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Apple and Microsoft: a tale of two piracy fighters

A recent interview between Apple founding CEO Steven Jobs and Newsweek editor Steven Levy was most instructive with respect to the differences between Apple and Microsoft when it comes to fighting piracy of music and software.

To be clear on what we are talking about, both Microsoft and Apple have been wildly successful in creating dominant - in Microsoft's case monopolistic - market shares in their respective areas of desktop software and portable music players.

In the case of both companies they have had to contend with the thorny issue of piracy. In many ways, their successful approach has been exactly the same - to turn a blind eye to it.

The Jobs interview, which marked the fifth anniversary of iPod, revealed that the Apple co-founder claims that if you charge the market a price it will accept for music, users will forgo illegal downloads and pay iTunes to download tracks. Jobs is indeed correct when he says this strategy has worked - iTunes has had something like 1.5 billion downloads.

What Jobs didn't say, however, is that the strategy only works up to a point. Of the hundreds and sometimes thousands of tracks that each iPod owner has on his or her player, on average only 20 to 25 were bought through iTunes.

Where did the rest come from? They were ripped from CDs, downloaded from other legal music sites, burned to CDs and then ripped from CDs, downloaded from illegal file sharing music sites - well you get the picture.

The fact is that iTunes is the most convenient way to get music onto your iPod but it is certainly not the only way. Apple knows this all too well.

Yet, with 80% market share or so, Apple has no intention of checking the contents of their iPods for illegal downloads each time they download a new iTunes track. A good way to reduce piracy for Apple would be to stop users from being able to rip tracks off CDs. Apple could reduce it even further by preventing users from burning tracks to CDs. After all, with an iPod that can be plugged into a home or car sound system, who needs CDs?

However, Apple has not done any of these things because the reality is that doing any one of them would put a damper on iPod sales and reduce its market share.

For many years, the situation has been somewhat similar with Microsoft and its Windows operating system. There are some differences however.

One key difference is that Microsoft has more than a dominant marketshare - it's a virtual monopoly. Thus, Microsoft charges what many believe is too much for their product, knowing that most users have no real choice but to pay or to illegally pirate the software.

Unlike the case with Apple, the majority of Microsoft software sitting on users' machines is legitimate. There is, however, a significant minority of pirated Windows copies - particularly in economically challenged regions of the world.

Until recently, Microsoft has turned a blind eye to this piracy, knowing like Apple that sooner or later many pirate users will convert to legitimate users - like for instance the first time they buy a brand name computer. In fact there is a strong argument to say that turning a blind eye to piracy has helped the proliferation of Windows.

We have now reached a point where the strategy of Microsoft is about to deviate from the path that has served it so well. With the release of Vista, Microsoft is about to do two things that could be deemed to be risky plays.

First, Microsoft is going to raise prices to a level that many would consider unacceptable. Second, using its Software Protection Program (SPP), Microsoft is going to scrutinize every single user as if they were a potential pirate and, if it deems that they are, it will disable their machines unless they pay up.

Why are these risky plays?

As far as prices are concerned, Apple CEO Jobs hit the nail on the head when he said, "If you want to stop piracy, the way to stop it is by competing with it, by offering a better product at a fair price." Many would argue that raising Windows to prices as high as hardware in some cases is not a fair price. In the affluent West, most people will pay it but in the second and third worlds, this will be an issue.

One of the reasons Microsoft grew into the most successful IT company of all time, and in the process nearly put Apple out of business, is that it originally offered users a reasonably priced product and the freedom to choose their hardware supplier. As the cost of hardware has dropped, Microsoft has increased its prices to the point where it is no longer reasonably priced.

As far as SPP is concerned, it will certainly stop the pirate users but it will also stop many of them from buying legitimate copies of Windows some time in the future because it will force them to look for free alternatives in the present such as Linux. It will also create bad feeling amongst legitimate users.

We have in the past been criticised by some readers for occasionally basing stories on our own polls. However, we decided to let a poll run for about one week asking the question: Is the Vista Software Protection Program fair to users? Of the 1312 responses, 1033 answered no (78.7%) and 279 answered yes (21.3%).

Admittedly it's hard to tell from polls like this whether the feeling is really that strong among users. However, it goes without saying that many people do not like the prospect of being constantly policed by a vendor to which they've already paid good money.

Maybe Microsoft believes that all this will not matter. If so, it may find that it has lost touch with its users.


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