Software Users (Slightly) More Willing To Pay

Software piracy is slowly declining worldwide. However, piracy rates in developed countries like the US, while low, are not getting any lower.
John EdwardsJuly 17, 2006

Software piracy is a source of pain for both software makers and users; the former suffer a hit to the top line, and the latter can be hit with a raft of fines. Many companies don’t even realize that some of the software they use has not been legally obtained. Others, of course, do.

While piracy remains a big problem — 35 percent of packaged software installed on PCs worldwide in 2005 was illegal — there are signs that the tide may be turning. A study sponsored by the Business Software Alliance (BSA), a Washington-based software industry trade group, finds that the software piracy decreased moderately in more than half (51) of the 97 countries it surveyed, while rising in only 19. In China, one of the world’s fastest growing IT markets, piracy dropped by 4 percent in 2005, marking the second consecutive yearly decline. Piracy also dropped by 6 percent in Ukraine, 4 percent in Russia, and by 2 percent in India.

The BSA credits much the change to market maturation. “Many emerging markets are developing more of a bona fide market economy,” says Jenny Blank, the BSA’s director of enforcement. “More companies are buying software legitimately as opposed to pirating.” John Gantz, chief research officer at International Data Corp., a technology research firm located in Framingham, Mass., adds that, “There’s sort of a slow, steady chipping away at software piracy. In Russia, the economy’s booming as oil prices rise and people are now actually buying software because of the inconvenience of using pirated versions.”

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It’s not all good news, however. In large, developed countries, which account for the majority of all software purchased (and pirated), piracy rates didn’t change. The U.S. has the lowest rate, at 21 percent of all PC software packages; that relatively low rate still accounts for $6.1 billion of the estimated $34 billion in worldwide losses stemming from piracy. And even with two consecutive years of decline, China’s current piracy rate is estimated at a whopping 86 percent. Vietnam and Zimbabwe tie at the top of the list at 90 percent.

No wonder, then, that the BSA has no plans to curtail its enforcement efforts. In July it paid more than $15,000 total to three people whose information led to successful enforcement actions at three U.S. firms. In all three cases the informers were ex-employees of the companies in question. The BSA may well come knocking on more company doors: its reward program netted more than 2,000 leads.

Still, software piracy appears to be going the way of a more obvious type of intellectual property theft, illegally downloaded music. “Our problem with peer-to-peer Internet piracy is still very real, but it appears to have stabilized,” says Mitch Bainwol, chairman and CEO of the Recording Industry Association of America (RIAA), the Washington-based the trade group that represents the US recording industry. “We are very much in a recovery mode.”

In theory, illegally downloaded music can pose a liability threat to companies if their systems were used by employees to download or store the music, but by far the larger threat has been to the music industry itself. Bainwol says that the arrival of legal music downloading services, such as Apple’s iTunes, have made people less inclined to steal music. “A few years ago, there were no legal alternatives to Internet theft,” he says. “If you wanted to acquire music via the Internet, the only option was to steal.” Facing increasing competition, numerous P2P music downloading services — most notably Napster — have either folded up or gone legitimate. According to In-Stat, a Scottsdale, Ariz.-based technology research firm, the legitimate online music market will continue growing for the rest of the decade, with worldwide sales climbing from $1.5 billion in 2005 to $10.7 billion in 2010.