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Does software piracy lead to monopoly?

Microsoft may be the world's biggest beneficiary of piracy...of its own software.

In a piece reminiscent of Tim O'Reilly's excellent "Piracy Is Progressive Taxation," Dagens Politik has written a provocative article arguing that "the actions of the pirates have merged with the interest of Microsoft to create a near monopoly in the operating systems market for the PC."

In other words, no piracy, no Microsoft monopoly.

The author suggests that piracy does the industry more harm (in sustaining Microsoft's monopoly) than it does to Microsoft (in any number of millions or billions of profits lost):

So, while Microsoft may weep crocodile tears about the piracy of their own products their interests and the actions of the pirates have gone hand in hand over the past years - in addition to the fact that the companies that do try to threaten Microsoft's dominance face financial annihilation at the hands of the pirates.

This in turn only strengthens Microsoft's dominance over the market, and maintains a situation where innovation is at a minimal level and where the likelihood of a change to a more fragmented and competition oriented market is significantly reduced.

Software piracy, then, if we separate this from the greater debate about the piracy of intellectual property, can indeed be said to be harmful since it creates the near monopoly and it reduces innovation and competition.

Hmm....I think this is probably true, so far as it goes. But does it go as far as the author suggests? (As a point in its favor, Microsoft certainly appears to be encouraging piracy in China as a way to combat Linux.

The biggest threat to any company is that no one cares enough about its software to steal it. With open source, the threat of theft is essentially removed. Perhaps this is one reason that Microsoft fears open source: it can't compete on price, and it also can't compete long-term with piracy. Piracy helped to cement its monopoly power, and may well be helping the company to hold onto this monopoly, but will open source eventually burst the dam?

How? By putting the emphasis on using software free of charge, open source removes the single biggest inhibitor to adoption of new software. Sure, there is also the problem of application support, user inertia, etc., but the first hurdle to overcome is cost, and open source does that. The next challenge is adoption, and projects like Linux, Firefox, MySQL, etc. prove that open source can drive adoption.

To hold its lead, Microsoft may well need all the piracy it can get/afford. The question is, how much is that?

Via the Firehose.