Here’s why pirates are important to our whole industry, nations and technological progress

Don’t get me wrong, I don’t necessarily like what you parrot lovers do, but I feel that there’s certain stuff that gets forgotten in all this piracy discussion. I’m taking economical point-of-view, and showing you in a pretty concrete way how we’d be screwed if there wasn’t pirates. (And, we’d might be in bad situation too if everybody would be pirating)

And no, pirating doesn’t make you as cool as LeChuck. Image googled and used without permission. I hope I don’t get into deep shit thanks to this.

I read one chap claiming that “pirates cost us (movie industry) 1 billion dollars revenues yearly” (figure that I just invented since I cannot remember the exact sum, but let’s say it’s 1 billion).

Now, pirates come and say “that’s not true!”.

But, I feel that’s pretty bad response. It’s somewhat irrelevant too. Let’s see what happens if we agree with the entertainment industry chap. That’s not necessarily a shinier future for the whole industry, or for technological progress for that matter. Let’s say that piracy costs for example 1 billion of lost revenue yearly to software makers.

1 billion is lost… but who have it?
Here’s the thing that these chaps fail to see:

the lost revenue from software manufacturers goes somewhere else, like to perhaps to hardware manufacturers

This is important, and this is also how software makers benefit. I explain.

The more revenue harware manufacturers make, the better computers they can make. More memory, more speed, and everything costs less.

That’s hugely important. I repeat the sentence bit differently, it’s that important:

if makers of hardware get more revenue, they can use that money to boost the development of computers

If CPU manufacturer gets more money, they can spend that money on research, and get faster computers at cheaper price which benefits software makers since cost of computers is getting lower, which means software makers don’t need to spend that much money to computers.

Let’s do an another example.

Let’s think of example world, called NormalWorld. In normal world, there’s pirates, non-pirates and something between. Here’s the population:

  • 50% of population are Parrot Lovers, they spend 1 billion dollars to hardware and illegally pirate all the software, and spend 1 billion to Ship industry.
  • 50% of population are Good Citizens, who spend 1 billion dollars on hardware and 1 billion dollars to software. But no money to Ship industry.
  • In NormalWorld, software industry makers are spending 0.5 billion to buy better computers from hardware industry.

In NormalWorld, hardware industry is doing fine (2.5 billion total = 1 billion from parrot folks, 1 billion from Good and 0.5 from software), ship industry too is going strong (1 billion from Parrot Lovers), and so is software (0.5 billion total = they get 1 billion from Good but lose 0.5 to hardware).

Everybody praises how Good Citizens are moral and respectable people, and everybody loves them (expect the parrots, who like more the other chaps).

But there are people who say that we should see what our neighbour, SopaWorld does. In SopaWorld, there’s no piracy.

This leads to the following situation:

  • 50% of population are Parrot Lovers there as well, forced to spend 1 billion to software industry, spending 0 billion to hardware, and ship industry gets 1 billion.
  • 50% of population are Good Citizens, who spend 1 billion dollars on hardware and 1 billion dollars to software. But no money to Ship industry.
  • In SopaWorld, software industry makers are spending 1.5 billion to buy expensive computers from hardware industry.

The hardware makers have less money on research, so they sell computers at 3 times higher price since they have got no technological progress which makes components cheaper. It follows that:

In SopaWorld, hardware industry is still doing fine thanks to higher prices (2.5 billion, 0 billion from parrot folks, 1 billion from Good and 1.5 from software), ship industry too is going strong (1 billion), and so is software (only 0.5 billion total = they need to buy 3x more expensive computers).

As you can see, the overall result is exactly the same as in NormalWorld. In NormalWorld, pirates bought so much hardware that software makers didn’t need to spend that much money, but in SopaWorld, pirates aren’t supporting hardware industry, so software industry needs to spend more money, as prices of hardware are higher.

NOTICE: these are imaginary numbers of course, and I’m not saying this would happen if governments introduce laws or if piracy stops. Just trying to explain that we cannot just look at one factor and forget everything else. I will be slowly be reaching towards the conclusions of this article. Read further.

Stopping piracy, might mean loss to other industries…
Then there’s also the DamnItWorld.

