In the olden days, a pirate looked like this, and he stole treasure, jewelry, gold and silver.
Nowadays, a pirate doesn't need a black eye patch, a sword or even a wooden leg.
All you need is a floppy disk and maybe a little ingenuity.
We'll take a look at software piracy coming up on The Computer Chronicles.
The Computer Chronicles is brought to you in part by McGraw-Hill,
publishers of Popular Computing, the magazine that gives readers an understanding
of the technology and applications of microcomputers and software in office, home and classroom.
Welcome to The Computer Chronicles. I'm Stuart Shiffey and this is Gary Kildall.
And Gary, the subject today is software piracy.
Gary, I know a guy who at home has this tremendous collection of software disks piled high,
and he proudly boasts to me, I didn't buy one of them.
Now, from your perspective as somebody in the software business, how serious is the piracy problem?
Well, Stuart, it's a very serious issue.
The problem is that as a software producer, you can't tell how much you're going to sell
versus how much is going to be stolen.
And as a result, the prices just go up to take care of that difference.
Now, if we can control piracy, then we can control the customer base we're working with,
we know how many we're going to sell, and as a result, the industry will stabilize
at probably a lower price level, much like the record industry.
So I think the issue right now in terms of mass marketing of software
is just how much can you control in terms of the piracy issue.
Okay, on today's program, we're going to meet a software pirate,
we'll meet somebody who sells a utility that helps you defeat copy protection,
we'll meet a lawyer who raided one of the largest pirate groups here in the Bay Area,
and we'll talk to a software company executive.
Now, some people say one of the problems with piracy is that software is so expensive in the first place.
Why is it so expensive? We have a report.
Behind much of the discussion about the rights and wrongs of piracy is a recurring question.
Why do software programs cost so much?
What can possibly justify the $500 price tag on a floppy disk that took a few minutes to duplicate?
In fact, except for the box it comes in, it looks like any other floppy disk.
But for the publisher, the production costs of that disk are easily measured.
The biggest expense, of course, is in programming development.
A top category word processor can take a year and a half of development time,
relying on a team of over 60 people.
The development team shares activities.
Source code development, screens and help systems, and instruction manuals
are all interdependent at various stages.
Prestigious software houses also stress their documentation and on-screen tutorials,
all part of extensive customer product training.
The impetus for the product's design comes from a large marketing department.
Advertising, package design, and merchandising devices add another expensive layer of cost.
And when you add the extra costs of disk reproduction, typesetting, printing, and distribution,
the overall cost of getting the program to the customer rises to several million dollars.
To an advanced user who buys software by word of mouth or by trying out a friend's copy,
the elaborate ad campaigns and customer coddling may seem like overkill.
On the other hand, the first-time computer user may demand it.
In any case, the expenses are considerable and genuine.
But for the user, that doesn't make the prices of software any easier to pay.
With us now is Mark Pump.
Mark is the president of AlphaLogic Business Systems, makers of a utility called LockSmith
that helps you copy software.
And next to Mark is Smith McKeithin, vice president of Activision,
a company which makes software and probably would rather not have it copied.
Gary?
You know, Stuart, there is a difference between the audio and video dubbing, or copying, business, I suppose,
and software, in the software industry, because the 20th copy of a program or data is just as good as the very first copy.
Now, I think of something like Activision as really being in the ROM cartridge business,
but I guess you've moved away from that.
How do you view the whole piracy issue from Activision's standpoint?
Well, Gary, the issue of piracy is one of our intellectual property being essentially ripped off by people
who haven't put the intellectual or financial investment into creating that.
It takes from 1,500 to 2,000 hours to create a piece of quality software,
and that's an investment just like the investment an author makes in writing a book
or a producer or director makes in putting on a movie.
And when someone takes that product and copies it and tries to market for cents on the dollar,
it means that the creator of the software, such as a David Crane in our business, is working for nothing.
Well, do you differentiate that between someone who's going to copy and then resell
versus someone who's going to copy and give to their friend?
No, I don't make any difference between the two,
because I believe that both people suffer from essentially ethical blinders.
