IDC Study Claims Pirates Cost Software Industry $48 Billion

The latest study commissioned by the Business Software Alliance (BSA) shows that software pirates caused the software industry sales losses of nearly $48 billion last year.

The fifth annual report says that from 2006 to 2007, overall losses grew by $8 billion and worldwide piracy rates increased by 3 percentage points to 38 percent. While overall losses grew, piracy rates dipped in 67 of 108 countries included in the report. The BSA said about half of the increased dollars are attributable to the declining value of the dollar.

In an interview conducted by CNET News, BSA President Robert Holleyman said that in countries in many of the emerging markets where there was an extraordinary growth of PC sales per year, the sales of legitimate software are lagging dramatically behind. These emerging markets -- namely Brazil, Russia, China and India -- accounted for 46 percent of all new PC shipments last year, but only 17 percent of new software shipments. Holleyman doesn't see the trend toward overall increased piracy losses reversing itself in the near future.

Piracy rates rose in eight countries: Armenia, Bangladesh, Azerbaijan, Moldova and Zimbabwe held the top five spots for the highest piracy rates. The United States, Luxembourg, New Zealand, Japan and Austria held the top five lowest piracy rates.

Questions pertaining to the accuracy of the BSA report have been raised in the past. A 2005 article from The Economist echoed concerns by two pro-fair use trade groups, the Computer & Communications Association and the Consumer Electronics Association who have claimed that the BSA report overstates the piracy problem.

Piracy study methodology information (PDF) from the BSA says it considers analyst expectations of how much software was installed on PCs in a given year versus how much software was paid for or "legally acquired" in that same year.

The difference between the amount of pirated and legally acquired software is then used to calculate a country's piracy rate, and that rate is multiplied by the revenue from legitimate sales to calculate the estimated losses.

Holleyman says the studies actually provide conservative estimates of his industry's losses, partially because it doesn't assume every piece of software downloaded through the Internet is pirated.

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