Bundling Software Increases Revenues – Only if Piracy is Eliminated

Bundling is considered to be an effective pricing strategy for zero-margin information goods. However, researchers at the University of Hawaii, argue that these types of goods are prone to piracy and may have a detrimental impact on the efficacy of bundling. In their article in the Journal of Management Information Systems, Piracy and Bundling of Information Goods, the authors reexamine the classic bundling problem with the backdrop of piracy and show that piracy can severely diminish the appeal of bundling to a monopolist seller. Additionally, they say as the manufacturer tries to raise the bundle price, piracy also increases in lockstep, seeking to erase the gains from bundling. The authors concluded that “the implication for manufacturers of digital goods is that they need to take piracy into consideration in their bundling decision. In particular, they should consider refraining from bundling when the illegal products are close substitutes for the legal ones.”

Do the issues put forth in this academic research apply to bundling software as well? Software bundling has been an accepted business strategy by software publishers for decades and its advantages are well established. Among the many advantages are reduced costs by combining marketing and distribution costs, ability to package products for specific vertical markets, and increased revenues by broadening market appeal.

Since software is generally considered a “near zero” margin good, perhaps it would be wise for the software industry to take these points into consideration, particularly given the high rate of software piracy. As of 2017, BSA | The Software Alliance reported that 37 percent of software installed on PCs around the world was not properly licensed.

As software security experts here at Wibu-Systems, we well know the severity of software piracy and the billions of dollars lost by software publishers each year as a result of illegal software copying. Piracy can take many forms: individuals use cracked copies obtained through the Internet; criminal enterprises crack expensive and high-volume products to sell for their own profit; business can intentionally buy fewer licenses than they need and use illegal copies to cut costs; and even legitimate business may lose track of how many licenses they have vs actual usage.

However, bundling software doesn’t necessarily mean a higher rate of piracy and diminished return on investment, as suggested in the research. If each software package is protected by a strong anti-piracy technology like CodeMeter Protection Suite, then it doesn’t matter if or how the software is bundled. All of the software will be equally protected.

CodeMeter Protection Suite is Wibu-Systems’ solution to protect software from piracy, counterfeiting, reverse engineering, and tampering. It consists of a cluster of modules, developed to fulfill every use case, including native languages, .NET, Java SE and EE, and embedded operating systems. All of the components encrypt the compiled code utilizing state-of-the-art anti-debugging and anti-reverse engineering technologies to achieve maximum protection.

For an in-depth look at how CodeMeter Protection Suite works, download our on-demand Webinar, The Fastest Way to Protect Your Know-How.