It's as if I took a Porsche that I never wanted to drive, but I slipped it past a security guard.
Even if I didn't drive it or if I gave it to a friend, that would be stealing.
And that's the same thing that happens to a company like Activision
when someone uses its software in an unauthorized manner.
Okay, now, Mark, from your side,
don't users sometimes have a legitimate need to make copies of a program?
Yes, without a doubt, the user has a legitimate need to make a copy of a program.
If he's using his original copy and for some reason the copy becomes unusable,
he's left without a program that his business might very well depend on for its day-to-day operations.
Being without the software is in many ways being without an important part of his company.
Well, it seems like there's also just a very basic need that some people have in taking a diskette
and copying it over to hard disk.
It's a very simple operation that you need to do a lot of times, say, on an IBM PC.
Yes.
Now, tell us about Locksmith. What does it do?
Well, Locksmith is a program that makes an identical copy of the original disk,
unlike what you might have heard about breaking a piece of software,
breaking the protection, which involves removing the protection
and in most cases removing any serial numbers and copyright notices that the software contains.
Locksmith makes an identical copy, retains the protection,
it retains the copyright notices, retains the serial numbers.
It makes an identical copy, an identical protected copy of the original piece of software.
Okay. Now, Mark, I think you have here in the Apple a piece of software which we don't want to identify,
but you're going to show us this piece.
You're going to make a copy of it with Locksmith,
even though we otherwise could not make a copy of this disk, right?
Yes. Locksmith, because of the way it works, it is not a very fast utility.
It takes between eight and ten minutes to make a backup copy of a piece of software.
This does not easily lend itself to the pirate who needs to make copies much faster.
Typically, the pirate, for this reason, will break the software.
Still, an eight-minute backup is, for many people, a lot cheaper, I guess,
than going out and paying the extra $40, right?
Well, yes, yes, it is, of course, used for that.
The idea of the backup disk is you make one backup, store the original away and use the backup.
When your backup becomes unusable, you have the original to make another backup copy.
Isn't that the real issue, that if you could control the use of, say, Locksmith,
then things would be a lot better?
You could say, well, this is only used for backup purposes,
not used for distribution of additional software.
So some people would say that Locksmith would be, say, a pirate's tool for copying software.
What would be your view of that?
Well, in our advertisements and, in fact, in the manual,
we encourage users to use it only for legal purposes.
Of course, there are people who use it for pirating,
even though there are much better ways to pirate software than using Locksmith.
Okay, show us how you'd make a copy of this uncopiable disk then.
Basically, you identify the disk drive that your original is in,
the disk drive that your copy diskette is in,
the range of tracks that you want to copy, a few other questions answered,
a prompt here to insert the disks, and it starts copying.
Now, that seems awfully easy, Smith, from your point of view.
How do you react to a product like that?
Well, the problem with a product like this is that this kind of product
just facilitates people getting into intellectual property and stealing it.
It makes it much too simple for them to do it.
And if, in fact, a user of, say, one of Activision's products has a problem with this product,
he only need call us on an 800 toll-free line or send the damaged product in, and we'll replace it.
We have a year-long warranty on our products. We stand behind them.
We receive over 3,000 pieces of mail a week from people who use Activision products
and want to know about upcoming products.
And these people have formed a bond with us, which we will not ignore by not giving them good service.
And all the responsible software manufacturers follow that same trend.
So there's no need for a product like this in the event of someone having a damaged product that they want to use.
Well, again, I think it goes back to the issue that maybe the software providers,
people who write the software initially, aren't really allowing for the possibility of a backup for a legitimate user.
At least I've run into that particular problem myself, that you go back to the diskette over the hard disk.
There's programs I just simply can't use because I have no way of getting them onto a hard disk system,
which is where all my programs are located.
But have you talked to the manufacturer about that?
Oh, sure. And then they say, well, they have no way of controlling the distribution of that kind of thing,
a backup, again, opens up the possibility of illegitimate copying.
