Software Piracy Down, Losses Up

While the amount of software illegally installed on personal computers decreased slightly in 2004, losses increased from $29 billion to $33 billion, the Business Software Alliance (BSA) said on Wednesday.

According to the BSA study conducted by IT research firm IDC, 35 percent of PC software installed worldwide in 2004 was pirated, 1 percent less than in 2003. Yet, losses due to piracy increased from $29 billion to $33 billion. Global sales of commercial packaged PC software were more than $59 billion, while more than $90 billion worth was actually installed, according to the report.

“A lot of good work has been done. But it’s a huge problem, and a lot more work needs to be done,” said Jenny Blake, director of enforcement for BSA, a trade association for software vendors.

The increased losses were due to a larger overall market for software, Blake said, as well as a lower value for the U.S. dollar. The United States had the lowest piracy rate reported, 21 percent, but the $6.6 billion lost to piracy was the highest amount, because it’s the largest market.

Piracy rates decreased in 37 countries and increased in 34 countries; in more than half of the countries studied, the piracy rate exceeded 60 percent. The countries with the highest rates of illegal installations were Vietnam, with 92 percent, Ukraine with 91 percent, and China and Zimbabwe, with 90 percent. The emerging markets in Asia Pacific, Latin America, Eastern Europe and the Middle East and Africa account for over one-third of PC shipments today, but only a tenth of spending on PC software, the BSA reported.

Adopting policies to protect intellectual property is the key to curbing piracy, Blake said. “We work with countries around the world that have less advanced intellectual property laws than in the more developed countries,” Blake said. “A good example is the United Arab Emirates, which broke into the top 20 lowest piracy rate because of initiatives starting about a decade ago.”

The BSA has developed consumer education programs aimed at elementary schoolchildren in English, French and Spanish; and for college students in English, Spanish and Portuguese; Taiwan and Ireland also have anti-piracy programs in the schools, Blake said. It also lobbies governments to take a firm stand on intellectual property and copyright, while helping members to enforce licensing requirements.

Blake said nations should take a holistic approach, from laws to education and self-help opportunities. “It’s important to make sure all people in the chain understand that what they’re doing is illegal and depriving others of their legal due. If I’m an end user, I’m not only depriving the person who wrote the software but also depriving myself of future things like innovation. How can a company devote time to R&D if it will be unable to be profitable?” she said.

For example, BSA member AutoDesk spent $239.4 million on R&D in fiscal year 2005, which closed in January 2005, on annual net revenue of $1.234 billion.

“If everyone who was using AutoCad, our flagship product, was actually paying for it, we could fund a tremendous amount of research and development and improvements in our products that we can’t do currently,” said Sandy Boulton, AutoDesk’s director of piracy prevention.

AutoDesk takes a three-pronged approach to piracy, Boulton said. It tries to educate its customer base about license management, while lobbying to strengthen laws in the United States and abroad. Meanwhile, a team of attorneys pursues suspected infringers, many of whom are identified by employees and competitors.

While the vast majority of AutoDesk users are legal, Boulton said, “It’s important to monitor use and audit licenses on a regular basis to stay in compliance.”

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