The Internet Encyclopedia (Volume 3)

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Software ̇Piracy ̇OLE ̇revised WL040/Bidgolio-Vol I WL040-Sample.cls June 20, 2003 13:8 Char Count= 0

300 SOFTWAREPIRACY

piracy is produced by the International Planning and Re-

search Corporation (IPR), a specialized consulting firm.

This study has been commissioned annually since 1994

by the BSA and SIIA.

The basic quantity estimated in the IPR study is the

piracy rate, defined as the number of illicit copies of soft-

ware applications in use, divided by the total number of

copies in use. Thus a piracy rate of zero would mean that

all software was acquired legitimately, whereas a piracy

rate of 100% would mean that all software was pirated.

The IPR study estimates the piracy rate globally, as well

as on a regional and country-by-country basis (Business

Software Alliance, 2002). The IPR study considers only

business software applications. Not included in the esti-

mates are operating systems, custom software, and typical

home-use applications such as recreational, educational,

or personal finance software. Piracy rates for these ex-

cluded categories are probably different from the rates

for business software.

The piracy rates calculated by IPR for the years 1994

to 2001 are shown in Figure 1. This chart shows a steady

decline in global piracy rate from 49% in 1994 to 36%

in 1999, followed by an upturn to 40% in 2001. The IPR

report attributes the decline in piracy rates seen in the

first part of this period to a number of factors, includ-

ing the efforts made by the software industry and na-

tional governments to educate the public about copyright

laws and to enforce those laws. Also, during that time,

U.S. software companies made efforts to increase their

presence in overseas markets, including providing better

user support, while at the same time software prices gen-

erally declined. These developments made the option of

purchasing software legitimately more attractive in those

countries. It is too soon to tell whether the recent increases

in piracy rates represent a reversal of the previous de-

clining trend or merely a temporary fluctuation. The IPR

report attributes these increases to the increased competi-

tive pressures during a period of slower economic growth,

which led businesses to be more willing to pirate software

in order to cut costs. If this explanation is correct, then we

WORLD PIRACY RATE

30%

35%

40%

45%

50%

1994 1995 1996 1997 1998 1999 2000 2001

Figure 1: World average piracy rate of business software for

the period covered by the IPR studies. Adapted from Business

Software Alliance (2002) with permission from International

Planning and Research Corp, and extended back to 1994 with

data from Business Software Alliance (1999).

DOLLAR LOSSES BY REGION (BILLIONS)

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

Mid East/

Africa

Eastern

Europe

Latin

America

North

America

Western

Europe

Asia/

Pacific

2000

2001

Figure 2: Market value of pirated business software by re-

gion for 2000 and 2001 (Business Software Alliance, 2002).

Reproduced with permission from International Planning and

Research Corp.

may expect to see piracy rates resume their decline once

worldwide economic conditions improve.

Figures 2 and 3 show the estimated dollar losses and

piracy rates, respectively, by region for 2000 and 2001.

Comparing Figure 2 with Figure 3, we see that North

America and Western Europe, which have the lowest

piracy rates, have some of the highest dollar losses. This

seeming paradox is explained by the fact that these two

regions are the largest consumers of software. A low per-

centage of a very large figure can be larger than a high

percentage of a small figure. The data also show that the

increase in the global piracy rate from 2000 to 2001 results

mainly from changes in the Asia/Pacific region, where the

increased piracy rate was coupled with a substantial in-

crease in the already large amounts of software used.

Country-by-country piracy data from the IPR study are

not shown here for reasons of space. Here we summarize

the results in terms of a few broad patterns. First, with

PIRACY RATE BY REGION

0%

10%

20%

30%

40%

50%

60%

70%

80%

North

America

Western

Europe

Mid East/

Africa

Asia/

Pacific

Latin

America

Eastern

Europe

2000

2001

2001 Average

Figure 3: Piracy rate of business software by region for 2000

and 2001 (Business Software Alliance, 2002). Reproduced with

permission from International Planning and Research Corp.