Report: Software Piracy Costs Industry Billions

A joint report by the Business Software Alliance (BSA) and market research firm IDC suggests that in many ways the problem of software piracy and the damage it does to software companies is growing. For the first time, the monetary value of unlicensed software--“losses” to software companies--broke the $50 billion level.

The report says governments and software companies are making progress in slowing the illegal use of personal computer software products, but progress has stalled in the United States, which the report says poses a serious challenge to the high tech sector and cyber-security.

The Sixth Annual BSA-IDC Global Software Piracy Study found in 2008, the rate of PC software piracy dropped in 57 percent of the 110 countries studied and remained the same in about a third (36 percent). The worldwide PC software piracy rate rose for the second year in a row, from 38 percent to 41 percent. The report says that rise was due to PC shipments growing fastest in high-piracy countries such as China and India.

BSA President and CEO Robert Holleyman said progress against PC software piracy is being made in many countries, which helps people working in the U.S.-led global software industry. “The bad news is that PC software piracy remains so prevalent in the United States and all over the world,” he said. “It undermines local IT service firms, gives illegal software users an unfair advantage in business, and spreads security risks. We should not and cannot tolerate a $9 billion hit on the software industry at a time of economic stress.”

The study notes the global economic recession is having a mixed impact on software piracy. John Gantz, chief research officer at IDC, notes that consumers with reduced spending power may hold on to computers longer, which would tend to increase piracy because consumers are more likely than other types of PC users to load unlicensed software on older computers.

However, pocketbook pressures are also spurring sales of inexpensive “netbooks” and laptops, which tend to come with legitimate pre-loaded software; and spurring businesses to implement software asset management (SAM) programs to increase efficiencies and lower IT costs. “Reduced buying power is only one of many factors affecting software piracy,” Gantz said. “The economic crisis will have an impact – part of it negative, part of it positive – but it may not become fully apparent until the 2009 figures come in.”

Among other factors affecting PC software piracy, the global spread of Internet access is driving up piracy, with IDC projecting 460 million new Internet users coming online in emerging markets in the next five years. The report suggests growth in the number of consumers and small businesses will also bring more high-piracy users into the fold. The report says lowering global piracy by just one point a year would add $20 billion in stimulus to the IT industry.

The report reveals the lowest-piracy countries are the United States, Japan, New Zealand and Luxembourg, all near 20 percent. The highest-piracy countries are Armenia, Bangladesh, Georgia and Zimbabwe, all over 90 percent. However, factors contributing to falling piracy rates include legalization programs offered by software vendors and governments, public-private partnerships in education and enforcement, new software distribution models such as “cloud computing” and better technical protection measures such as digital rights management.

“The proven ‘blueprint’ for reducing piracy is a combination of consumer education, strong intellectual property policies, effective law enforcement and legalization programs by software companies and government agencies,” Holleyman said. “The progress seen in so many nations is proof that this anti-piracy strategy works.”