Well, there may be a tension in the system, but the problem is that a product like this and the wide use,
the wider than we like to have use of illegitimate copies, really can, in the long range,
spoil the production of creative intellectual product for everybody.
Absolutely.
And that's a zero-sum game.
Well, Mark, what about that? I mean, do you have any feedback on how your product is, in fact, being used?
Well, without programs like Locksmith, pirating would, in fact, still exist.
Sophisticated computer users, so-called hackers, don't need programs like Locksmith.
They have the technical expertise to break or remove the protection from the software
without actually making an identical copy of the original disk.
I don't know whether that's true for real or dyed-in-the-wool pirators, but I think that they're,
I've experienced this myself because I have a 15-year-old son who's involved.
Now, I've tried very hard to keep him from copying software, and he's very good at that,
but I see a community of, say, relatively unsophisticated users of that age group that do some copying.
And I don't think, in many cases, they would be doing it if they didn't have programs available to unlock some of these things.
Well, one of the largest users of Locksmith is schools.
Educational software is not cheap, and teachers feel reluctant to take their only copy of an expensive piece of software,
put it in their students' hands, and allow it to be either stolen or damaged by sharp objects,
magnetic fields, what have you.
Most schools that buy Locksmith use Locksmith to archive.
They make a backup copy of the original, archive the original, and let the students use the backup copy.
Thank you, gentlemen.
Now, in just a minute, we're going to meet Captain Crunch, one of the original pirates.
We'll meet a current-day pirate, and we'll meet a lawyer who busted the West Coast Computer Connection,
an alleged band of pirates.
That's coming up next.
[♪upbeat music playing♪
With us now is Captain Crunch, whose real name is John Draper.
John was called a pirate when that referred to stealing long-distance telephone calls rather than software.
And sitting next to John is Neil Smith.
Neil is a partner in the firm of Limbach, Limbach & Sutton, and Neil might be called a pirate buster these days.
Gary?
Yeah, John, I guess the phone-freaking of the 60s is sort of the computer hacking of today's date.
And you were, I guess, what we'd call a phone cracker, and you got into the system and so forth.
I guess you'd be considered a pirate in those days.
Now you've moved into being a software vendor now.
You're the author of EasyWriter.
You're working on a lot of Mac software.
How do you feel about software piracy?
Well, it's definitely a problem, and the problem is probably because of the very high cost of the software.
And the reason for that, of course, is that programmers can't work for nothing,
and the cost of development is very, very high.
And with that in consideration, this is the reason why a lot of programmers are reluctant to come up with good software.
Freeware seems to be the best way to go all around.
It eliminates a lot of the problems caused by the copy protection thing.
Freeware has the problem of the support around it, though.
Right, exactly, and you must really support the product in order to come out with Freeware.
Takes a lot of dedication.
And only for those people that mail in their $20 or $30 checks will get the support and the licensing to run the program.
Neil, would you agree about this problem of expensive software?
Well, I think we have somewhat of a chicken or egg problem because if you look at the marketing of software,
you'd find that one of the reasons software has to be marketed so high is to recoup those high development costs,
the amount of money it takes to develop that software in order to get good software that has the bugs worked out.
Or you had a reasonable ad campaign.
Well, that's right, to do that.
And if the manufacturer could count on everybody who uses programs buying one, that cost could drop dramatically.
And I think in many cases we're fooling ourselves in blaming the high price because in many cases,
if that could be spread out, everybody would buy one.
It would be very much like records, perhaps $10 a piece rather than quite a bit much more.
Neil, we've been trying to get a handle on the volume of this problem,
and you happen to have a catalog there from the West Coast Computer Connection.
Show it to us.
Right, let me show you this.
This is one of the more brazen operations.
This is a multi-page catalog listing just scads and scads of titles of pirated software documentation,
including some of the cracking programs and locksmith.
It's interesting, locksmith is on both sides of these.
They have a problem with their proprietary software being pirated as well.
Okay, what was the West Coast Computer Connection doing and what happened to them?
Well, what they were doing was they were marketing mail order.
They were making contacts, not through bulletin boards.