In DamnItWorld, things are bit different. DamnItWorld was exactly like NormalWorld, but then a new way to punish piracy caused the following change in the population:

  • Since Angry Parrot Lovers (they were like Parrot Lovers except they really had no intention of buying never any software) were no longer getting software free, and had no intention to get faster hardware (since they could no longer brag about how they saw in their goddamn expensive home cinema all the newest ripped full hd quality movies). These people had no absolutely any reason to continue purchasing better computers. They weren’t going to buy software anyway, so they stopped buying hardware too. Instead, they took their fishing gear and started buying ships. In DamnItWorld, the ship industry gets 2 billion
  • Good Citizens still spend 1 billion to hardware and 1 billion to software, but they are using worse computers than their neighbours (since computer technology is not profitable here, so no much improvements are being made) and since computers are shitty, their games also have worse looking graphics than in the neighbour countries (that might be a good thing though).
  • Software industry here uses 0.5 billion to buy from hardware, but gets crappy quality computers. Software industry is blaming hardware industry for high costs, hardware industry is blaming software industry for crappy quality products – and they both are whining that ship industry should be taxed so that some money would go into technological research which would help technological progress.

DamnItWorld has 1.5 billion hardware, 0.5 billion software and 2 billion ship industry. Tons of ex-software people nowadays manufacture ships.

Then there’s the LetsSavePaperWorld where people store 2 billion worth of paper under their pillows, hoping that after 30 years, somebody will be willing to buy that paper with some good price. Like, when for example all trees have been cut and there’s shortage of toilet paper. Then those might come handy.

The point
What I’m trying to show you here, that stating something like “movie industry is losing 1 billion or 10 000 jobs thanks to software piracy” also means that some other industries have those 10 000 jobs. (Since movie industry is losing, it means there’s buying power).

If movie industry arguments that stopping online piracy creates jobs, that indeed is true. It sure creates jobs to the software industry. What they fail to point out, that jobs are lost from some other industry.

It works globally too: sure, if random Finnish person (not that we honest citizens pirate, but for the argument, let’s say we do) pirates your US movies and shares it freely here, the US movie industry suffers (compared to situation where Finn would have spent 500 eur to buy stuff). But what the movie industry fails to notice is that the nasty imaginary Finnish pirate is buying your TV electronics that helps your TV industry. If our imaginary Finnish parrot lover is forced to “spend money to US movie industry” or “spend money to US tv industry” (as you see, we like your industries), then to US as a nation, it’s quite irrelevant. Finn is willing to spend 500 eur to your country, and you can choose which industry (tv or movies) gets that money. That Finn is too lazy to work more, so he won’t have more than the 500 eur to spend anyway. That’s all there is for you. And if you cut the piracy option, our imaginary pirate just might start go build ships instead – and then the US movie and tv industry is actually getting 0 eur.

And it works locally too, here’s an example:

If our Regular Joe american is spending 500 dollars yearly on hardware, 0 dollars yearly on software and 500 dollars yearly on shoes – and now is forced to buy software (since movie industry is losing), it means that Joe will spend 500 dollars yearly on hardware, 500 on software and 0 dollars on shoes. So yes, software industry wins, but shoe industry loses.

(Unless of course Joe takes another job, gets +500 dollars to spend on shoes too yearly, and then receives burnout at the age of 29 – then all other industries win, and Joe’s health suffers.)

So, shouldn’t we all become pirates! That way everybody wins, right?!
As said, this is a matter of balance. If everybody would be pirates and nobody would spend a dime in software industry, that industry would die.

If nobody would spend a dime in software industry, then it would mean that other industries win and software industry loses. If software industry dies totally, then it might lead to a scenario where hardware industry gets taxed to support software industry. Or, it might mean that after everybody stopped making software, nobody is buying any more hardware and we are all making ships.

The key point here is that, piracy is not just about “what is wrong and what is right”. This is a matter of allocation of resources.

What do we want to support?

  • Hardware makers?
  • Software makers?
  • Ship industry?

