Microsoft drops physical box sales of Windows 8 in China

In China, Windows 8 will only be distributed through downloads and devices pre-installed with the OS

Microsoft will not sell Windows 8 as a physical boxed product in China and instead will only distribute the OS through downloads and pre-installs on devices, in a move that could help the company drive consumers away from pirated copies of its products.

"After having talked to many customers, Microsoft has made the decision to simplify the distribution model of Windows in China, by taking all physical Windows media off the market," the company said in an email Monday.

Microsoft, which plans to release Windows 8 in China Friday, said it made the change in order to protect customers' PCs from malware and spyware. Downloads of Windows 8 in China will be available through sites owned by the company

Software piracy continues to be a major problem plaguing product sales in the country. In 2011, China's illegal software market was valued at $9 billion, while legal software sales reached less than $3 billion, according to a study from the Business Software Alliance.

Microsoft has tried fighting the problem through lawsuits against Chinese vendors for allegedly installing pirated versions of its software on to PCs, and by also holding advertising campaigns to educate the public on the merits of using official copies of its products.

Despite these efforts, pirated Windows products are still easily found in stores at gadget malls in the country, and the pirated versions are known to contain malware and spyware. The severity of the problem was apparent in 2009, when bootleg copies of Windows 7 were on store shelves in China months before the official release of the product.

Microsoft's decision to forgo physical sales of Windows 8 might delay China's software pirates from mass printing DVDs with pirated versions of the OS, said Vic DeMarines, vice president of products for V.I. Labs, a U.S. firm that specializes in helping companies track and stop software piracy.

DeMarines, however, still expects a bootleg copy of Windows 8 to be available as soon as 30 days after the OS is official released, given that the software pirating community has been active for months trying to pirate the OS. Different piracy groups are all racing with one another to be the first to crack Windows 8, he added.

But the greater impact in Microsoft's new approach toward selling Windows in China could be in making it easier for users to differentiate between official and bootleg copies. Chinese consumers won't be able to claim they've bought an official version of unless it came from a Microsoft download or a computer pre-installed with it, said Michael Goff, marketing director for V.I. Labs.

In the Xinyang market in Shanghai, which is known to sell bootleg software, stores are selling boxed copies of "Windows 8 Ultimate", with the price ranging from 350 yuan ($55) to 60 yuan. A store worker, however, said all the Window 8 copies simply contain the consumer preview of the OS, which can be downloaded online for free.

"All the other store owners came to me to get their copies of Windows 8," said the worker, who declined to give out his name. He estimates software pirates will have actual bootleg copies of Windows 8 ready likely in another two months.

In the run up to the Windows 8 launch, Microsoft on Monday held an event in Shanghai, promoting a wide range of devices, including tablets, laptops and desktops running the OS that are slated to come to China. The company did not speak about piracy issues.

"China is a big business opportunity for us" said Microsoft's Greater China region CEO Ralph Haupter in a speech. He pointed to how the country is becoming a major market for product sales. The country has already overtaken the U.S. to become the largest market for PC shipments, according to research firm IDC.

Despite the expected arrival of pirated copies of Windows 8 in China, some users in the country may decide to ignore the new OS given that it was designed for touchscreen devices, said Kitty Fok, an analyst with research firm IDC.

"If you decide to buy a touchscreen computer, it will probably come with a legal version of Windows 8," she said. "But if your computer doesn't have touch, and you want to experience Windows 8, you might find it's not as good as the other versions of Windows."

In the desktop OS market for July, Microsoft's Windows XP had a 73.7% market share in China, while Windows 7 has a 22.8%, according to data from analytics firm Net Applications.

Copyright © 2012 IDG Communications, Inc.

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