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Bill Gates, the richest man in the world, is worried about the money he is losing to Russian pirates.
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Nov. 08, 2006
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Bill Gates Downloads Copyright
// Into the Russian government
William Gates III, the riches man on the planet, visited in Moscow yesterday. He met with First Deputy Prime Minister Dmitry Medvedev and Minister of IT and Communications Leonid Reiman to talk about software piracy. Kommersant has learned that Gates proposed specific technology for combating that piracy in the form of Microsoft's Digital Rights management. By introducing that technology in Russia at the governmental level, Microsoft hopes to make hundreds of millions of dollars a year.
Bill Gates, chairman of the board and main shareholder of Microsoft, only comes to Moscow for serious reasons. He was last here in 1997 and discussed with high government officials converting the Russian SS-18 intercontinental ballistic missiles into carrier rockets. He was then enthused with the idea of a heavenly Internet, a complex system of 300 low-flying satellites that would provide Internet access to every point on the planet. That project was soon abandoned, and the rockets were not needed.

This time, Gates has come to meet with officials at various levels and suggest measures to fight piracy. It would be of benefit for both Russia and Microsoft to solve that problem, he thinks. Russia is eager to accede to the WTO, where its level of piracy will be unacceptable. Microsoft says that 84 percent of the software sold and used in Russia is illegal. Gates also wants to make a lot more money in Russia. The Russian office of Microsoft made $258 million last year. Olga Yashina, executive secretary of the Moscow mayor's and city administration commission on security of the information market, if the level of piracy on the market for Microsoft operation systems and utilities were reduced from its current level of 80 percent even to 50 percent, the proceeds of that corporation's Russian division would at least double.

Microsoft's Russian office did not reveal the details of Gates' negotiations with Russian officials. A source that deals with the company said unofficially that Gates proposed Microsoft's Digital Rights Management technology as a national standard to fight piracy at the governmental level. That system allows for complete control over the use of the digital content of Microsoft products. If the state makes Microsoft's DRM mandatory, life will be much harder for users and sellers of illegal software. Internet content stores will have to be equipped, at a cost of about $1 million a piece, with systems that encode the media files sold according to Microsoft standards and transfer all data on the handling of that data to a central Microsoft identification center. Another component of DRM that will come with the new Vista operating system will block the files in the user's computer that have not been licensed by Microsoft. As a result, the user will have to pay for all of those media files and for downloaded software.

Microsoft is lobbying for DRM as a national antipiracy standard throughout the world, said Alexander Chachava, president of the LETA company. That issue will most likely be brought up in Russia by the head of Microsoft. The global control system will increase Russia's chances for accession to the WTO. Piracy remains one of the biggest claims against Russia. The introduction of DRM will allow Microsoft to make a many-times larger turnover in Russia as well.

The Microsoft system for protecting copyright is not the only one on the market. Its biggest competitor is Apple iTunes. But over 90 percent of Russian PC users use Microsoft software, so the Microsoft antipiracy system will become the unavoidable universal. Chachava estimates that Microsoft will make $20-50 million just from introducing the technology in the 50 largest Internet stores. But that's not the main thing, he noted. Technical support, integration and other services based on Microsoft products will increase it proceeds by many times. Finally, experts say, Microsoft will most likely insist on verifying no less than 10 percent of the proceeds of legal Russian Internet music and video sellers, whose market is estimated at at least $1.5 billion per year.

On the market, they are saying that the introduction of DRM will be an effective measure. The use of DRM is the way to a controlled, civilized market, opined Alexey Ugrenovich, director of the National Federation of Sound Recordings. Using DRM, the user will be required to respect the rights to use digital content as set by the holder of the rights.

More skeptical market participants will make Russian buyers and sellers of media content completely dependent on Microsoft. In the new system from Microsoft, there are many systems for tracing the user, noted Igor Ashmanov, head of Ashmanov and Partners, Using it on a governmental level is risky, especially if you consider that the system is made in a country that is not friendly to Russia.

Viktor Khilko, Alexandra Khodonova

All the Article in Russian as of Nov. 08, 2006

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