This was a few months ago, not through bulletin boards that we knew about really,
but through the advertising and through the marketing catalogs being distributed.
And what we did there, it turns out this happened to be,
and I'm not saying everybody is going to get by so easily,
but it happened to be some juveniles, and because of the concern about that,
we really went over and visited them and explained the seriousness of this,
and they agreed to cut it out.
We had written an agreement from them that they would discontinue it.
The remedies under the law are much stronger, and we may want to talk about that.
Thank you, gentlemen. We'll be back in just a minute.
As we heard, some people suggested if software were cheaper,
then there wouldn't be the motivation to have piracy.
Wendy Woods took a look at that idea.
Overlooking the San Francisco Bay and here in this little garage
is one of the most revolutionary software businesses in the United States.
Welcome to Hedlund Press.
This is the home of Freeware, specifically PC Talk,
a communications program that's not copy protected.
In fact, each shipment encourages piracy.
You can copy freely every single diskette in a unique approach to software sales.
I think what we've done is just address the whole notion of copy protection and piracy
in a different way, and rather than restricting access to the program
and appealing to people's dishonesty,
we're giving wide access to the program and appealing to their honesty.
This mom-and-pop operation claims one out of ten people who copy PC Talk
will pay the suggested $35 fee, and their letters tell the tale of appreciation.
Well, all this is fine and good, but what does it mean for support?
That's usually the biggest part of a software company's budget,
and Hedlund Press stays on the phone quite a lot.
What do they do if people haven't paid for the program?
We really found that we did better business by giving out the information,
and if someone was using it and hadn't paid,
we could help them use the program, then they'd be more likely to pay us.
Flugelman thinks the rest of the industry should take a lesson.
He's getting important feedback, business, and appreciation because of his philosophy.
He's not getting rich, but he is getting a surprising amount of gratitude.
Reporting for the Computer Chronicles, I'm Wendy Woods.
Thank you, Wendy.
Joining us now is a young man who we're going to call Frankie Mouse.
That's not his real name, but the guy we're calling Frankie Mouse is a pirate,
and he's going to show us quite an incredible demonstration. Gary?
You know, Stuart, I think it's one of the important things we should mention
is that by showing these activities on the show here,
we're not really condoning them in any way.
In fact, we're not condoning them at all.
But I think it's a rare opportunity for us to get a chance to see
just exactly what pirating is all about.
So, Frankie, what's going on here?
Okay, we're logged onto a bulletin board right now,
and what you see on the screen are titles of text files that you can look at.
The ones of interest right here are like Basics of Cracking 101, et cetera.
If you're not already a pirate, these will tell you how to.
Who's the person, how does he have a cell phone?
Basically, yeah, there's many, many parts to it.
In fact, not all of it is displayed here. There's much more than what you see here.
And these are Apple II-oriented.
If you want to look at one, just type the number of it,
and it will start scrolling across the screen right here.
I would like to have brought a 1200-watt modem. It would have gone a lot faster.
Okay, so this is one of your how-to text files on a kind of cracker.
Basically right. Well, first of all, they're not mine.
Somebody else has written these, and basically they go all over the country.
This is a bulletin board, a local bulletin board that people dial into from,
let's say, all over the country.
So how many people, let's say, would be involved in this particular activity here?
Well, it all depends on the board.
Some boards have got as few as 100 members.
Some have got as few as 2,000 and 3,000 members.
Okay, now, so can we go on this bulletin board and actually get a piece of pirated software?
There are items like that that exist.
For the Apple II especially, they're called AE lines.
And that's not really a bulletin board,
but it is a way of allowing you to call that computer
and download files that have already been cracked.
This particular bulletin board does not have anything like that.
How many bulletin boards are like this throughout the country, just as a guess?
Do you have any idea at all? Hundreds or?
I think thousands. I have really no idea.
They're all over the place, though.
How do you feel about that? Do you feel like it's a—why do you do this?
What's the reason?
Well, unlike West Coast Computer Connection here, we don't do anything like that for profit.
