Will iPhone App Makers Learn to Stop Worrying and Love Piracy?

Don’t know if this qualifies as a parable. But at the very least, it’s interesting: An iPhone app developer has figured out how to combat the burgeoning problem of piracy on Apple’s (AAPL) software platform–by embracing the pirates.

Here’s the story of Tapulous, relayed from the Midem music conference in Cannes by Robert Andrews of MocoNews:

Rhythm game Tap Tap Revenge saw 2.5 million downloads in its first two months–but a million of those were pirate downloads, Tapulous business development head Tim O’Brien told delegates.

But that’s okay. “We know who they are,” O’Brien said, adding that many of the pirates are now buying virtual goods and legal music downloads within the app.

“We’ve started running ads to the pirate users more aggressively.  Some of those users, because we sell virtual goods, have become high-volume users.” Now Tapulous has 25 million unique users and has been profitable since June.

Had the music labels tried this approach, would the industry be in better shape today? I’m not sure. The labels do make periodic attempts to steer “file-sharers” to legal purchases, either via marketing or threats.

But the big problem there is that people who are looking for free music are looking for free music, and there’s no equivalent “virtual good” the labels can sell to enhance the music they’re not selling.

The labels have started branching out again into revenue streams beyond music sales–concerts, T-shirts, headphones, etc.–so in theory, there could be an opportunity to do a variant: Hey we noticed you’re “sharing” a Madonna song. Would you like to buy a concert DVD? Etc. But if they’re doing it–and if it’s working–that’s news to me.