Dodgy Counterfeit Statistics, Software Edition

"F.B.I. and Chinese Seize $500 Million of Counterfeit Software" is the headline at the top of the NYT business section this morning. Wow. $500 million: that's a lot of money. How much software is that?

The F.B.I. said Tuesday that a joint effort with the Chinese authorities had led to the arrest of 25 people and the seizing of more than $500 million worth of counterfeit Microsoft and Symantec software that was being made in China and distributed worldwide...
In the last couple of weeks, the operation led to the seizing by the Chinese government of 290,000 counterfeit discs and certificates of authenticity.

Ahem. 290,000 discs, with pirated Microsoft and Symantec software on them, are supposedly worth half a billion dollars? That works out at $1,724 per disc. At Amazon.com, the most popular version of Microsoft Office is $121.99; the full version is $399.99. The most popular version of Vista is $149.99; the full versio is $359.99. The most popular piece of Symantec software is $62.99, and that allows three users.

That, remember, is the full retail price for genuine software: it bears no relation to the value of counterfeit software. To get an idea of what counterfeit software is selling for, look here: it generally goes for somewhere in the $20 to $30 range. At $25 a pop, those 290,000 discs would be worth just over $7 million: a hefty sum, to be sure, but nowhere near the number in the headline. (To put that number in perspective, the Apple store on Fifth Avenue brings in $7 million every two weeks.)

What's more, all the counterfeit Microsoft software in China is good for Microsoft. Think about it: when you pop into your local Wal-Mart (I know, but bear with me here) do you by a Linux-based laptop for $398? No, because you grew up with Windows, you know Windows, and everybody you know knows Windows. As my friend Matt Clark said in an email to me last night,

Let's not forget that MS needs large scale piracy, especially in developing markets, to maintain its market dominance. If people in China, India etc couldn't get hold of pirated MS software they'd all be running Linux & OpenOffice instead. And if that happened then it wouldn't be too long before they lost their dominance in the first world too.

Right now, Microsoft is more interested in having everybody in China run Windows than it is in having everybody in China buy Windows. Of course, at the margin, they'd prefer that Chinese people were running genuine rather than counterfeit software. And so they'll definitely cooperate with these kind of investigations. But let's not kid ourselves that the $500 million figure bears any relation to reality, or that all this piracy is actually particularly bad for anyone concerned.

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