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When Piracy Helps Your Business

"Piracy is generally bad for business," The Economist proclaims. "It can undermine sales of legitimate products, deprive a company of its valuable intellectual property and tarnish its brand...stealing other people's R&D, artistic endeavor or even journalism is still theft." This is a principle that's well worth defending, the paper says, but when it comes to illegal file-sharing, "companies have to deal with the real world" -- a certain amount of piracy is going to continue, so why not use that knowledge to your advantage?

According to BigChampagne, a research firm that measures file-sharing, around 20 times as many music tracks are exchanged over the Web on "peer-to-peer" file sharing networks as are sold legitimately online or in music stores. That may sound scary to music companies, but statistics like this can also be a useful bit of market research, revealing, for example, the countries where a new singer is more popular. "Having initially been reluctant to be seen exploiting this information, record companies are now making use of it." And later this month, BigChampagne is extending its monitoring service to pirated video, too. This information will surely help broadcasters when negotiating with advertisers on planning schedules.

Elsewhere, piracy opens up new markets. Take China, for example, where Microsoft's Windows operating system is used on 90% of PCs, but most of these copies are pirated. Unofficially, the company admits that tolerating piracy of its software has helped give it huge market share in the Internet's largest market, boosting revenues in the long term. Without piracy, open source alternatives might reign supreme in China.

Read the whole story at The Economist »

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