized disks in use.
The potential size is bigger than the combined number of authorized and
unauthorize disks usages because there are people appealed to the
software product but didn't make unauthorized usage.

The next question is why within the market audience, there are
people who will make unauthorized copy of disks while there are
people who will not.
This be explained by two facts.
First, there are available alternative sources of the product (which
is copying, rather than clones).
Second, AT CURRENT PRICE LEVEL, the market profile is such that the
majority (ref. Cole's claim) of the market audience appealed to the
software products are "less" ethical, "less" willing to pay stiff
price, "more" aware of the alternative available source, "strongly"
attracted to the product, ...etc. and therefore, resort to copy-right
violations.  At current price level, the "prize", which is the price
of the product minus the costs (tangible and intangible, e.g.
feeling guilty) of unauthorized copying is high as perceived by the
majority of the market audience.

The interplay of the price of product, prize of obtaining the
product from alternate source and personal profile is
just like the $20 bill on the ground example.
The $20 bill is a product. Its price is $20.
The normal way to "buy" $20 is to earn it (the old fashion way.:-)
When it is sitting on the ground, it is your alternate source.
Depending on your profile (i.e., income, ethical value, awareness of
the $20 bill, ...etc.) you may not pick up and keep the $20.
But what if it's a stack of bills worth $200? $2000? $2 million?
At what "price level" will the "prize" more than your "value"?
With respect to economic activities,
people act to maximize their gains.
The "gain" is a total gain of both tangibles (e.g. $2 Million ) and
intangible (e.g., guilt, violation of own ethical value.)

Hence, as the price of software product comes down, lowered relative
to the "ethical value", willing to pay "value", ...etc., more people
will shift from the copy crowd to the non-copy crowd within the
market audience.  Furthermore, others in the market audience 
with high "value" system will enter the market thus increasing the
market size.
The solution to the software piracy problem is therefore to
determine the "right" pricing so that
ideally, the non-copy crowd is so much bigger than the copy-crowd so
that the effect of the copy-crowd activities is negligible like the
phono-record industry.

Again, the right pricing is influenced by the "quality" of your
product market profile!  I think the software industry should spend
money to study the market profile and determine the right pricing.

But who knows?  Perhaps, the software industry already found out that
the software product market audience is such a bunch of crooks that
the software products have to be priced at around $9.99 in order
to move significant number of "copiers" to the non-copy crowd.
If that is true, then I think
the legal actions against the offenders are justified.
Instead of lowering the price of product, the software inducstry is
increasing the cost of alternative source, thus decreasing the value
of the "prize" to a level that there are less
"copiers".  Whether this will increase the number of "non-copiers" is
questionable.


					S. Kho
					hou2a!kho