Intuit Will Discontinue Product Activation

Intuit said Wednesday that it has dropped product activation and digital-rights-management software from almost all future products, including paid copies of TurboTax, in response to a backlash from its customers.

Adding digital-rights-management software to the companys tax preparation neither paid off financially in attracting new customers, nor in consumer satisfaction, Intuit spokesman Scott Gulbransen said.

“Were dropping (DRM) in all prepaid products—that means any copy you purchase at a retail store or direct from us,” the spokesman said, referring to sales over the Internet from Intuits web site.

“That means no Macrovision DRM software, no DRM software from anyone,” Gulbransen said.

The consumer rancor over the Macrovision DRM software included in TurboTax exploded in January, when ExtremeTech reported the growing unrest over the use of DRM software. ETs message boards swelled with consumer protests, and Intuit added an uninstaller program in response. However, ExtremeTech tests reported that the technology wrote data to the undocumented Sector 33 of the boot track, even as Intuit executives publicly worried about piracy and claimed that the protests were the result of “other interests”.

Intuit will retain its mechanism to unlock and allow payment for free copies of its software that it ships to potential customers, however. Like ISP America On-Line, Intuit has mailed trial versions of its software to lure new customers. The in-product unlocking mechanism will only be added to the trial and marketing versions of Intuit TurboTax 2003.

“We feel that if were going to ship you a free working copy of our product, we have the right to ask you to unlock it and pay,” the spokesman said.

In addition, the decision doesnt rule out the possibility that Intuit will find other ways of preventing piracy. “Were still committed to protecting IP rights; obviously we need to explore new DRM options for the future,” Gulbransen added. “Its about doing right by our customers.”

“We just need to go back to the drawing board,” Gulbransen said.

Intuit reported earnings for its third fiscal quarter ended April 30 on Wednesday afternoon. The company said that total paid TurboTax federal returns were up 12 percent over last season, to 8.5 million. According to the IRS, individual returns prepared by software – both on the desktop and Web – grew only 8 percent, slower than Intuits growth, Intuit said.

“All in all, this was a solid tax season for us,” said Steve Bennett, Intuits president and chief executive officer, in a statement. “We grew faster than the industry and were successful in driving customers to new, higher-end offerings, though product activation didnt perform as wed expected.

“Intuit has a long heritage of doing right by customers, and some of our customers didnt have the great experience they expect from Intuit,” Bennett added. “In addition, we didnt get the revenue and profit growth we expected. Therefore, weve decided to discontinue product activation next season.”