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About one-third of all software installed on personal computers globally in 2006 was pirated, according to a study from IDC.  This resulted in a worldwide software revenue loss of $40 billion, an increase of more than $5 billion or 15% over 2005.  The software piracy rate exceeded 60% in more than half of the 102 countries studied, and exceeded 75% in about one-third of the countries.

Some Good News

The good news is there was improvement in some countries with notoriously bad piracy rates, most notably China, where software piracy dropped 10% in three years to 82%, and in Russia, where piracy fell 7% in three years to 80%.  Of the 102 countries studied, piracy rates dropped moderately in 62 countries, but increased in 13 countries.  The reduction was primarily the result of government efforts to reduce piracy both within its own organizations as well in the general populace, formal arrangements with software vendors to use legitimate software, and increasing education and enforcement efforts.

“We are making progress, however, we still have a lot of work to do to reduce unacceptable levels of piracy,” said BSA President and CEO Robert Holleyman.  “These significant losses translate into negative impacts on IT industry employment, revenues, and financial resources available for future innovation and the development of new technologies.”

Big Losses

But even lower piracy rates can add up to huge losses, the study showed. For example, while the U.S. had the lowest piracy rate (21%) of all countries studied, it also had the highest total loss at $7.3 billion.  China had the second highest loss at $5.4 billion, followed by France at $2.7 billion.

IDC predicts $350 billion of PC software will be sold over the next four years. If current software piracy trends continue, then $180 billion worth of PC software will also be stolen.

Excuses, Excuses

Why do normally law-abiding citizens, who wouldn’t even think about shoplifting a CD from a record store, have no trouble stealing thousands of dollars of software?  Typical excuses for software piracy include:

• All software should be free.
• Software is intangible.
• Software is too expensive.
• Software is too buggy to deserve payment.
• The software license agreement is too confusing.
• Software piracy is not a problem.
• Software piracy is a victimless crime.
• Software piracy is illegal??
• Bill Gates and Microsoft are rich enough.
• I’m just one person versus a large multinational corporation.
• I don’t have the money.
• I plan to use the software only a few times.
• I wouldn’t buy it anyway.
• Because I can.

Can you imagine walking into a Lexus dealer, driving off with a new $60,000 LS without paying, then telling the cops, “I didn’t have the money,” or “It was too expensive to buy.”  Of course not, and yet people do it with software everyday.

Crime Doesn’t Pay

Pirated software may be free, but there are significant financial and legal penalties for software piracy.  Illegally using or distributing software can result in felony charges with prison terms up to five years and fines up to US$250,000.  In civil litigation, software pirates may be liable for the higher of: lost profits for the software vendor, ill-gotten gains by the software pirate, or statutory damages of up to US$150,000 per product infringed plus attorney fees.

The cost of using pirated software isn’t just financial.  Software pirates tend to lose out on many benefits enjoyed by customers who legally pay for the software they use:

• No customer support, upgrades and bug fixes
• No warranty protection
• Pirated software can contain viruses or spyware
• Pirated software may be outdated or beta versions
• Pirated software may not be fully “cracked” and can still contain some anti-piracy measures that may cripple the software or damage your data

Fight Software Piracy

The use of pirated software also drives up the costs for legitimate users.  Somebody is going to pay the price, so if it’s not the pirates, then it will be you.  This gives legitimate users all the more reason to help fight software piracy by reporting companies that are not “playing by the rules.”

I’ve heard some software entrepreneurs say that pirates wouldn’t buy their software anyway, therefore the true cost of piracy is negligible.  But other vendors have reported sales drops of 30-50% literally overnight when a pirated version of their software appears online.

In a future article I will discuss some of the more popular counter-measures used by software entrepreneurs to help reduce losses from software piracy.

Links

• REPORT SOFTWARE PIRACY
• Business Software Alliance
• Microsoft Software Piracy Protection
• Software and Information Industry Association (SIIA)

Article published on June 2, 2007

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Tags: Anti-Piracy, BSA, Business, Piracy, SIIA, Software-Piracy