… or health care, or parrot food, or wood leg industry or what. And of course we must remember that nowadays the different industries are so connected that it’s quite damn tough to say how things really affect. For example, if you like this article so much that you go and order my $1 ludum dare mini game thing from year 2010, the following happens:

  • Transaction handler industry receives their share of that dollar
  • I get my share of that dollar
  • Indirectly, Finnish government benefits from that dollar too, as I pay taxes
  • And as my taxes support public health care, there’s some finnish hospital worker who gets his share of this transaction (or the tax money can be used to support roads building or library, or whatever they might do with it)
  • Website server bandwidth thingy receives their share indirectly (as I need to pay that too)

And that’s at the expense of your dollar, which you could use to buy for example sweet cold drink.

It’s your call.

The final point
Please notice that all these numbers are fictional. I think there’s no person living in this planet who can accurately draw the flow of money in gaming/movie industry – and all connected industries. This doesn’t mean it would be irrelevant either. This simply means that “cutting piracy” has effects that affect various industries and arguments about “lost jobs” are shaky at most. I find this sort of legislation quite dangerous to be honest.

If there’s pirates, then there’s more support for example to hardware industry (or any other non-software industry for that matter, since pirates have more money left to spend on hardware, rest of us spent it on software you know). If we stop pirates, then they might take their money to some other industry. Or, if they are forced to buy software, then it means all those *other* industries suffer (like the drink industry which didn’t get your dollar when you chose to buy my game).

I wouldn’t be suprised to see more taxing of “industries that do well” to “support those industries that do poorer”, which practically would mean that we got rid of pirates yes, but thanks to taxation, things are (in industry scale) exactly the way they were before.

And after all, we are talking about entertainment industry here. There are much more important jobs in the world than making games or movies. Firemen, police, mental care, teachers, doctors, nurses, child care… all these are important industries.

I’m not saying that it’s somehow acceptable that certain individuals (or groups) have taken the right to share some one else’s invention without owners permission. Telling “it’s good for all” is simply not true, since it forgets the creator.

I don’t have no more so strong opinion on piracy, whether it’s right or wrong. I do not like the idea of government introducing laws and regulations into this industry. I do think that old copyright ideas might not be suitable anymore, but I do also think inventors should not be forgotten when we praise how good sharing of culture is.

I’m not fan of piracy, but stopping piracy is bit like fighting against windmills – and there’s some indirect benefits from piracy.

I think in the end, it’s an individual choice on how we respect each others effort, and how we balance everything. If we all support software industry, other industries suffer… which also makes software industry suffer (since there’s no good hardware). If we all support hardware industry, then software industry suffers (and then there’s no good software). If too many people join the pirate bandwagon, if too many think “I have the right to do this, as I support hardware industry – I let others support software”, then software industry will be facing bad times. It can mean poorer quality, or bigger lawsuits or other bad things.

I feel that as a person who supports both hardware and software industry – it would be equally nice if those pirates who do not support software industry, would re-consider if they too would like to have some direct support to software industry.

How do you vote?
Every citizen who spends their money to hardware and not on software is directly hoping of voting the following:

  • Hardware quality must get better, therefore I support your industry!
  • Software quality (and all other industries) can suffer!

And every citizen who spends their money on software and not hardware, is directly hoping of voting:

  • Software quality must get better, therefore I support you!
  • Hardware quality (and all other industries) can suffer!

By “hardware quality” I here mean “faster CPU, better gfx card, more memory, faster memory, better screens, etc”. By “software quality” I mean for example “better graphics, better gameplay, better innovations”.

To put other way around: those nasty pirates who don’t indirectly support software industry, gladly support hardware industry – which helps us makers of software industry too, indirectly (they help get cheaper computers, which means you and me pay less for CPUs).

I’m not saying this makes piracy legal or good in absolute sense. As noted earlier, if nobody supports software industry, software industry suffers.

Note to pirates who argue that “they pirate just because want better service”. There’s better way to get better service than boycott. It happens this way. (1) Buy stuff and (2) tell what you want. Sure, boycott might work too, but as a creator I know It’s easier to do better services when you have some money to fund the development of better service.

Naturally, this is only the direct support. As pointed out earlier, direct support to software industry might mean indirect support to various other industries. And of course directly hoping of voting here might not mean better quality products. For example, the maker of hardware might keep the profits and buy ships instead. That’s why you can only hope your money goes to making of better products. Long-term, I think it’s pretty safe to say that “industries that receive support tends to grow”, so your hopes might come true)

We need balance, and perhaps bit more respect towards each others work.

