Companies adopt activation as software piracy tops $33 billion

More software companies are moving to protect their products through some form of activation process as the cost of piracy rises above US$33 billion worldwide, according to the Business Software Alliance (BSA). For their part developers are unanimous in saying that while they don’t like implementing anti-piracy measures, it’s something that they must do to protect their products.

“It’s a very expensive proposition to put together an organization like the BSA,” Jenny Blank, the Business Software Alliance’s director of enforcement, told MacCentral. “Not only are our member companies active, but they also have people within the organizations that work with us. Fighting piracy is a significant investment for these companies, but the size of the damages are so huge that you have to make this investment.”

While saying that product activation may discourage casual copying, one industry analyst isn’t so sure about how much money piracy is really costing the industry.

“I tend to be somewhat dubious about so-called lost sales estimates, because it's not reasonable to assume that every pirated copy is a lost sale,” said Jupiter analyst Joe Wilcox. “Additionally, the estimates assume that nobody pays, which isn't the case.”

Striking a balance

The first priority of the companies we spoke with was to make registration and activation easy for the honest user – the second priority was to make it more difficult to crack. A difficult balancing act for any company to achieve.

“You cannot make software totally immune to piracy – it just doesn’t work,” said audio application-maker Native Instruments’, Tobias Thon. “No anti-piracy scheme should punish the people that buy the software.”

Quark’s Glen Turpin agrees. “Clearly, protecting our intellectual property is as important to Quark as it is for any software vendor and we take piracy very seriously. The challenge is how do we protect our software without hurting our customers.”

While large companies may be able to absorb more of the financial loses associated with piracy, smaller companies and their employees feel the loss of every product that is pirated.

“We are a small company, but our employees have families and they rely on the money they get from us to support them,” said Andrew Welch, president of Ambrosia Software.

Al Schilling, general manager of Macintosh game-maker MacSoft, finds himself in a similar situation.

"We're not getting rich at this and it's getting harder to make a living," said Schilling.

Software is too expensive?

One of the reasons often associated as a cause for software being pirated rather than purchased is the price. Some contend that if software products were cheaper more copies would be sold and the piracy rate would fall, but the BSA doesn’t agree.

“We have found that price really isn’t the issue that some people think it is,” said the BSA’s, Jenny Blank. “People that are inclined to copy the software will take inexpensive software as well as the expensive ones. The same people that are saying ‘if software were cheaper we would buy it,’ are copying $10 software.”

Ambrosia Software’s Andrew Welch also disagrees that price is an issue. Welch said that when he first released Snapz Pro years ago, there was no copy protection at all. Over time, when he opened his business, a “nag screen” was added, then features were disabled on non-registered versions and other things were done to encourage users to register. The end result, says Welch, is that price has nothing to do with why people pirate software.

“We found that every time we implemented more protection on our software, we get more sales,” said Welch.

Software piracy is a relatively anonymous experience that can be done from the comfort of your home, but the BSA said it’s no different than walking into the local Best Buy and stealing something from them. While most people would have a problem stealing from a store, downloading a piece of software seems much easier for them.

“These are people that wouldn’t consider themselves as thieves – they just convince themselves that they’re not,” said Jenny Blank.

MacSoft’s Al Schilling agrees. "It's dead simple to download pirated software," said Schilling, “and what's worse, many people don't recognize that it's wrong. In many of their minds, people who download software illicitly believe that the software has no intrinsic value since they never intended to pay for it.”

Peter Tamte, the president of MacSoft’s parent company, Destineer, noted market research from The NPD Group that points to a downward turn in sales of PC games. The percentage of PC games sold compared to overall video games, in the first quarters of 2004 and 2005 has fallen from 27 percent to 17 percent. Tamte attributes much of this drop-off to piracy.

"More PC gamers are playing online than ever before, even though fewer games are being sold," Tamte said.

Tamte also explained what happened when the company disabled a serial number for one of their online playable games.

"We recently deactivated a serial number used by a [PC] software pirate," said Tamte. The game's online servers then prevented users with that serial number from playing. "Within days, we saw ten times the number of players try to access the game online using that pirated serial number than our total number of online players."

Piracy that involves companies purchasing one license and installing software on multiple machines is also a huge problem. According to the BSA, this type of piracy accounts for a significant portion of the overall losses.

Working on activation instead of the product

While more companies jump on the activation bandwagon out of necessity, at least one developer said he doesn’t like it all.

“From a software developer and publisher’s point of view, I can’t stand having to do this kind of stuff,” said Ambrosia’s, Andrew Welch. “Any time that we spend working on the system to protect our software is time we are not spending working on making the product better.”