Basically, it's just for fun and recognition.
If you have a popular name, such as—you mentioned the name Mr. Crackman to any pirate,
and they'll know who you're talking about.
They won't know who he is personally, but they'll know who you're referring to.
So your interest is, I guess, in the fun that you would have in actually cracking the program,
and that's the activity that—
It's kind of like a game. Right. You're outsmarting the software makers.
Do you feel like that has any—are there any moral issues at all that you're worried about?
Well, you can't deny it. I guess it is stealing.
I mean, you didn't pay for it, and now you have it.
I mean, you've got it somewhere. That's stealing.
I really can't say, though, how much software companies lose in revenue,
because, first of all, a copied program is like free advertising in a way because it goes out.
And among me and my friends, we have sort of a code of honor that we follow.
If we have a program and we use it a lot, we like it, we will go out and buy it,
simply so we have the manuals and the support and all that stuff.
Frankie, if you could log off here, and I want you to show me your Pirate of D.D. Master in a second.
Neil, while Frankie's doing that, how do you react to what you just heard from Neil
as a guy who represents software publishers?
Well, I think there's both a moral issue here and a legal issue.
We talked about before, and Frankie didn't hear that, but he may catch it later,
really the fact that people are using this software and not paying for it
really means the software is a lot more expensive.
I think there's an economic issue here that they really—
if everybody was using it, paid a small amount, we'd probably have the price drop dramatically.
The second part is the legal, and I'm happy to hear Frankie admit that it is in fact stealing.
It is in fact a criminal act.
There's a copyright infringement, has been a crime and continues to be a crime.
You can get a year in jail, perhaps more monetary fines, as well as use of trademarks.
We do use the name of the trademark when you have a new criminal statute,
criminal counterfeiting statute that provides up to five years in jail.
Okay, let's go back to Frankie. What do you have here now, Frankie?
Okay, this is a popular program for the Apple II known as DB Master,
and it's protected like crazy. You can't copy it conventionally.
What did you do?
What we've done to it is we've totally opened it up.
I mean, you can copy it from BASIC right now.
There's no protection whatsoever.
One thing that we found that was interesting when we did it
is that DB Master is written for a large part in BASIC.
I mean, most commercial programs are written in assembly language.
It crosses the confidence we're now listing now.
What would it take, Frankie, for you to buy a program?
I'm not sure I understand what you're asking.
Rather than steal it.
Is there any incentive that a manufacturer could provide for you to buy that program?
Well, like I say, if I have a program that I use a lot,
I'll buy it for the manuals and for the support.
So I guess what I could say is to put out good manuals and support the product.
Okay, gentlemen, Frankie and Neil, thanks a lot.
Now, as we see, this is a complex issue with problems of morality and ethics and price and so on.
Commentator Paul Schindler has some thoughts on the whole problem of piracy.
Avast! I'll bet you never thought of old Paul Schindler as a pirate.
But you know, there are some people who do.
And that takes us to the heart of the software piracy question.
Is it moral or isn't?
Now, that's a hard question to answer, but I can tell you that software piracy is illegal,
and the definition is pretty simple.
It's piracy if you give away a commercial software program.
That's right. You're a pirate even if you give it away.
Now, most people don't think it's immoral unless you sell the program.
Those two views are irreconcilable,
and they cause a great deal of controversy in the software industry.
As a result, software developers are constantly looking for ways to prevent software piracy.
One of the most common, and the dumbest, is copyproofing.
Copyproofing causes a lot of problems that I'm not going to get into right now.
But the fact of the matter is that what's worst about copyproofing is
that it attacks the symptoms, not the cause, of software piracy.
In my opinion, high prices cause software piracy.
Now, I know that Lotus costs $700 because the developers want to make their money back.
But the fact of the matter is that corporations can afford prices like that,
and private individuals can't.
Whether it's moral or not, expensive software is pirated a lot more frequently than cheap software.
So my solution to software piracy is for developers to figure out a way to make cheaper software.
That's my opinion. I'm Paul Schindler.
