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From: denbeste@cc5.bbn.com.BBN.COM (Steven Den Beste)
Newsgroups: comp.sys.amiga
Subject: Copy protection: A marketing analysis
Message-ID: <207@cc5.bbn.com.BBN.COM>
Date: Tue, 14-Jul-87 18:54:20 EDT
Article-I.D.: cc5.207
Posted: Tue Jul 14 18:54:20 1987
Date-Received: Sat, 18-Jul-87 13:59:10 EDT
Organization: Bolt Beranek and Newman, Cambridge, MA
Lines: 233

affects of various copy protections schemes.

Assume that I am a company with a software package to sell. I view the market
as dividing into the following groups:

A. HONEST USERS who will buy the product regardless.

B. BORROWERS who will copy it if they can and buy it otherwise. Mostly these
people are doing so simply because it is easy. Common examples of this are
school districts, office mates, relatively inexperienced hobbyists. They
aren't usually aware of (or at least don't concern themselves with) the
copyright protection - they do it because it is easier than buying a copy.
[For purposes of this discussion, I define this group to be people who will
switch to buying the program if they can't copy it easily.]

C. SOFT-CORE PIRATES will copy the program if there is an easy way to crack
the copy protection. If there isn't, they may buy and they may not.

D. HARD-CORE PIRATES will bend heaven and earth to copy the program, but will
never buy it regardless. They can never be customers (again, by definition)
but are important because they may feed copies to the soft-core pirates.

E. NON-CUSTOMERS aren't interested in my program regardless. I include it for
completeness, but they don't affect the rest of the discussion, so won't be
mentioned again.


Here are my potential tactics, and the effects:




NO PROTECTION OF ANY KIND except maybe a plea on the package, the manual
and/or a pull-down menu choice not to pirate.

MY ENGINEERING EXPENSE: minimal.

INCREASED MANUFACTURING EXPENSE: minimal.

CUSTOMER EFFORT TO MAKE A COPY: minimal.

CUSTOMER EFFECT:
   A. Honest users buy.
   B. Borrowers borrow and don't buy.
   C. Soft-core pirates borrow and don't buy.
   D. Hard-core pirates borrow and don't buy.

[I've heard a lot of rhetoric here about people that say that they will steal
a copy-protected program and buy a non-protected program, but I stand by my
judgement here. The people who will actually do that (as opposed to just
talking about it) are such a small number that they make very little
financial difference compared to the quantity of Borrowers and Soft-core
pirates who will steal.]

My customer base is only A.




ZAPPED-SECTOR PROTECTION

MY ENGINEERING EXPENSE: about 3 weeks for one person

INCREASED MANUFACTURING EXPENSE: It may require a special way to make the
   disks - could increase setup time and take longer to duplicate.

CUSTOMER EFFORT TO MAKE A COPY: Depends on the availability of commercial
   copying aids. Without help the average copier is stuck. However, with
   the availability of programs like Marauder this approach will only
   prevent unknowledgeable users from getting copies.

CUSTOMER EFFECT:
   A. Honest users buy (but get somewhat annoyed)
   B. Borrowers buy (but get somewhat annoyed)
   C. Soft-core pirates copy and don't buy.
   D. Hard-core pirates copy and don't buy.

My customer base is A + B.




LOOK-UP-THE-WORD PROTECTION

MY ENGINEERING EXPENSE: Not very great, but it means that the manual must be
   frozen before I manufacture the disks.

INCREASED MANUFACTURING EXPENSE: The manual should be printed/bound in such a
   way that it can't easily be photocopied. Likely the manual writer is told
   to pad it extensively, it is probably bound so that it breaks apart when
   photocopied, and if I am serious about this I print in light blue ink.

CUSTOMER EFFORT TO MAKE A COPY: The disk is very easy to copy, since it isn't
   protected. The manual may be easy or hard to copy, ideally hard. Depending
   on how hard a hard-core pirate works, he may come up with a way of patching
   my program to remove the protection code. This can be made more difficult
   with a bit of code-obfuscation, slightly increasing the engineering expense.
   However, this cannot be prevented entirely.

CUSTOMER EFFECT:
   A. Honest users buy. Occasional honest users may be annoyed by the
      technique, and I may lose a few return sales on other products in
      the future. I think this is a very small proportion.
   B. Some borrowers buy, some pass the manual around constantly if they
      work together and are willing to put up with the annoyance.
   C. Some soft-core pirates buy, some do without.
   D. Most hard-core pirates do without, some may patch the program. They
      will scream and yell and talk about a boycott - but I don't care
      about what they say because they wouldn't buy from me anyway.

My customer base is A + much of B + much of C.




THE GIZMO: This is a computer-readable gadget which must be plugged into the
machine either when the program first runs, or the entire time it runs. On
PC's and Mac's it usually attaches to the parallel port. On the Amiga, I think
it would go into the second-joystick port on the front. It is easy to engineer
- it consists of a DB-9 connector, a very small circuit board, a good PAL, and
a plastic case. (The PAL shouldn't be CMOS because of the chance of it getting
blown.)

