Study: Pirates cost software industry $48 billion
Pirates caused the software industry to lose nearly $48 billion in sales last year, even as most countries experienced declines in their piracy rates, according to the latest annual study commissioned by the Business Software Alliance.
The fifth annual report, released on Wednesday, determined that from 2006 to 2007, overall losses grew by $8 billion and worldwide piracy rates increased by 3 percentage points to 38 percent. At the same time, piracy rates dipped in 67 of 108 countries included in the report. (About half of the increased dollar losses are attributable to the declining value of the dollar, BSA said.)
"What that means is in countries in many of the emerging markets where there is an extraordinary growth of PC sales per year, the sales of legitimate software are lagging dramatically behind that," BSA President Robert Holleyman said in a telephone interview, adding that he doesn't see the trend toward overall increased piracy losses reversing itself in the near future.
The study found, for instance, that so-called "emerging markets"--namely Brazil, Russia, China, and India--accounted for 46 percent of all new PC shipments last year but only 17 percent of new software shipments, Holleyman said.
Piracy rates rose in only eight countries, with Armenia, Bangladesh, Azerbaijan, Moldova, and Zimbabwe holding the top five spots for highest piracy rates. The United States, Luxembourg, New Zealand, Japan, and Austria were the countries with the top five lowest piracy rates.
One mildly encouraging spot was Russia, which has experienced a one-year piracy reduction of 7 percentage points, to 73 percent, and 14-point drop over the last five years, thanks in part to stricter government enforcement efforts, the group noted.
The methodology used by BSA and its analysts, IDC, for these reports has attracted a fair share of controversy in the past, with some claiming it overstates the piracy problem.
"They dubiously presume that each piece of software pirated equals a direct loss of revenue to software firms," said a 2005 piece in The Economist, echoing concerns voiced by two pro-fair use trade groups, the Computer & Communications Association and the Consumer Electronics Association.
To derive its figures, the group says (PDF) it considers analyst expectations of how much software was installed on PCs in a particular year versus how much software was paid for or "legally acquired" in the same year. The difference between the amount of pirated and legally acquired software is then used to calculate a country's piracy rate, and that rate is multiplied by the revenue from legitimate sales to arrive at the estimated losses.
Holleyman, for his part, argued the studies actually provide a "conservative" estimate of his industry's losses, in part because it doesn't assume every piece of software downloaded through the Internet is pirated and thus represents a sales loss.
"It's certainly true that not every piece of pirated software would be replaced immediately with licensed software if piracy rates went down," Holleyman told News.com, "but we do believe...that the evidence is that all of the pirated software will be replaced with legitimate software over time because people need good software."
My software is affordable, but I lose if people steal something expensive instead of purchasing mine. If you can't afford mine, don't use it. I'm fine with that. Somebody else will do your work.
Companies that can afford software lose when they are undercut by companies abroad that not only have lower labor costs, but don't pay for their software either.
Are they claiming these figmentary losses to the IRS? That would be interesting to see.
Another problem with that logic is 90% of all software is garbage (see, I can make up numbers too). They slap it in a pretty box 10 times too large for the CD and manual and make superfluous claims about the capability of the product. I have personally burned up thousands of dollars by pouring it into the stoker of the software locomotive. The giant metal beast that rolls down the tracks fueled by our hard earned money.
There should be a standard for software providers. If it sucks then they have to pull it off the shelf. They have to have full working demos that last 60 days. Long enough to get used to it and see if it does everything it claims, as easily as it claims to do it.
No more of this 'product cannot be returned once opened' garbage. I understand the need to protect keys and serial numbers so how about offering a 'deregistration' option where we can fill out a form online, enter our key or serial number and have it deactivated? Then return the product to the store and get our money back.
Sounds too logical so it will probably never get done. That way they can keep claiming that every software title downloaded is a sale they missed out on.
BSA's study measures the retail value of pirated software, so by definition, these losses represent real revenues forgone. While it's true that not every piece of pirated software would be replaced immediately with licensed software if piracy rates went down, the evidence suggests that all pirated software will be replaced with legitimate software over time, because people need good software.
A lower piracy rate can also lead to greater competition in the software industry. What I mean is - lower piracy spurs more companies to enter the market and develop and sell a wider variety of software at a variety of price points. Higher piracy deters competition.
So, basically, piracy really does cause significant losses for the industry and the wider economy; these are real losses; and the IDC study is the best approximation we have of the magnitude of these losses.
Diane Smiroldo, Business Software Alliance
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May 29, 2008 11:01 AM PDT
- While I completely agree that the software industry (ALL copyright protected products industries) have a right to protect their products, I have always had difficulties with this series of studies. When you closely review the methodology there is entirely too much fog around how the statistics were genuinely acquired. Is software piracy an issue? Absolutely. Is it as horrible as it is being portrayed? Hardly.
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(11 Comments)Here is where we should ALL be VERY concerned:
1. The copyright enforcement industry players are not regulated by ANY governmental agencies--anywhere. They pretty much do as they please.
2. These same enforcement players (and their friends/members) are investing tens of millions of dollars in establishing legislation that favors their perspective--at the expense of the business technology consumer.
3. Once again, these same groups are pushing their "research" as bottom line proof and our own legislators are acting on these (questionable?) industry sponsored (paid for?) research studies as the absolute reactive basis for passing national and global legislation.
4. The countries that have been ?proven? to have the lowest piracy rates are also the ones where small- to medium-sized businesses are being hunted with the most ruthlessness. That's right, America, even though we have one of the LOWEST piracy rates, our business owners are the only ones in the world targeted by (up to) $1,000,000 whistle-blower rewards.
5. The countries with the highest piracy rates somehow wind up with highly lucrative international contracts with the same industries that are suing SMEs in the so-called developed nations for consuming products that?in many cases?they don't even know are pirated.
It is well beyond time that global small- to medium-sized businesses began voting with their feet. Unless, and until the collective enforcement industry players begin treating your businesses as valued customers, it is your responsibility to simply quit buying their products.
As I am constantly reminded: ?It is your fiduciary responsibility to act in such a manner as to protect your company.? We could easily take that to mean you should NEVER enter into a software license with a software publisher with a clear record of threatened?or factual?litigation against its own customers.
As usual, I have very little room in this venue to clarify my entire position. Feel free to visit my web site (BizTechNet.org) for details as well as virtually costless processes your own company can use to combat these predatory enforcement groups.