In the random access file this week, imagine it's April 15th, almost midnight,
and instead of rushing down to the post office to drop in your tax returns,
you simply turn on your modem and download the old 1040 to Uncle Sam.
The IRS says it is looking into electronic tax filing, including sending in a return on a floppy disk.
One IRS analyst said, you thought there could be electronic filing within five years.
Meanwhile, just like Christmas baubles in October, software store shelves are filling up with tax preparation programs.
There are an estimated 50 tax programs in the market this year,
ranging in price from about $50 to more than $300.
Some just help you prepare your returns, others actually help you in tax planning.
Here's a list of five of the most well-known tax programs and their prices.
Most of the tax software is available for the IBM PC and the Apple line.
The IRS, by the way, has cracked down on the rules regarding tax deductions for home computers.
Under the revised law, you can only take the full tax deduction for your PC
if you use it at least 50% of the time for legitimate business purposes.
And using your computer to analyze personal investments will not count as part of that.
Best to check with your accountant.
Well, along with electronic tax filing, electronic job finding is growing.
There are now five online job databases in the country.
Business Week magazine says employers are warming to the efficiency of doing online searches for prospects
since they can add or subtract qualifying criteria and so narrow or broaden the pool as needed.
American computer manufacturers are poised for the impending invasion of the Japanese MSX computers,
but no one seems too worried.
Most analysts seem to think the Japanese PCs will offer too little, too late.
MSX machines were introduced in Europe late last year and have so far received a cool reception.
How about a warm reception for our software reviewer, Paul Schindler.
If you don't recognize these moves, you probably never played pinball.
Now, I'm not talking video games here. I'm talking the real thing.
A little steel ball moving down through a gadget-filled field.
You know, I can still remember the first time I found out that real pinball players deliberately bumped the game
and felt the rhythm of the tilt detectors in order to try to avoid a tilt.
Now, why am I telling you about all this?
Because the true pinball experience has been captured by a game called Night Mission Pinball.
Now, this is not one of those games where you get to design the pinball game.
The basic design is locked in.
But while you can install things just where you want them, you can control every other aspect of the game.
Ball speed, friction, kicker power, bonus points, bumper resilience.
I still remember at MIT whenever people would start winning too many games, they'd deaden the bumpers.
Talk about realism!
When you start Night Mission Pinball, you see quarters on the screen dropping into a slot.
And you can bump this game.
But if you bump it too hard, it tilts.
This is the finest simulation of a physical game I've ever seen.
Hats off to Suvlogic, Champaign, Illinois,
the people who, for just $40, bring you Night Mission Pinball.
For Random Access, I'm Paul Schindler.
Commodore says it will lay off more than 500 workers from its plants in Pennsylvania and California.
Commodore says inventories are high, due in part to slower-than-expected Christmas sales.
Hewlett Packard reportedly will be coming out with an upgrade of its Model 110 portable.
The new version will feature a 24-line display, 512K of RAM, and a price tag under $2,000.
It reportedly will not come with bundled software in ROM.
Software Access International just completed a survey of computer users
to see what they do with their computers.
Results? An average user spends 12.2 hours a week with his PC,
and about half of the time is spent on work, the other half on games.
There's a new game out called Comex the Game by the Commodity Exchange in New York.
It's a sophisticated simulation of real commodities trading,
where money can be made and lost real fast.
The exchange says it is selling the software in the hopes that users
will then move from the game to the real thing.
Finally, you've seen those personals columns in the newspaper,
you know, single white male, six, etc.
Well, you guessed it, New York Magazine,
the famed repository for the cryptic lust-wanted ads,
has a new electronic mail network called XNet.
It is essentially a personals bulletin board in which New Yorkers can post their desires for dates.
XNet says about 300 hungry hopefuls have signed up for the service.
That's it for this week's Computer Chronicles. We'll see you next time.
The Computer Chronicles was brought to you in part by McGraw-Hill,
publishers of Popular Computing,
the magazine that gives readers an understanding of the technology
and applications of microcomputers and software in office, home and classroom.
The Computer Chronicles