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Yes, Chinese Piracy Has Lost Microsoft a Lot of Windows Revenue. But the Story Isn't So Simple
By David Meyer
2018-11-09 12:58:49
 

 Source: finance.yahoo.com

 

          No production can proceed without material means and technological skills. Means of production contains, besides hidden potential value from Nature, also the value of collective wisdom of all humanity; while production technology contains, besides the current creative mental labor value of individual inventors and innovators, also collective human wisdom inherited from the long past. Knowledge and wisdom inherited from different regional and cultural communities would mix, interpenetrate and enrich each other, develop together and become inseparable and shared spiritual wealth belonging to the whole humanity. Today’s high-tech and whole spiritual civilization would not have been possible but for the continual and co-operative efforts of generation after generation of all peoples of the world working like a collective relay team. Such collective wisdom is embodied in people’s productive labor, manual or mental, and in the materials and process design for production as well. Like the Nature-endowed value in all materials, the value of collective wisdom to people can never be measured, calculated, indicated by any numbers, any math equations, any economic theories, either! We should not, however, ignore the existence of their value just because they cannot be measured, just as one cannot ignore the existence of one’s own head just because one cannot measure its weight!     

        Furthermore, the value of collective wisdom should also in principle belong jointly to all mankind of all generations to come on earth, not to any individual persons, any groups, or any regional communities (including nation-states). This view has also been shared by some outstanding thinkers, including Thomas Jefferson, but has been concealed by the atomistic individualist worldview and methodology of Western economics, which regards the society as an aggregation of isolated individual humans with only external mechanic connections, but no internal, organic, socio-historical interpenetration and interdependence and which serves to cover up the injustice of a few people or groups’ exclusive possession of such values.

   -- From Sherwin Lu: A New Political Economy: A theory of three sources of value 

 

Former Microsoft CEO Steve Ballmer is unhappy about software piracy in China, accusing businesses in the country of ripping off his former firm. However, the issue is not so simple as it may appear.

Ballmer told Fox Business on Thursday that, when he left Microsoft a few years ago, 90% of Chinese companies were using Windows, but only 1% were paying for it. This piracy, he said, was costing Microsoft $10 billion or more in profit.

However, when asked what the U.S. government should be doing about it—and bear in mind that the Trump administration is using Chinese intellectual property theft as a key reason for its tariffs on China—Ballmer responded cautiously.

“I’m a free trader, by nature. I went to the school of economics–it’s the best thing for the world,” he said. “This one’s a tricky issue because it’s absolutely clear that the rules don’t apply in China, and the U.S. government needs to do something. Whether tariffs are right or wrong—I’m silent on that point.”

The issue is indeed tricky, and not just because of the difficulty in figuring out an appropriate response.

In 2015, the year after Ballmer stepped down as CEO, it was indeed the case that more than 97% of PCs in China were running Windows. However, Microsoft’s operating system achieved that position of extreme dominance through piracy.

That proved lucrative for the company, because it meant Microsoft could fend off the threat of the free alternative to Windows, the Linux operating system, by slashing its prices in China in order to get people there to convert to paid Windows users. Note that the Linux threat has always been particularly prevalent in China, as the government has enthusiastically backed local versions of the open-source OS.

Back in 2007, Microsoft co-founder Bill Gates described the strategy clearly, telling Fortune: “It’s easier for our software to compete with Linux when there’s piracy than when there’s not. Are you kidding? You can get the real thing, and you get the same price.”

However, even with those low prices—we’re talking $3 for a bundle of Windows and Office—Microsoft still faced a serious piracy problem in China. So, after Ballmer left, the company essentially capitulated, offering Windows users in the country a free upgrade to the genuine (and new at the time) Windows 10, even if they had been running a bootleg copy of the OS.

Those who have not taken Microsoft up on that offer have perhaps had cause to regret their decision. When a ransomware attack swept the world last year, it proved particularly destructive in China because of the number of pirated copies of Windows that were not fully benefiting from Microsoft’s security updates.

While Ballmer is correct to say Windows piracy remains a big deal in China, and that this denies Microsoft some enterprise revenue, it is also worth noting that Microsoft has moved much more to a services model where it charges for cloud offerings such as storage and email, using Windows to draw people in. These days it even provides regular, free updates for Windows 10, rather than moving to new versions of the OS and charging for them.

Times have changed, and piracy doesn’t have quite the same effect on the operating system market that it once did. And in Microsoft’s case, that effect was never entirely negative anyway.

 
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