The Fight Against Software Piracy: Geographic Pricing
Before I begin this article - I feel the need to put things into perspective.
Currently the price for Microsoft Vista as advertised on the MS website ranges from approximately 200 USD for the Home Edition to 320 USD for the Ultimate Edition. The average retail price for the four versions that they offer comes out to approximately 270 USD (Source). If we use the current global exchange rate being presented at www.XE.com (as of March 14 2009), that converts to 21,657 Pakistani Rupees, 1529 Egyptian Pounds, or 35,370 Zimbabwean Dollars.
Adobe Photoshop CS4? Retail Price 600 USD = 56,147 Pakistani Rupees, 3,964 Egyptian Pounds, or 91,700 Zimbabwean Dollars.
Now - lets add another figure to the mix. When i was going through my undergraduate just a couple of years ago (studying at the Lahore University of Management Sciences - Lahore, Pakistan), my allowance was 8000 Pakistani Rupees - given the current deflation of the economy that would be roughly 10,000 PKR for the entire month - approximately 120 USD. I managed to live very comfortably in this amount, going to my fare share of parties, traveling, and eating well. I wasn't driving a Porsche - but I definitely lived more than comfortably.
Did I pirate software? Of course I did.
Seriously - does Microsoft expect for me to spend twice my monthly allowance for a licensed copy of their (flawed) operating system? Adobe wants me to spend half a years livable income so that i can spawn my creative ideas using licensed versions of Photoshop? Seriously?
In 1997 the computer mall in Karachi was closed down for three months. Apparently Microsoft had decided to get their act together and in an attempt to reduce global piracy (read: piracy by third world nations) they decided to crack down on all the retailers that were distributing fake versions of Windows. Did this stop the national consumption of pirated software? Though there are absolutely no numbers to confirm or deny this - ill put my money down any day on the fact that it didnt do squat.
The fact of the matter is - as long as I live in Pakistan or Egypt and earning in the local currency - I am personally never going to pay that much money in US Dollars for a licensed version of any software. The question is not a matter of ethics for me - its a matter of what is the value that this software delivers, and considering the currency that i earn in, how much I am willing to pay in return for this value. A perfect example of this is Photomatix, an HDR Processing software used by photographers. Its a great software with incredible power under the hood developed by a small software company by the name of HDRSoft. The retail price for this software used to be 30 USD, a price that i happily paid without thinking twice - knowing that the software delivered at least this much value. The price has now gone upto 100 USD and now I really must think, do i truly need this software for 8000 PKR / 600 EGP?
No matter how much Microsoft or anyone else tries to flex its business power in third world countries, torrents and p2p networks have made it impossible for them to effectively crack down on piracy in third world countries or anywhere in the world for that matter. Given that this is the scenario and that they will always lose money when their software is at a price point that is simply beyond the purchasing power of the average third world individual, is it just me who has thought that maybe the old rules of selling software have changed? Maybe the combination of the internet spreading information beyond boarders and the existence of file sharing networks of any kind have broken down the power of monopolies to charge what they feel is the right amount - particularly within the software industry.
Wouldn't it make more sense simply to create a tiered geographical pricing scheme, taking into account the local purchasing power and the specific conditions of each individual country? Wouldn't this at least create a revenue stream where before none existed?
Wikipedia has defined a Geographical Pricing Scheme as follows: Geographical pricing, in marketing, is the practice of modifying a basic list price based on the geographical location of the buyer. It is intended to reflect the costs of shipping to different locations.reference
The Business Dictionary has its own definition: Geographical Pricing is a variable-pricing method in which a selling price is computed according to the customer's or market's distance or transportation costs incurred. reference
Note that both of these definitions specifically mention that geographical pricing is meant to offset the cost of shipping to different locations - but with software - there is no shipping cost. What you have is simply the existence of software products that have become an absolute requirement (such as MS Office or MS XP / Vista) at a price point that is vastly outside of the range of the buyers who in essence, need this product.
Yes i realize that the implementation of such a system is neither simple nor trivial. At TayaIT we have implemented a system in its infancy stages - where we deal with our clients on a case to case basis and draw a clean pricing differentiation for customers from Egypt and international customers. A company with a user base such as Microsoft could not even comprehend dealing with sales on a case to case basis, nor should they attempt to. Yes they would definitely have to protect themselves from all sorts of fraud that may arise from such a pricing structure (i.e. users in the US or Europe attempting to buy software at Pakistani prices). But tech savvy users willing to go this far are already the same users who are pirating software because its priced too high above its perceived value.
To say that I have a complete solution for this problem would be giving me way too much credit (though I have my ideas, writing about them would be more of a research paper then a blog post) - I have yet to see any major articles written on the topic. In fact while I often read about software companies attempting to fight piracy all over the world, no one seems to be putting their hammers on the nail. If you cant afford food - you will steal it to survive. If you simply cant afford essential software or services, the same will apply.
Perhaps all us "third worlders" should just go open source and power up with Ubuntu? Hows that for a lost revenue stream? :)
As always, thanks for the read.
Salman Suhail is Senior Manager Online Product Design at TayaIT