Piracy costs software industry $51 billion in '09

The software industry missed out on more than $51 billion in profits last year as a result of software piracy, says a new study released Tuesday by IDC and the Business Software Alliance (BSA).

The seventh Annual BSA and IDC Global Software Piracy Study found that the rate of software piracy rose by 2 percentage points last year to hit 43 percent. This means that for every $100 of legal software sold last year, another $75 worth of unlicensed software hit the market and reached the hands of consumers.

The increase in piracy over 2008 was due largely to higher PC shipments and sales, especially in emerging markets such as Brazil, India, and China, reported the study. One of the biggest markets for pirated software, China, saw the value of illegal software jump to $7.6 billion last year, $900 million more than in 2008.

In an ironic positive twist during last year's recession, software piracy actually fell in 54 of the 111 economies covered in the report and grew in only 19. In the United States, the rate of software piracy stayed the same at 20 percent, the lowest in the world. But in light of the nation's huge PC market, pirated software in the U.S. cost the industry $8.4 billion in profits.

"Given the economy, 2009 piracy rates are better than we expected," BSA President and CEO Robert Holleyman said in a statement. "But incremental improvements are not enough. Few if any industries could withstand the theft of $51 billion worth of their products."

IDC and the BSA believe software piracy doesn't just take profits away from the industry but also has a domino effect on the economy. One statistic cited in the study reported that for every dollar of legal software sold, another $3 to $4 in sales are generated for local businesses.

"Software theft hurts not just software companies and the IT sector, but also the broader economy at the local, regional, and global levels by cutting out service and distribution firms," John Gantz, chief research officer at IDC, said in a statement. "Lowering software piracy by just 10 percentage points during the next four years would create nearly 500,000 new jobs and pump $140 billion into ailing economies."

Additionally, IDC and the BSA point out that software vendors are hurt by illegal software, businesses and consumers waste time and money dealing with buggy or unsupported applications, and users can face security hazards as well as legal risks running pirated products.

To combat software piracy, the study recommends several measures, some of which have already been initiated.

• Software makers should provide governments with low-cost software in bulk as a way of replacing illegal software.
• The industry should continue to work with manufacturers to preload software onto PCs before they ship.
• Software companies should offer extra value and services to users of legal software and restrict those from people who use unlicensed products.

To generate the report, IDC said it looked at 182 different sets of data from 111 individual economies. The study covered all commercial software that runs on desktop PCs, laptops, ultra-portables, and Netbooks, including operating systems and applications.