MY ENGINEERING EXPENSE: I have to design the thing, and obfuscate-hide the
   code which checks for it.

INCREASED MANUFACTURING EXPENSE: I should be able to get them made for me in
   quantity for less than $5 each - maybe much less, considering that there are
   only 5 parts to it, one of which must be programmed. My manufacturing cost
   for the disk is about $4, for the manual about $2, so it almost doubles my
   manufacturing expense - but the sales price of software doesn't depend very
   highly on the manufacturing cost. It probably adds $10 to the sales price.

CUSTOMER EFFORT TO MAKE A COPY: Virtually impossible. Unlike "enter-the-word"
   protection, which happens once and has visible and traceable effects,
   I can make my code check the gizmo many times during initialization and
   in many ways - and throughout the code if I require it to stay attached.
   The gizmo itself is essentially impossible to duplicate without
   industrial espionage (the PAL equations).
   Before you say "The pirate can find all the places and patch them out",
   how about if there are 100 places, all of which treat the gizmo in a
   different way and are coded differently? I don't see how it can be done.

CUSTOMER EFFECT:
   A. Honest users buy.
   B. Borrowers buy.
   C. Soft-core pirates buy or do without.
   D. Hard-core pirates scream a lot. Screw 'em.

My customer base is A + B + much of C.



At this point we leave the realm of game theory and enter marketing - one has
to make a judgement about how large each group is for my particular product.
However, based on this analysis, no-protection-at-all loses to the other three
regardless. I therefore make the cold business decision to copy-protect my
product.

Zapped-sector versus look-up-the-word is a tougher decision - it depends on
the size of the B and C groups, the number of each which will buy if I have
look-up-the-word protection, and the availability and ease of super-copier
programs. On balance since the super-copiers are easy and available and
well-known, I think I would prefer look-up-the-word.

The GIZMO beats all of these. Consider its advantages: It is almost impossible
to subvert or defeat. It is convenient for the customer (no manual to search).
It allows unlimited backup-copies, and works just fine from a hard-drive. The
only draw-back is that it requires me to manufacture it. (Also an occasional
customer will lose it.)

I may try to get together with some company making hardware for the Amiga and
talk them into making the gizmos for me. I would give them license to sell
them to other companies as well - this cuts down my my expense through greater
volume.

A good company to approach would be that company in Texas that makes the "TIC"
clock, which already has the plastic and manufacturing set up. (By the way, I
own one of these, and a fine product it is, too.)


-----------------------------

OK, I am back out of pretending to be in business. In fact I am not in the
consumer software market (I work for an industrial engineering firm). But
I think too many of the people who have been trying to talk about piracy here
recently have been either projecting what they want, or simply ignoring the
numbers, which is the way the company will look at it. Consider some cases:

1. Boycott the copy-protecters: Just how many people will really do this,
anyway? Lots of talk, but a serious wide spread boycott is extremely
far-fetched. I will deal with it when and if it happens. Even if it did, just
how many people would be involved? In order for it to be a serious problem for
me it has to involve more of group A than I gain from groups B and C by adding
copy-protection, and since I suspect that either zapped-sector or
look-up-the-word just about double my sales, the boycott would have to involve
a hell of a lot of folks. My best guess is that most of the people joining the
boycott would be from groups D and E anyway, about whom I don't care.

2. Angry customers who refuse to buy again: Again, I suspect there is more
wind than rain here - a lot of people will bluster and blow, but if my product
is good enough and unique enough, they'll buy anyway, or at least enough of
them will to make me a reasonable profit. In fact, again I need to lose more
people from group A than I gain from groups B and C - and I don't think I
will.

3. Customer loses the gizmo and needs another one: How do I tell this guy from
a clever pirate trying to sneak in the back door? In fact I cannot, and my
reaction to this is to tell him to search harder for the gizmo. I may lose
some repeat sales, but that's how it goes. This is more than made up by the
fact that my product is virtually unpiratable.



I want to emphasize that I am still trying to keep neutral on the subject of
piracy and copy-protection. I have opinions on both subjects, but I don't
consider them of interest to the public.

Every time I really analyze it, I come up with the answer that the companies
should be searching for more effective copy protection, not less of it.
Local blustering and threats to the contrary, I can see no benefit for any
company to relax the copy-protection on their product. Every analysis I make
shows that more effective copy-protection results in more total sales.

If I was an entrepreneur, I'd go into the business of making the
joystick-gizmos. As it is I freely offer the idea into the public domain - it
should make everyone except the pirates happy. And as to the pirates,
Screw 'em.
-- 

     Steven C. Den Beste
     Bolt Beranek & Newman, Cambridge MA
     denbeste@bbn.com  (ARPA or CSNET)