No surprise: if people want something, and you lower the price, they will usually consume more of it.
That might lead to greater profits if the growth in sales volume exceeds the reduction in profit margin. Or it might not. That relationship is called the price elasticity curve; every product has a different shape and optimization point. Learning the shape, and picking the optimization point, is a huge part of selling something.
But the key point is that it is the right of seller to place themselves on that curve. LogMeIn Ignition is $30 in the iOS App Store. Obviously they would sell more copies if it was 99 cents, but they've chosen their pricing strategy. Does the mere existence of greater demand make it ok for people to pirate that software instead? I don't think it does.
It's obviously true that there is not a 1:1 relationship between piracy and lost sales. But it's also not a 0:1...some pirated copies are in fact lost sales. And, what's lost in talking about this equivalence (or lack thereof) is the damage to the pricing strategy of the seller--even the copies they do sell will necessarily be lower on the price elasticity curve because piracy increases the volume.
In fact, sometimes it may be the reverse - the net result, that is. Being able to pirate products (say, music) may lead to more consumption of services (say, concerts). I do not have a citation available, but IIRC, studies have shown that people who pirate CDs generally use more money for going to concerts, buying merchandice, etc.
> It's obviously true that there is not a 1:1 relationship between piracy and lost sales. But it's also not a 0:1...some pirated copies are in fact lost sales
Another thing to consider is that pirated copies can be lost sales to someone OTHER than the owner of the pirated material.
Suppose I would like a game to relax with. I'm willing to spend up to $20. I see a game that I'd like but it is $50--so I pirate it. Let's assume that if I could not have pirated it, I would not have bought. $50 is simply off the table for me.
We can't reasonably count my pirated copy as a lost sale to the maker of that $50 game.
However, if I could not have pirated it I would still want to have a game. I would have probably found an older game that I could get for $20, or perhaps picked up an indie title or two.
Steam is a great example. For years the big publishers had been whining that piracy was destroying PC gaming. Then Steam came out[1] with reasonable priced games, awesome sales and no hassle updates and it is a huge success. There are countless of people who formerly pirated games that now buy a lot of games through Steam.
That might lead to greater profits if the growth in sales volume exceeds the reduction in profit margin. Or it might not. That relationship is called the price elasticity curve; every product has a different shape and optimization point. Learning the shape, and picking the optimization point, is a huge part of selling something.
But the key point is that it is the right of seller to place themselves on that curve. LogMeIn Ignition is $30 in the iOS App Store. Obviously they would sell more copies if it was 99 cents, but they've chosen their pricing strategy. Does the mere existence of greater demand make it ok for people to pirate that software instead? I don't think it does.
It's obviously true that there is not a 1:1 relationship between piracy and lost sales. But it's also not a 0:1...some pirated copies are in fact lost sales. And, what's lost in talking about this equivalence (or lack thereof) is the damage to the pricing strategy of the seller--even the copies they do sell will necessarily be lower on the price elasticity curve because piracy increases the volume.