"For the last five years I have operated my own business as a networking consultant, but many years ago I managed a grocery store for a large chain," the reader wrote me recently. "I mention this to let you know that I'm not totally clueless when it comes to operating a business. And one thing I have learned from my own experience and those of my clients is that almost everyone suffers from inventory loss. In the grocery store we called it 'shrink' and operated on a 7.5 percent basis for loss. In my own business it's closer to 1.5 percent. This results from stolen product by employees, shoplifting, customers not paying bills, piracy etc. Whatever the source, almost any decent accountant and every business owner knows of this problem, and about what it costs them."

Customers aren't always aware of it, the reader says, but they pay for the 'shrink' in the form of higher prices. "I know Microsoft and others have accountants at least as good as mine, so I'm quite sure that they have factored shrink in someplace," the reader wrote. "Microsoft has claimed that 30 percent of Windows installations are pirated copies that cost them millions, but in another breath they say that 'he reason software costs YOU the consumer so much is because of piracy. Since Microsoft isn't just being a nice guy and eating the cost of that 30 percent, we the consumers are. This applies to the RIAA and others (who employ DRM) as well."

And that leads to the reader's question."At what point does the price of software decrease?" he wonders. "If piracy were to stop tomorrow, how much would the price of Windows XP drop? Microsoft's claim in the beginning was that it wanted to reduce piracy. Fine, I applaud that, because I write software too and design more efficient communications networks that save my clients money. So I also want my intellectual property protected. But they seem to be talking out of both sides of their mouths with claims of losses in the millions AND higher prices. If the claims are that activation was introduced to eliminate or at least reduce piracy, and piracy results in higher prices to the consumer, shouldn't the reduction of pirated copies due to activation result in lower prices to the consumer?"

It's a good question. What do you suppose the answer is? Will activation and other forms of DRM ever lead to lower prices? If software publishers aren't actually making money because of activation, why are they doing it? Or is the real answer that activation isn't actually about fighting piracy, so we shouldn't expect it to make business sense on that basis at all? Post your comments below or write me at Foster@gripe2ed.com and let me know what you think.