When Microsoft announces a swathe of unexpected price cuts, as they did in Hong Kong last week, the easiest, knee-jerk reaction is to blame piracy. But Microsoft has never cut prices to compete with pirates. Quite the opposite. So I asked Microsoft whether it was changing tack. The reply, from Microsoft Hong Kong's chief marketing director, Yolanda Chan, was emphatic. 'No, this is a common price promotion related to our products in the Hong Kong market and is unrelated to piracy,' she said. When even Microsoft denies that piracy is affecting prices, then piracy is no longer the bogeyman everyone seems to fear. Anyone who remembers the heyday of Shamshuipo's Golden Arcade knows how effectively the government has dealt with software piracy. In the mid-1990s malls like the Golden Arcade or Wan Chai's 298 Computer Zone were packed with shoppers buying pirate software like Iraqis stocking up on canned food. But visiting Windsor House, E-Tech, 298 and Wanchai Computer Centre on Saturday, I spotted just one store selling copy software. Five years ago there would have been dozens. As the number of pirate outlets has diminished, the number of legitimate retailers has grown. But for any company that sells licensed software, piracy, even in small doses, will always be a threat. Intuit announced recently that 15 million Americans had filed their tax returns with Intuit TurboTax. This ought to have been good news for the company's accountants, but for the fact that Intuit has sold only 5.5 million copies of the program. I saw Intuit's Quicken in Wan Chai Computer Centre on Saturday, for HK$900. Just a few doors away, a temporary pirate store was selling Intuit software for HK$33. I say 'temporary' because, as any self-respecting pirate knows, possession is enough to land you a lengthy jail term. And with few stores to target, it is only a matter of time before this one is raided. No matter how high the risks, however, there will always be somebody stupid or desperate enough to man a pirate stall. Many Hong Kong people are aware of the risks they run by running pirate software. The Business Software Alliance's (BSA) HK$30,000 reward is a tempting bonus for the average underpaid office worker, while the awards against companies, like the HK$36 million Microsoft scored from Able System Development last year, are frightening. Microsoft agrees that this message has got through. 'We believe that people running businesses in Hong Kong understand the importance of using legal software and have been educated on the risks associated with piracy,' said Ms Chan. With piracy on the wane, and many businesses unwilling to risk running copy software, there is one more weapon in Microsoft's armoury. I do not like software activation. I find it intrusive, I worry about its security, and I resent being unable to install my own software on more than one computer. But it works. This is why companies, including Microsoft and Intuit, have set up activation programs. Sooner or later, someone will crack any built-in copy protection. But tying product features, support and updates to a specific machine does encourage users to buy legitimate software and get it registered. 'The activation feature in XP and some other newer products does help to prevent the casual copying of software, which is a very prevalent and damaging type of software piracy,' said Ms Chan. Microsoft agrees that the combination of government enforcement, BSA strategies, product registration and public fear mean piracy is no longer the angel of death that once apparently hovered over Hong Kong. 'According to the most recent figures available from the Business Software Alliance, you're right that piracy rates in Hong Kong have been declining, from 64 per cent in 1996 to 53 per cent in 2001,' said Ms Chan. 'We would agree that this is due to the reasons you outline.' I have never trusted BSA statistics, but those falling figures are straight from the horse's mouth. Piracy is not the threat it used to be, and that's official. But Microsoft has other, longer-term concerns. Although Ms Chan insisted the timing was a coincidence, the company has just settled a long price-fixing battle with Taiwan's Fair Trade Commission. As of Saturday, Microsoft prices in the country were cut by up to 54 per cent. The laws of the grey market dictate that when two neighbours sell the same product at vastly different prices, the expensive market will soon be flooded with cheap imports. Although Microsoft refers to the Taiwanese settlement as a 'special promotional programme', it is clear that you cannot hold these special promotions in one country without offering them in the next. Of course piracy remains a problem. As long as proprietary software developers continue to neglect their own product protection, piracy will be with us. Besides, with the threat of open-source software growing ever larger, at least it helps build up market share. Neil Taylor is the editor of Technology Post.