One-third of software pirated in 2003

By DAR HADDIX, UPI Business Correspondent   |   July 7, 2004 at 11:12 PM

WASHINGTON, July 7 (UPI) -- More than one-third of software installed on computers worldwide in 2003 was pirated, a study released Wednesday by the Washington, D.C.-based Business Software Alliance said, and such piracy could worsen even as industry groups and governments ramp up efforts to crack down on the problem.

The study, conducted by Massachusetts-based information technology market research firm IDC, looked at $80 billion worth of software installed on computers last year, and found only $51 billion was legally purchased, resulting in a $29 billion loss. Worldwide, the average piracy rate was 36 percent.

"For every two dollars' worth of software purchased legitimately, one dollar's worth was obtained illegally," the study said.

"Software piracy continues to be a major challenge for economies worldwide," said Robert Holleyman, president and chief executive of BSA. "From Algeria to New Zealand, Canada to China, piracy deprives local governments of tax revenue, costs jobs throughout the technology supply chain and cripples the local, in-country software industry."

An April 2003 study commissioned by BSA showed that reducing piracy by 10 percentage points over four years would add more than 1 million jobs and grow the world economy by $400 billion.

The study looked at various segments of the software market, including operating systems, consumer software and local market software, in 86 countries categorized into six global sub-regions. IDC computed their piracy numbers by comparing the amount of software sold directly, plus the software pre-installed on PC's, to the amount of software in use in each country based on surveys of consumer and business users.

Regionally, the Asia/Pacific piracy rate was 53 percent with $7.5 billion in losses. Eastern Europe saw piracy rates of 71 percent and $2.1 billion in losses. In Western Europe, the piracy rate was 36 percent with $9.6 billion in losses. The average piracy rate in Latin America was 63 percent with $1.3 billion in losses. Fifty-six percent of software was obtained illegally in the Middle East and Africa, with $1 billion in losses. The North American piracy rate was 23 percent, with about $7.2 billion in losses.

China and Vietnam led the Top 20 Pirating Countries list with the highest piracy rate of all countries examined in the survey, 92 percent. They were followed by Ukraine, Indonesia, Russia, Zimbabwe, Algeria, Nigeria, Pakistan, Paraguay, Tunisia, Kenya, Thailand, El Salvador, Nicaragua, Bolivia, Guatemala, Dominican Republic, Lebanon, and India.

The United States had the lowest piracy rate of any country, 22 percent, followed on the Bottom 20 Pirating Countries list by New Zealand, Denmark, Austria, Sweden, Belgium, Japan, United Kingdom, Germany, Australia, Finland, Switzerland, Norway, Netherlands, United Arab Emirates, Canada, Israel, South Africa, Reunion, and the Czech Republic.

More than half of the 86 countries had piracy rates above 60 percent.

Software piracy is most rampant in developing markets, the study showed. "The emerging markets in Asia Pacific, Latin America, Eastern Europe, the Middle East and Africa account for more than 30 percent of PC shipments today, but less than 10 percent of PC software shipments," according to the report.

A software market's size as well as piracy rates are what determine actual losses. A larger percentage of software was pirated in Ukraine than in Britain in 2003 -- 91 percent compared to 30 percent -- but because the British PC software market is much larger than the Ukraine's, losses from British piracy totaled $1.6 billion, about 17 times the losses from Ukrainian piracy, $92.1 million.

"A number of factors contribute to the regional differences in piracy, including local-market size, the availability of pirated software, the strength of copyright laws, and cultural differences regarding intellectual property rights," said John Gantz, chief research officer at IDC. "Unfortunately, we found that high-market growth regions also tend to be high-piracy regions, such as China, India and Russia. If the piracy rate in emerging markets -- where people are rapidly integrating computers into their lives and businesses -- does not drop, the worldwide piracy rate will continue to increase."

Several groups including BSA are pushing education programs and policies that include better copyright laws and enforcement to combat piracy, against an opposing force of new Internet users and ever-more-accessible pirated software, the study indicated.

Advances in technology are also making it easier to be a software pirate. Faster Internet connections facilitate online piracy by allowing users to send and download larger files, including software programs, the study said. Today's 70 million broadband Internet connections will increase by another 100 million by the end of 2007.

By the end of 2007, the number of Internet users will increase from 700 million (as of the end of 2003) to more than 1 billion, with piracy heavyweight China adding nearly 90 million of those new users.

"Our industries account for over 5 percent of U.S. gross domestic product, and USTR's support in improving global copyright enforcement is vital to these industries," said International Intellectual Property Alliance representative Eric Smith, after the publication of the USTR's intellectual piracy watch list on May 4. BSA is a member of IIPA, six trade associations representing more than 1,300 U.S. companies producing and distributing materials protected by copyright laws throughout the world, including all types of computer software.

The USTR, upon issuing the report, called for some governments to take stronger actions to fight piracy and counterfeiting.

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