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The Piracy Equation

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Let's get it out there asap: I have no actual numbers (statistics) so, whatever I say is to be taken with a huge grain of salt. Ok.

Why aren't more developers of DAWs and plugins embracing I-lok protection? Is it cost? Implementation?

Given that most products are cracked within days of release and given that in 20+ years I have met only a very tiny minority of people actually paying for their DAWs or plugins, wouldn't it be far more profitable for developers to drastically lower their prices while making sure their products won't be used for free?

Plugin X sells for, say, $100, but it's pirated and only 5 out of 100 users pay for it. developer gets $500.

Wouldn't it be better to sell it for 40 and have 20 people pay for it - $800? It feels like we, the people trying to do the right thing, are forced to subsidize piracy through the often irrationally high prices....

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The "subsidizing" part is complete gibberish.

If you want cheap DAW, go to Cockos. Justin Frankel has made a fortune selling Nullsoft to AOL for 100.000.000 USD. He doesn't need to make any money from software sales from REAPER for the rest of his life, unless Cockos turns into a larger development corporation with hundreds of employees. Would he have a large number of professional users, the current pricing would not be sustainable.

The idea of the market growing ten-or hundredfold if people would only pay is pure fiction. Nobody knows how many illegal downloads are actually done, let alone how many people would actually pay if they had to, or just leave it alone. Most people just load because they can. Preventing them to do so has no benefit, so the short answer to your question why there is not more ILoking is that it is causing cost.

For half-ways capitalistic license prices, look at AVID. They own more than 2/3 of the market. If they would own 95% of the market, prices would not be lower but higher. See Microsoft.

-S

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The "subsidizing" part is complete gibberish.

If you want cheap DAW, go to Cockos. Justin Frankel has made a fortune selling Nullsoft to AOL for 100.000.000 USD. He doesn't need to make any money from software sales from REAPER for the rest of his life, unless Cockos turns into a larger development corporation with hundreds of employees. Would he have a large number of professional users, the current pricing would not be sustainable.

The idea of the market growing ten-or hundredfold if people would only pay is pure fiction. Nobody knows how many illegal downloads are actually done, let alone how many people would actually pay if they had to, or just leave it alone. Most people just load because they can. Preventing them to do so has no benefit, so the short answer to your question why there is not more ILoking is that it is causing cost.

For half-ways capitalistic license prices, look at AVID. They own more than 2/3 of the market. If they would own 95% of the market, prices would not be lower but higher. See Microsoft.

-S

From your convoluted reply, I see the ghost of Reaper (a great DAW - every bit as good as Samplitude at a tiny fraction of the cost!) is still roaming these forums...lol. And before Tim and friends wet their pants, I would like to point out that it is YOU, Sebastian, the one mentioning Reaper. My original post has absolutely nothing to do with Cockos, Avid or any company/product in particular.

With that out of the way, my point is still very valid: there is no benefit to legitimate users or developers in not protecting their products against widespread piracy. And the "subsidize" part is very real: developers can only stay in business if they generate enough income from the sale of their products. If sales plummet because of piracy, the only way to maintain that income is by charging more for the same product. There is no other way - but my question remains: why aren't more developers embracing I-lok?

Perhaps someone with more knowledge than us can chime in - because there must be an explanation.

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I do not know that sales would plummet because of piracy. It's nothing but projection that suggests so. As I said, there is no correlation between illegal downloads and software license prices. That's pure fiction. If publishers (the devs have nothing to do with the sales anyhow) would increase prices they just would speed up their market exit.

In fact, illegal downloads have a marketing effect that can be proven. The PC as we know it would not exist without them. That effect is morally questionable, and that's why I personally do approve of appropriate license management tools when applicable.

-S

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I think the Samplitude Codemeter was never cracked was it? But then they switched to serial or Codemeter with Pro X and it became available on torrents pretty quickly as far as I understand. I'm not even sure that iLok is uncrackable.

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I do not know that sales would plummet because of piracy. It's nothing but projection that suggests so. As I said, there is no correlation between illegal downloads and software license prices. That's pure fiction. If publishers (the devs have nothing to do with the sales anyhow) would increase prices they just would speed up their market exit.

In fact, illegal downloads have a marketing effect that can be proven. The PC as we know it would not exist without them. That effect is morally questionable, and that's why I personally do approve of appropriate license management tools when applicable.

