To properly account for proprietary software dominance, not only must you take into account the exclusionary nature of rights granted in copyright and patent law, or the networks effects and switching costs, but fundamentally where much of that power comes from, and it's from piracy. The zero cost, wide distribution model that Free software pessimists conclude will limit business incentives is in fact a defining feature of the proprietary software world. It is something they acknowledge, that many have accepted, and in fact carries large advantages to the producers of such software, even as they publicly claim their business declining because of it1. As Free software advocates talk doom and gloom about the inability to sell software and even the potential inability of certain sectors like the game industry to become FOSS due to zero cost, widespread distribution, proprietary companies admit the benefits they get from piracy that are allowing them to sell more software, in some cases to people and places they would not normally be able to reach either due to distribution inefficiencies or the high price of their own software.
As the SSRC's Media Piracy in Emerging Economies details:
In all the countries examined in this report, price competition and service innovation come primarily from competition among domestically owned media industries. The multinationals, our work suggests, simply do not have the incentives to offer significant price cuts in low- and middle-income markets, for fear that these will impact pricing in their larger, more profitable markets. In the software sector especially, piracy assists this policy by providing the vendors a form of de facto price discrimination that generates positive network effects for commercial products, while locking out “free” open-source alternatives. The Ponosov case suggests the complexity behind this balancing act—as well as the pragmatism of the Russian government in angling for advantageous deals with multinationals. The government’s strong stated commitment to open source appears to be just one part of this larger strategy of hedging and dealmaking.As noted in the above quote, such strategy is not unique to any particular country. The main difference between countries like Russia and the US is simply the latters more developed economy and higher income, representing a later stage in the piracy myth propagation in which further rhetoric is used to dissuade piracy and a stronger position from which to appeal for stronger laws to effectively bully companies and individuals to pay licensing costs, all for what Richard Stallman might call an act of kindness if it weren't for the lack of freedom.
Russia, P. 226, Sec2:212
In our view, the Indian experience is consistent with the market development strategy outlined in chapter 1 of this report, in which the major software vendors (1) tolerate high levels of piracy in order to capture market share and lock out open-source competitors and then (2) progressively enforce licenses against the largest public institutions and organizations. Recent licensing deals with state governments in Karnataka and Maharashtra exemplify this second phase of operations, as do volume licensing deals with Hewlett-Packard and other locally- active equipment vendors, which ensure that new machines come pre-loaded with copies of Windows to discourage both pirate and open-source alternatives.
As elsewhere, the licensing deals are a gamble: they push public institutions into the legal software market but also increase the risk of large-scale adoption of open-source software as institutions think about their long-term software strategies. School-based open-source adoption programs, in particular, are widespread in India, with a large-scale pilot program in the state of Kerala providing the template for more recent adoption efforts in Karnataka, Gujarat, Assam, and West Bengal.
And as long as they're going to steal it, we want them to steal ours. They’ll get sort of addicted, and then we’ll somehow figure out how to collect sometime in the next decadeWhat we have here is a paradox of thought. As the Free software community laments its (entirely assumed) inability to sell software in a low cost distribution environment, proprietary software is reaping the monetary rewards of a low cost distribution environment. As the Free software community wonders whether it can become as big as proprietary software with community development models, more and more proprietary vendors are incorporating those same methods into their own model, ever more relying on community testers, documenters, feedback and even contributions, complete with donations even(!).
Microsoft Chairman Bill Gates to students at the University of Washington, in 1998
Not only does proprietary software compete in an environment with free distribution of its own products, it exists in an environment that increasingly justifies it, rejects claims of harm and seeks to address its illegality at the very least in non-commercial forms, without an associated push for freedoms that would allow them to break the shackles of their own making that free software has long recognised. The fact that research and people within the industry recognise the benefits piracy can afford them leaves a push to legitimise at least non-commercial piracy as a process that will result in little true change for the major software vendors.
As I've described before, piracy, sharing or whatever else you wish to call it is in itself not a problem. What is a problem is the blockage in thought, the inability to think past zero cost that stops individuals and groups moving free software into profitable business ventures as a challenge to traditional proprietary norms. What we certainly don't need is to fall back on the myths perpetuated by proprietary vendors after spending 20 years fighting them.
1 The Entertainment Software Association on piracy: http://www.theesa.com/policy/antipiracy.asp
A media piece from Gamepro that also tows this line, with focus on individual pleading about the harm of piracy with no real evidence presented on its effects good or bad: The Cost of Piracy
2Much discussion around FOSS games focuses on the inability to compete with free, typically resigning themselves to some reliance on "all rights reserved" or "some rights reserved" aspect, whether for code, art, or both.
3More and more evidence and research is being built up in this area. In particular see:
Media Piracy in Emerging Economies
Lessons from Fashions Free Culture (Youtube)
The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music: A Study for Industry Canada
Channels & Conflict: Response to Digital Media Distribution, Impact on Sales and Internet Piracy (Youtube)
File-Sharing and Copyright - Felix Oberholzer-Gee and Koleman Strumpf