PC Software Piracy on the Rise

Now, for what software makers don't want to hear: "However, because the worldwide PC market grew fastest in high-piracy countries," states the report, "the worldwide PC software piracy rate increased by three percentage points to 38 per cent in 2007." (The median piracy rate is 61 per cent.) Countries such as Armenia (93 per cent piracy rate), Bangladesh (92 per cent), and Azerbaijan (92 per cent) led the way in software pirating.

By the end of 2007, there were more than 1 billion PCs installed around the globe, the report notes. Nearly half of them have pirated software running on them.

"We are making much-needed progress in the battle against PC software piracy, and that's good news for governments, end users, businesses, and the industry," said BSA President and CEO Robert Holleyman, in a press release. "The battleground is now shifting, however, to emerging markets where many of our collective challenges remain."

How Much Does Piracy Actually Cost Software Vendors?

For this study, the BSA relied heavily on IDC's "deep and broad information base from which to assess the market and estimate the rate of PC software piracy around the world," notes the report.

IDC relied on proprietary statistics for software and hardware shipments gathered through surveys of vendors, users and the software sales channels; it also enlisted IDC analysts in more than 60 countries to review local market conditions. "Losses to the industry from piracy were calculated using the known size of the legitimate software market in a country or region and using the piracy rate to derive the retail value of software that was not paid for," according to the study.

The "retail" value of software that came bundled with a PC, the study notes, was considered to be the share of the retail price of the system attributable to software. (Software that was legitimately free, such as shareware or some open-source software, was not considered pirated.)

In total, according to the IDC's calculations, dollar losses from piracy rose by US$8 billion from 2006 to 2007, which was a 20 per cent increase, and now stands at nearly US$48 billion. That "losses" number, in particular, has been controversial over the years. "For many years, BSA has equated the value of pirated software to industry 'losses,'" notes the report. "This has led to questions as to whether these losses are real."

In a February 2008 post, Dave Taylor, an industry watcher, online strategist and blogger, ] with how the BSA calculates its losses. Taylor's fundamental problem is that the BSA "cannot assume that every illegal copy of software would have been otherwise purchased," he writes. "That's a complete fallacy and distortion of the situation and does a disservice to the companies that are represented by the Alliance."

This year's BSA report states that "while not every piece of pirated software would be purchased if piracy rates were to go down-some will be substituted, some not used-lower piracy rates yield more economic activity that stimulates more software production and purchases."

The BSA states that IDC has "confirmed this by analyzing the ratio of software spending to hardware spending for the countries in the study and finds that, as expected, there is a high correlation between piracy rates and that ratio," the report states. "The higher the piracy rate, the lower the ratio of software spending to hardware spending. Given the definition of piracy, that would seem obvious."