Does software piracy exist?

From time to time, readers let me know that my fonts are circu­lating on such-and-such website devoted to some cate­gory of soft­ware piracy.

Well yes—of course they are. In the font world, as in most areas of soft­ware endeavor, there’s been much hand-wringing over the last 40 years about the (suppos­edly) massive losses to this kind of unau­tho­rized redis­tri­b­u­tion and copying, and the lack of any satis­fying protec­tion mech­a­nisms to prevent it.

For the most part, anti-piracy schemes have never gotten far because they incon­ve­nience legit­i­mate customers far more than they inhibit thieves. Consis­tent with this, I’ve always been open about the fact that my busi­ness runs primarily on the honor system. It’s much more worth­while to put a unit of effort into winning new customers rather than chasing down bad actors. (Peak audacity: the gentleman who once stole my fonts off a pirate website and then emailed me wanting tech­nical support.)

But let’s take this prin­ciple further. I don’t quite agree with publisher Tim O’Reilly’s view that “piracy is progres­sive taxa­tion”, which implies that these effects are equi­tably allo­cated. But what is the optimal level of soft­ware piracy?

The naive answer is zero. But consider that there are only two fool­proof ways to prevent soft­ware piracy. The first is to never release the soft­ware at all—silly but effec­tive—in which case revenue is $0. The second is to permit the work to be freely copied and redis­trib­uted—say, under an open-source license, which condones the other­wise pirat­ical behavior—in which case revenue is also $0. But at both ends of this continuum, revenue is $0. So the maximum revenue happens in the middle, where some amount of piracy occurs. There­fore, the optimal level of piracy is greater than zero.

Similar logic applies to return poli­cies. I know that some buyers exploit my 30-day return policy—e.g., so they can use a font in a project for free. (Peak audacity: the intel­lec­tual-prop­erty lawyer who once asked for tech support months after returning the fonts, and then claimed “I didn’t read the license.”) But those cowardly losers are offset by those who rely on the return policy to buy fonts that they might be unsure about. In a lot of those cases, they keep the fonts. So in the end, the policy is a net winner. But it only works if the rate of return is greater than zero.

We can even use a rational-choice argu­ment to show, roughly, that soft­ware piracy doesn’t exist. Let’s suppose you were opening a soft­ware company. I give you the choice of two sales trajec­to­ries, which would recur indef­i­nitely:

Trajec­tory A: $10,000 annual revenue with a 1% piracy rate (= $100 per year)
Trajec­tory B: $1 million annual revenue with a 1000% piracy rate (= $10 million per year)

Which would you choose? If you feel that losses to piracy are real, then your expected value from trajec­tory A is $9900 per year; your expected value from trajec­tory B is nega­tive $9 million. Clearly, A is the prof­itable choice.

But obvi­ously, no one would do that. Any reason­able person would pick trajec­tory B. The only dollars that matter are the real ones (= revenue) not the conjec­tural ones (= piracy losses). More­over, you can substi­tute any rate of piracy as part of trajec­tory B and the answer will never change. So to the extent that it doesn’t influ­ence economic choices, piracy does not exist.

Ulti­mately, the flaw in the piracy-losses argu­ment is the under­lying assump­tion that those who take your work for free would buy it if piracy were made impos­sible. By and large, this isn’t true. People who down­load my fonts from pirate sites were never poten­tial customers. They’re free­loaders, who only find one price satis­fying: $0.