What is certain, that we hell sure should have much more respect for people who do some actual work (and not just watch movies or code magic numbers).

Juuso Hietalahti


  1. That means you’ve added $800 to this industry, meaning you’ve helped boost development of computers with that money.

    Which means that your money has gone for example to research & development of computers.

    Then, the remaining $19 200 (if you really had the purchasing power) has gone to other industries, such as to shoemakers or food or whatever you’ve bought.

    Nowhere I said that “hardware balances software” – the purchasing power you have & use balances among several industries, hardware being one.

    Had you not pirated stuff, you might have not spend that money into computer. I know pirates who buy huge tv screens. Screens are used also in computer industry. Thus, if there’s billion pirates buying tvs… that means my computer screen price will go down.

    This still doesn’t make piracy ok. Just pointing out economical effects of piracy.

  2. I bought my computer 9 years ago for $800.

    I have pirated over $20k in software and media.

    Hmm. Equation doesn’t quite balance.

  3. Yeh, just think about for example people who pirate movies. Those chaps invest in high bandwidth network, expensive tvs… these investments make all that stuff less expensive (aka we game creators benefit since our computer screens cost less)

    It might not be as good as if they’d buy our stuff directly… but shows that piracy is not black & white issue.

  4. People who actually love the game/product so much that they buy it make pretty good sneezers too.

    I do not think this stuff justifies piracy (aka “consuming someone’s creation without giving chap any credit” or “giving money to the distributor who makes it easy to share stuff between each others (aka certain torrent/tracker places which get ad revenue and don’t give a dime to creators)” but, I don’t think it’s so black & white issue hat stopping piracy is the way to go.

    Bottom line still remains, that if nobody buys your game… and your game is distributed by some folks who earn ad revenue from your game, then profitwise it becomes bit tricky (especially for those folks who don’t like the idea of producing more t-shirts & mugs in this planet).

    Anyway, pirates do have some ways of contributing to the industry as a whole, so industrywise getting rid of them might actually have bad effect on total profits (when looked at nation level).

    Thanks for taking time to read and comment.

  5. Interesting point about pirates spending money on hardware, shoes etc, so their money still enters the economy, just not devs pockets. Very true.

  6. “are they really creating enhancements in the quality of the products they serve us”

    I can assure you that modern day video games are *MUCH* better quality than games 20 years ago 8)

  7. The short version of this argument is that you can’t print money. And counting a pirated copy of a product as a direct loss is the same thing as printing money, because not everyone who pirates something would have (or maybe not even could have) paid for it otherwise.

    If I was to pirate a million dollars worth of software, movies and music, those industries *in no way* lost a million dollars in sales, because I never had a million dollars to give them in the first place.

    Piracy is not a good thing, but it is no where near as bad as some try to make it out to be.

  8. Parrot lovers are Seth Godin’s Sneezers: they’re the early adopters who keep hitting refresh on a torrent site to be the first to discover a new game and tell all their friends and family about it.

    And, like most humans, they’ll get in all kinds of familial trouble if they burn a disc of pirated software for their loved ones for Christmas – so they buy the DVD’s, Gift Steam games and pick up EB Gift Cards just like the rest of us.

    You may not get cash from them directly right away, but they’ll introduce you to all kinds of people who do prefer to buy their content both for comfort of clean bug free entertainment and the warm fuzzies of supporting creative peeps. And you’ve got a pretty good chance of converting them to paying members eventually as well.

    Turning parrot lovers into a support network takes a totally different perspective as a business developer. You have to trust that even if they don’t support your business right now directly, they’ll support you eventually or support you indirectly. That kind of trust is scary.

    Awesome article Juuso, and full of great examples! Thanks for taking the time to write it 8)

  9. Your last sentence I can especially relate to and support. Also, why not use our resources on something that’s actually good like helping those that lack the basic necessities in life by donating to UNICEF or something similar, it even makes you happier than buying some crap. Then use our remaining pennies on indie games or something simple.

    The whole economic system is something to question: even when you look at the numbers where a lot of the money is going to the ones with big marketing budgets, are they really creating enhancements in the quality of the products they serve us? At least for me , quality can be much more than prettier graphics or, say, realistic simulation of a sports game. (Go play outside, duh?)

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