-S

You do not know that sales plummet because of piracy, but several developers have spoken on the subject and confirmed it as a fact. Slater and the U-he guy come to mind, but there are others. Besides that, common sense would suggest piracy has to affect sales: look at the Waves fiasco: they abandoned Ilok and the entire plugin collection became available (pirated) within a few days.

It's quite hard to believe the argument that those using cracked versions would never buy the products, anyway. That's naive at best, dishonest at worst: there is every indication that at least, *some* fraction of those users would pay for it because they wanted it enough. It's not only clueless teenagers embracing piracy. There is a huge segment of the recording industry using cracked software (go to the average studio and look around).

Finally, the issue of piracy has affected big and small companies - and the universal trend is toward tougher security measures. There is no other choice, really. Given that -so far- Ilok has proven unbreakable, i'd expect more companies to embrace it.

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I think the Samplitude Codemeter was never cracked was it? But then they switched to serial or Codemeter with Pro X and it became available on torrents pretty quickly as far as I understand. I'm not even sure that iLok is uncrackable.

I-lok 2 remains unbeaten until today (may change tomorrow). I know that if I were a developer I'd go I-lok 100% - there is nothing to lose and everything to gain by securing the product(s).

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I think the Samplitude Codemeter was never cracked was it? But then they switched to serial or Codemeter with Pro X and it became available on torrents pretty quickly as far as I understand. I'm not even sure that iLok is uncrackable.

I-lok 2 remains unbeaten until today (may change tomorrow). I know that if I were a developer I'd go I-lok 100% - there is nothing to lose and everything to gain by securing the product(s).

Yes but Codemeter is secure afaik and iLok does scare some legit users off . Personally I'm not crazy about dongles. I have a Codemeter, iLok2 and E-Licenser. So if for example I want to work with a Ultrabook with 2 usb ports I end up having to hang usb hub off it. Although the advantage is that if you do a OS re-install, the dongled software is less hassle to re-install. It's murder going though all the serials etc re-installing the non-dongled software. Anwyay I think pirates will always pirate and the consciencious will alway buy software.

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It's quite hard to believe the argument that those using cracked versions would never buy the products, anyway. That's naive at best, dishonest at worst: there is every indication that at least, *some* fraction of those users would pay for it because they wanted it enough.

I don't see that anybody would maintain that nobody using illegally would never buy. For your claim however, disputing that argument is completely insufficient. Instead, it would be required that the potentially paying fraction

- would be significant among the illegal downloaders

- would be significant in comparison of the total (paying) existing market.

I have not met anybody so far who would put any substance to these conditions, and I haven't seen you trying in the least.

There is a huge segment of the recording industry using cracked software (go to the average studio and look around).

There is a huge segment of recording (industry?) not making any money with their work (go to the average studio and look around). Obviously, these people are not a go-to market.

I-lok 2 remains unbeaten until today

Codemeter is in the market for 10 years, uncracked. Ilok was cracked, Ilok 2 is in the market for how long? Less. So, Codemeter beats Ilok2, no?

-S

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BTW Codemeter have a micro dongle as well ( I have one) which is really unobtrusive. Same size as the wi-fi dongle for Logitech Mouses. Fits on a keyring very easily.

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You do not know that sales plummet because of piracy, but several developers have spoken on the subject and confirmed it as a fact. Slater and the U-he guy come to mind, but there are others.

Obviously you are sharing allegations made by others. No software publisher has numbers on the sales he did not make. The assumption that an illegal download equals a lost sale is incorrect, no matter made by whom.

It may well be that Waves lost sales in the moment they lifted the curtain on their copy protection. However, neither do I assume they were so naive not to expecting something, nor does it prove in any way that a difference went to illegal channels. There are other reasons, and as I said earlier, this industry is short on statistical data anyway. Specifically, someone who cares about saving 3 $ cost on copy protection doesn't spend 30.000 $ on the proof of the pudding.

-S

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It would be impossible to prove how many sales are lost to piracy, the same way no record company could prove how many sales were lost to bootlegged cds (they tried by going after the manufacturing numbers). Common sense would indicate that there is serious damage done for the simple reason that most people would simply download the cracked version if given that choice vs paying full price.

If you don't think piracy hurts developers, there is no conversation to be had. We will just agree to disagree, as they say...lol

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I've got 2 things to throw in here:

1. We're experiencing major fuckups with Pace here. Every once in a while, their signing process goes haywire and permits our build servers from successfully building and signing the AAX versions. We have several accounts (on several iLoks) and it's happened several times that only one remained active while others got blocked for no apparent reason. During the build process, it's mandatory for these to phone home. Well.

