$500M Piracy Ring Busted In China

Blahbooboo3 writes "Reported by several news organizations, pirated software worth more than $500 million has been seized by authorities in China as part of a joint operation run by Chinese police and the FBI. Microsoft estimates that the software piracy of an international counterfeiting syndicate, over the past six years, cost the company at least $2 billion in lost software revenue. Microsoft said that key information in the investigation came from its Windows Genuine Advantage program, an anti-piracy system that can check whether an OS is legit. It's generally accepted that Microsoft has done well out of software piracy: it helps products become widely used, and as the market matures, people start to pay for their software. And this has been a major factor in Windows beating Linux in China, as Bill Gates has admitted."

The price of piracy

[tigress]

I've always been amused by the figures that are put on software piracy.

Unlike things like producing a line of denim clothing and putting the Levis brand on it, creating pirated software costs virtually nothing. It takes just as much effort to copy a DVD containing your latest vacation photos as copying a DVD containing a $10k software package.

Just because they discovered a few thousand copies of expensive software doesn't mean that it either cost that much to produce, or has that much sale value (pirated software sells for far less). Neither does it mean that the loss in sales is nearly as much, as many of those who buy/download pirated software would never have bought the software in the first place.

Windows beating Linux

[140Mandak262Jamuna]

The main reason is that once people use Windows, they get locked in. Incompatible file formats, refusal to interoperate with anything other than Windows. The only choice they have after that is to continue to pirate or pay an enormous switching cost to go to Linux or pay the tax and become even more locked into MSFT. Since piracy is so rampant in those parts of the world, they will switch to Linux last. Though China and India are poor and could ill afford to pay full price for Windows, and you would logically expect them to be switching to Linux first, they wont because it is so easy to pirate Windows. So MSFT will protest and go through all the motions of fighting piracy but in reality it knows it is the piracy of windows that is keeping Linux at bay.

Re:$500 million

[JonathanR]

But that is the fallacy of such an argument. They say that the software traded has a value of $500 million, but the truth is that this is the value placed on it at western RRP prices. The true value of the software is much closer to the actual revenues that the pirates derive. This makes the revenue stream probably closer to a hundredth of that ($200 rrp say selling as a pirate copy for $5). If the pirates could make their $500 million, you bet they would.

Re:Windows beating Linux

[SerpentMage]

How about Windows is easier to use?

Naaaa, couldn't be that!

You can debate, argue, point all one wants. BUT the reality of the matter is that people seem to continue buying Windows, year after year. Some of that may be lock in, but I doubt 100% of that is lock in. Thus when everything is done and said, maybe there might be a few million people who actually prefer Windows...

Re:$500 million EXACTLY

[hesaigo999ca]

Thats is so true, as well, knowing someone who goes to China often and tells me all sorts of stories,
remember that the person who pays 5$ for a windows copy, will A) know not to ask questions or tell anyone about it B) buy a copy for thier friends if they need it without telling any names, C) if they get caught are in as much trouble therefor would not want to implicate anyone.

Short of using extreme torture tactics, these guys stick together....this to me was the chinese goverments fault because they wanted to throw the dog a very very small bone. What I know is this is not even the tip of the iceberg.... it is more like a scratch of a scratch of a scratch on the tip of the biggest iceberg you have ever seen... : )

Re:The price of piracy

[nasor]

If the "value" of pirated software was anything like what the industry claimed, everyone with a CD burner would simply make a copy of AutoCAD (retails for around $17k) every month and retire early.

Re:Why

[Qwerpafw]

This kind of piracy hurts the US, so we really should be all for enforcement. Counterfeit software from American companies that is sold abroad means that the money is not flowing back into the US, and is instead entirely in foreign pockets. That means fewer taxes for the US GOVT, which in turn means that your personal taxes are higher in some small way.

You taxes pay for the US infrastructure that allowed companies like microsoft to arise, and thus companies pay back into the tax system. But when foreign counterfeiters reap the benefits of the labor of American companies, your taxes are paying for their profits. Busting counterfeiters is good for taxes, and a good use of government money, not bad.

Now, I know slashdot hates copyright enforcement, and the tactics of the RIAA, MPAA, and BSA are deplorable. Microsoft certainly benefits in some way from software adoption due to piracy. But before you crucify me for supporting police action against counterfeiters, keep this in mind:

This is not piracy as you know it.

These counterfeiters were selling what appeared to be genuine software, at normal retail prices. They forged the holograms, faked the boxes, and generated the serial numbers. The consumers buying the software were unaware of what was going on.

Imagine buying a copy of Micrsoft Vista, and shelling out the full $250 or whatever for VistaFlavorX(tm). You install it and everything runs fine. Then, six months later the computer locks you out when Microsoft realizes it's pirated.

Putting aside the issue of WGA, can you not realize how much that would suck for the mom and pop consumer? These chinese counterfeiters were not the "little guys," and they were certainly not "sticking it to the man."

They were profiting off American companies, American labor, American tax dollars, and in the end they were screwing over the little guy.

Re:Why

[networkBoy]

And it is the movie equivalent of theise guys that the MPAA should go after.
On the bright side, because of them I was able to buy some out of print disney DVDs for my kids...

Re:Why

[kimvette]

That means fewer taxes for the US GOVT, which in turn means that your personal taxes are higher in some small way.

I have a better solution: cut spending.

MS BS

[groovebot]

Microsoft estimates that the software piracy of an international counterfeiting syndicate, over the past six years, cost the company at least $2 billion in lost software revenue.

That's bullshit. The Chinese are pirating software because they can't afford the real thing. If they weren't pirating Windows, they simply wouldn't have it. Therefore, Microsoft has lost no money to software piracy, because there was never potential for them to get any. However, if Microsoft started selling legit copies of Windows in China for very cheap (I'm talking as cheap as the counterfeits), they'd probably start making more money on the Chinese market.

Re:Windows beating Linux

[KoldKompress]

[Brings out the old trusty 'Car' Metaphor]

Imagine you have a car with terrible steering. It always veers to the right, and has terrible understeer.

Now you get a brand new car, and it doesn't veer to the right. And it turns perfectly, without understeer or oversteer.
You'd still have to get used to not having to correct the understeer.

Just because you're familiar with it, doesn't mean the car with the understeer is the easiest to use.

Re:FIRST

[HermMunster]

It was a $2 billion ring as of yesterday in the news. But we know who has been exaggerating these numbers. More likely the $2 billion is more like $2 million. It is hard to get $2 billion of anything, so we all know that's utter nonsense. If they have $2 billion they can easily afford to defend themselves. And, since when did China adopt US copyright practices. And since when is $2 billion dollars equal to $2 billion dollars in China? Not really possible.

Re:$500 million

[uncoveror]

Considering that a "legitimate" copy of XP, Office or Vista costs more than the average Chinese worker earns in several months if not a full year, Microsoft's lost revenue is nearly nil. To someone who can barely afford to eat, the idea that "intellectual property" has any real value is unspeakably absurd.