Why Piracy is Sometimes Good For the Software Industry

This morning at the gym I started thinking about how nice it would be to be a Photoshop guru.

The ability to just have an idea of an image of design in your head, open up Photoshop and come out with a snazzy-looking result after a few minutes of hard work. It would be frickin' awesome. Unfortunately all the tools I really have at my disposal for design work are HTML + CSS. Bummer.

And then there's the cost.

A copy of Photoshop CS4 (the latest version in Adobe's suite) goes for $699 if you're buying it fresh off the presses. The extended version will burn a grand in your pocket.

That's way too expensive. Especially if you just want to play around (like I do). Which leads to why so many people download Photoshop off of Bittorrent. Free is free. Honestly, how many Photoshop gurus actually bought the damn thing when they were first curious about it? I doubt very many.

I don't know why this is what first came to me, but I thought for a second that maybe Adobe wants its software to be pirated. Look at it this way: maybe Adobe charging such an exorbitant amount for its software is just a form of price discrimination.

They know that businesses will fork over the price as long as its not ridiculous. Hell, if you're a design firm you need Photoshop. You bite your lip, buy the software, hire a great designer (who probably learned Photoshop off of a pirated version), and move on. It sucks, but no company wants to be using pirated software. It's just not a good idea.

If you don't have the money, you'll just download it.

Here's a little example to illustrate why Adobe wants people to pirate their software. Fixed costs for software production is very, very high (programmers are expensive ;) ). On the other hand, variable costs are basically nil (you're basically paying for the cost of bandwidth if its download only, and the cost of shipping otherwise). A software company can charge nearly nothing for software given that people will continue to buy it forever into the future.

Other products, like jet engines, have a high variable cost, so it would be pretty stupid to charge a penny for one. You'd go out of business in the blink of an eye.

Now let's imagine that Adobe charged $9.99 for Photoshop CS4. I would buy it without a second thought. So would maybe other people who wanted to get their feet wet in design. Flipside: Adobe now needs to ship 70 times more copies.

This is a bad business decision if more than 1 of 70 Photoshop installations are legal. I'm actually inclined to say that the number is higher. In the end, it's better business sense to keep the price at an astronomically high value and let the rest of us download the thing on Bittorrent. It's a small price to pay, but Adobe makes more money in the end.

What do you think?

Originally posted at http://dloewenherz.blogspot.com/2010/02/why-piracy-is-sometimes-good-for.html