We also suffered badly from the 'ilokalypse' that hit the music production scene a while ago (you may google that...) where Pace knocked us out of ProTools business even longer than for the downtime the end users experienced back then. That's a pity for Avid who get miscredited regularly although it's Pace' fault.

2. We haven't been cracked for several years. All the recent u-he cracks out there don't work. Period. They might work at first glance or even be ok for the occasional user but what we're interested in is to have customers that work with our stuff on a regular basis.

We can say that our efforts definitely pay off. On every special day per month, it is 'ACE day', where a deep check within ACE kicks in, and we immediately have sales spikes afterwards. We also had the same in July where people used serials from one of the big warez places, which led to one of the most successful months in our company history, because they were bought with a stolen credit card and we blacklisted them (where our deep checks kick in again when people least expect them). What makes it annoying for those people is that we don't do stuff right away so that they feel safe and start investing a great deal of time in their music. Again, we want the 'power users', and we apparently get lots of converts this way.

If interested:

http://www.kvraudio.com/forum/viewtopic.php?p=5756335#p5756335

Urs:
"Well, we're facing two different problems: Leaked serial numbers and cracks. Leaked serial numbers can be met with updates. We make updates that seem to work for a while but then, well, don't. In the meantime nobody knows which versions of our software worked with the leaked serials and which don't. So most of them blow up at some point, usually shortly before x-mas.

Cracks is a whole different story, and we found a very simple yet efficient answer: Analyse how users use the software (casual vs. power user) and only if it's a power user, do another 4-lines-of-code serial check (do so in 10 different areas, once a month or so). It's a simple heuristic, it's simple means, but they are damn hard to find for someone with a classical toolset (IDA Pro, OllyDbg etc.). Hence there has not been a working crack of a release version in 8 or so years. There has been a supposedly working crack once of a beta version a few years ago, but that has been long forgotten by the trackers and we had it removed from all filehosters.

Therefore we can proudly say: The only usable warez of our stuff is either buggy betas, or really, really old versions. Not much to worry about."

And:

"If anyone is interested, I checked traffic from "expired demos" a week ago. We had about 250 unique visitors which we could match to 20 or so sales. That's pretty consistent with previous months. So we actually make 2000 bucks from people who thought that our stuff was cracked. Each month. And that's only those who click the buy now link in the software.

In the meantime I think we have 10 different "delayed checks" in our software, each taking up 10-30 lines of code and no measurable CPU. The most of these checks that was ever cracked away was 4, by Team R2R, who since gave up on us, like Assign, Beat, something with D, something with A, Union, AiR and god only knows who before.

As I said, the only thing out there that's usable is an old beta with a crash bug. Good luck working with that icon_lol.gif"

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Another issue is that many people are turned off by the hit on resale value when something has been cracked. It's comforting for me to know that I can sell the licences for some of my dongle protected programs without a huge loss. I'm currently weighing up Pyramix and Sequoia. The copy protection in Pyramix gives it an edge. Although I will buy Sam ProX2 if I don't buy Sequoia.

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I've got 2 things to throw in here:

1. We're experiencing major fuckups with Pace here. Every once in a while, their signing process goes haywire and permits our build servers from successfully building and signing the AAX versions. We have several accounts (on several iLoks) and it's happened several times that only one remained active while others got blocked for no apparent reason. During the build process, it's mandatory for these to phone home. Well.

We also suffered badly from the 'ilokalypse' that hit the music production scene a while ago (you may google that...) where Pace knocked us out of ProTools business even longer than for the downtime the end users experienced back then. That's a pity for Avid who get miscredited regularly although it's Pace' fault.

2. We haven't been cracked for several years. All the recent u-he cracks out there don't work. Period. They might work at first glance or even be ok for the occasional user but what we're interested in is to have customers that work with our stuff on a regular basis.

We can say that our efforts definitely pay off. On every special day per month, it is 'ACE day', where a deep check within ACE kicks in, and we immediately have sales spikes afterwards. We also had the same in July where people used serials from one of the big warez places, which led to one of the most successful months in our company history, because they were bought with a stolen credit card and we blacklisted them (where our deep checks kick in again when people least expect them). What makes it annoying for those people is that we don't do stuff right away so that they feel safe and start investing a great deal of time in their music. Again, we want the 'power users', and we apparently get lots of converts this way.