The fact remains that, like it or not, most companies these days feel the need to protect themselves and their products as best as they can. That means that updates don’t come out as quickly as people may want them to and new product development is often put on the back burner while code is written to combat piracy.

“We need to keep innovating on all levels, but we would prefer to focus on technologies that help the customer in their workflow and achieve their business goals,” said Quark’s Glen Turpin.

Different types of activation

The types of activation are as varied as the applications that use them, but they usually contact the company’s server to verify that the serial number is valid. In addition, companies are beginning to enforce license agreements and only authorize a certain number of machines for use at one time.

Native Instruments uses this type of activation, but they have added something that makes deactivating a computer a matter of a couple of mouse clicks. Activating one of the company’s products requires registration and then copying an activation code into the product before it can be used.

If you have already installed and activated the application on two machines, you will be alerted and taken to the Native Instruments Web site. There the company lists the machines and the date the application was licensed and gives you the option to deactivate one of the machines. Once this is done you can activate the new computer and use it immediately.

“Copy protection should be convenient – this is a must for us,” said Native Instruments’, Tobias Thon. “Part of our system allows you to deauthorize the software and get a new authorization, so whenever you switch machines it’s absolutely no problem.”

Ambrosia Software has developed a system that includes expiring serial numbers to combat people giving their registration to pirate lists on the Internet. The serial numbers don’t actually expire, but after 30 days they will contact the company’s server for validation. If you reinstall the application and your code is valid, it will be registered with no problems.

“This allows us to block license codes,” said Welch. “People that would give their code away may think twice if it won’t work them either.”

Quark uses a two-pronged approach to combat piracy of their software – one targeted to individuals and another tailored to the needs of big businesses.

“The first approach we use is activation,” said Quark’s Glen Turpin. “Product activation in QuarkXPress for most users is a fairly simple process – you can activate the software on two systems, so you can have a copy at home and work, for example. For larger organizations we use a server application called Quark License Administrator that allows concurrent uses of your licenses.”

The advantage of the Quark License Administrator, says Turpin, is that the application can be installed on as many desktops as you like. When the application launches it will validate itself with the server and as long as the current number of users doesn’t exceed the number of licenses, you can use the application. This is good if someone only uses the application on an occasional basis, according to Turpin.

Adding value and incentives to activation and registration

Native Instruments has been offering its customers incentives to register their software. This, says the company, gives users added value when the registration process is complete.

Being a developer of professional-level music applications, Native Instruments’ Web site is full of extras like guitar amp presets for Guitar Rig and libraries and instruments for their entire product line. The company makes some of these, others are uploaded by users of the applications.

The company also provides exclusive tutorials and other content on their Web site that is only accessible if you register your product.

Update on Adobe

Adobe Systems is the latest large company to move its flagship products to an activation model. With the release of Creative Suite 2 in early April, Adobe said it would enforce its longstanding licensing agreement and require customers to activate the software.

“We have been actively monitoring online forums and feedback we receive directly from our customers,” said Mihir Nanavati, Adobe senior product manager, Licensing and Anti-Piracy. “Typically it’s what we expected – there are segments of our customer base that remain skeptical about activation. On the other hand there is a lot of renewed interest and awareness on what the license really means.”

Nanavati said that Adobe has been receiving calls from customers asking what to do in “what if” situations, like buying a new computer or if they lose their notebook. A small number of customers have said they will not buy any product that has activation because they don’t believe it is a good thing.

Adobe has heard of workarounds available at some piracy Web sites that Nanavati said do appear to work. However, as with the other companies, Adobe’s first concern is for its customers, not stopping every person that wants to steal its software.

“If we have a choice to plug the capability of some people to pirate the software or offer our customers the best options, we will continue to offer our customers the best options,” said Nanavati.

While this is the first time Adobe has required its users to register their Creative Suite product in the United States, Adobe is not new to activation. In March 2003, Adobe required activation on Photoshop for Windows in Australia. Adobe also said that Chinese versions of several Adobe products have required activation recently.

Education and law enforcement

The Business Software Alliance is working with law enforcement officials to try to stop piracy, but as the BSA’s Jenny Blank points out, they can’t tackle the whole Internet. As part of its long term planning, the BSA has developed two programs to help educate students on the ramifications of software piracy.

One program targets young children and the other focuses on college-aged students. The BSA hopes this two-pronged approach will help stop piracy before it gets started.

"The best thing we can do is to educate consumers," said MacSoft’s Schilling. "Hopefully if we can pierce the public's awareness of the issue, we can get that message out there and affect a change."

This story, "Companies adopt activation as software piracy tops $33 billion" was originally published by PCWorld.

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