If interested:

http://www.kvraudio.com/forum/viewtopic.php?p=5756335#p5756335

Urs:

"Well, we're facing two different problems: Leaked serial numbers and cracks. Leaked serial numbers can be met with updates. We make updates that seem to work for a while but then, well, don't. In the meantime nobody knows which versions of our software worked with the leaked serials and which don't. So most of them blow up at some point, usually shortly before x-mas.

Cracks is a whole different story, and we found a very simple yet efficient answer: Analyse how users use the software (casual vs. power user) and only if it's a power user, do another 4-lines-of-code serial check (do so in 10 different areas, once a month or so). It's a simple heuristic, it's simple means, but they are damn hard to find for someone with a classical toolset (IDA Pro, OllyDbg etc.). Hence there has not been a working crack of a release version in 8 or so years. There has been a supposedly working crack once of a beta version a few years ago, but that has been long forgotten by the trackers and we had it removed from all filehosters.

Therefore we can proudly say: The only usable warez of our stuff is either buggy betas, or really, really old versions. Not much to worry about."

And:

"If anyone is interested, I checked traffic from "expired demos" a week ago. We had about 250 unique visitors which we could match to 20 or so sales. That's pretty consistent with previous months. So we actually make 2000 bucks from people who thought that our stuff was cracked. Each month. And that's only those who click the buy now link in the software.

In the meantime I think we have 10 different "delayed checks" in our software, each taking up 10-30 lines of code and no measurable CPU. The most of these checks that was ever cracked away was 4, by Team R2R, who since gave up on us, like Assign, Beat, something with D, something with A, Union, AiR and god only knows who before.

As I said, the only thing out there that's usable is an old beta with a crash bug. Good luck working with that icon_lol.gif"

Thank you for shedding some light and for providing some actual numbers. It's pretty clear that piracy does impact sales negatively.

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It's pretty clear that piracy does impact sales negatively.

At least in the u-he universe. And frankly, I'm glad Urs cares. We're small, but already 10 people, and can't distribute the risk like big or multi-market companys can.

Another issue is that many people are turned off by the hit on resale value when something has been cracked.

Apart from trying to stay uncracked, keeping a product's value is an important thing. Urs never did sales, and no edu discounts (although constantly asked for), which is a principle nailed in stone here. Zebra costs the same than 10 years ago, which is good for resellers.

What I personally see more of a rising problem is that people begin to think audio software has to cost sigificantly less, since mobile apps are so cheap. It's become harder to justify a plugin's price of, say, 100$, when you can have a full-blown sequencer or guitar-suite app for $4.99 or so.

[Oh, that reminds me of those nights Urs & me used to spend with Jürgen from Jomox (of X-Base fame) who kept saying we software guys are destroying the hardware market... that was many years ago... I'm glad he's still around...]

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What I personally see more of a rising problem is that people begin to think audio software has to cost sigificantly less, since mobile apps are so cheap. It's become harder to justify a plugin's price of, say, 100$, when you can have a full-blown sequencer or guitar-suite app for $4.99 or so.

I do believe prices are terribly inflated (partially to compensate for piracy-related loss of income, partially because people assume more expensive *always* equals better,etc.). That said, prices will follow the natural course of market saturation (it happened to Adobe Photoshop plugins): as the bundled DAW plugins become better, users will have less of an incentive to buy from the myriad third-party offers. Only the really good ones will survive - and that's good for everyone.

BTW, there is only so much "tape saturation" "ssl emulation", "vintage sound" (read: distortion), etc. that can be marketed to poor souls out there. Why would people look to replicate the worst aspects of old technology???? - the Beatles did not succeed because of "saturation" - they succeeded *in spite* of it; if the top engineers of yesteryear had FabFilter's EQ-2, 99% of them they would sell their Pultecs in a second, but that will be a topic for another day...lol...

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I think that Sascha rather gave an example how to utilize cracks for marketing. In that way, cracking is helping their business, not harming it. Not that I really approve of such business practises, but they seem to work.

Did U-HE reduce their sales prices already? Pobably not. 2000.-/m is about 1/3 monthly cost for a junior developer. A large share is eaten by the copy protection as well. Sascha mentioned substantial effort. (maintaining PACE, researching crack groups, setting up deferred checks, ...)

-S

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I do believe prices are terribly inflated

The audio market is really small. If you want to make serious money, it's somewhere else. Obviously, software mainly depends on the scale factor. On the other end, "terribly inflated" could start at 0.99.

-S

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I think that Sascha rather gave an example how to utilize cracks for marketing. In that way, cracking is helping their business, not harming it.

That's what I call a positive spin....lol...

Not that I really approve of such business practises, but they seem to work.

I don't think it is a "business practice" - rather it's their way of combating piracy. Plain and simple.

Did U-HE reduce their sales prices already? Pobably not. 2000.-/m is about 1/3 monthly cost for a junior developer. A large share is eaten by the copy protection as well. Sascha mentioned substantial effort. (maintaining PACE, researching crack groups, setting up deferred checks, ...)

No, but al least their products are not losing their value. You can re-sell them because they are not available for free. Great benefit to users. Try selling your copy of Sequoia, Samplitude or Waves - good luck!

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I don't think audio production software prices are inflated in the slightest.

I've never heard of anybody getting rich back in the '90s when everything was five times more expensive. Very few DAWs are still under their original ownership and you can bet no audio developer has ever willingly sold out to a larger company. If they were only interested in making money, they've always been able to earn far more outside of audio.

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I think that Sascha rather gave an example how to utilize cracks for marketing. In that way, cracking is helping their business, not harming it.

That's what I call a positive spin....lol...

Not that I really approve of such business practises, but they seem to work.

I don't think it is a "business practice" - rather it's their way of combating piracy. Plain and simple.

Did U-HE reduce their sales prices already? Pobably not. 2000.-/m is about 1/3 monthly cost for a junior developer. A large share is eaten by the copy protection as well. Sascha mentioned substantial effort. (maintaining PACE, researching crack groups, setting up deferred checks, ...)

No, but al least their products are not losing their value. You can re-sell them because they are not available for free. Great benefit to users. Try selling your copy of Sequoia, Samplitude or Waves - good luck!

U-he don't do sales. Never had and probably never will (Urs is very stubborn on this, maybe his Northern nature). It's carved in stone here. Not even edu licences. I'm often the first in the office here and there's rarely a morning where nobody's on the phone trying to persuade us to do discounts for music schools or teachers. We're explaining we try to keep things low enough for everybody to afford, given a certain quality and effort put in. Thing is, you can't tell people to invest in your products when they're on sale for a fraction of the price a couple of months later, which is common business practice among the 'big' plugin players. As soon as I explain Zebra still costs the same as 10 years ago and updates are free, they're usually convinced. But you probably can only do that when you're small enough and niche and have customers buying the entire portfolio (strange, but happens more often than we thought).

Sebastian, please don't see things from the wrong end. We're not happy with piracy at all. In fact, it bothers us big time. When there's a happy ending and we get sales, we're fine. But only for the moment. Of course we could spend the day much better. But at least, our scheme has proven to be bullet-proof - it's not only a technical thing but also psychological, we got deep insights to the cracker scene meanwhile and how they 'tick'. A couple of devs already follow our routes and observations, and Urs already considered releasing it as public domain.

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Hi Sascha,

isn't it finally as I said initially: if you take into account how much effort and nerves go into it, the 24.000 added turnover are nothing to write home about for a 10-people company. OTOH, why should you be obsessed about the crackers? You can't get more of them, either. And you have tried at least.

-S

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Hi Sascha,

isn't it finally as I said initially: if you take into account how much effort and nerves go into it, the 24.000 added turnover are nothing to write home about for a 10-people company.

Nah, it's not too much effort. It's mainly Urs, and we're harvesting the seeds he's sown years ago. Jan and me just include a hash file and flip a switch. That's all, set & forget.

It really seems the groups have given up on us. Either we're smart asses, or they're just fed up. It's a bit like in our business: non-working stuff creates support cases. A lot of 'your stuff doesn't work' shouts adds up to all the whiners in their forums begging for this or that as crack, 'pleeeaaazzzeee!'. One of the group eventually parted because of the scene demanding too much for their taste, at least that was what they wrote in their final .nfo file. That was almost cute.

Anyway, I was trying to point out that communicating you care and relate to customers' fears of losing invested value is important, IMO. That's way more than 24.000 added turnover, it's a great part of the company's business ethics and drives both sides onward.

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Anyway, I was trying to point out that communicating you care and relate to customers' fears of losing invested value is important, IMO.

You can't cut prices for that reason. Even if 1,000,000 pirates would convert to paying users all of a sudden. Instead, you would need to have those conversions per month, and end up buying Apple from all the cash.

-S

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