Software piracy worldwide costing industry $40 billion

WASHINGTON, D.C. – Thirty-five percent of software installed on personal computers worldwide in 2006 was obtained illegally, amounting to nearly $40 billion in global losses due to software piracy, according to a new study.

Progress was seen in a number of emerging markets, most notably in China, where the piracy rate dropped 10 percent in three years, and in Russia, where piracy fell 7 percent during a three-year period, according.

These are among the findings of the global PC software piracy study released by the Business Software Alliance, or BSA, an international association representing the commercial software industry. The study was conducted independently by IDC, the information technology industry’s leading global market research and forecasting firm.

“The good news is we are making progress, however, we still have a lot of work to do to reduce unacceptable levels of piracy,´ said Robert Holleyman, BSA president and chief executive. “These significant losses translate into negative impacts on IT industry employment, revenues and financial resources available for future innovation and the development of new technologies.”

Worldwide, for every $2 of software purchased legitimately, $1 was obtained illegally. Global losses increased in 2006 by more than $5 billion, or 15 percent, during the previous year. Of the 102 countries covered in this year’s study, piracy rates dropped moderately in 62 countries, while increasing in 13.

China’s piracy rate dropped four percentage points for the second consecutive year and has dropped 10 percentage points in the last three years – from 92 percent in 2003 to 82 percent in 2006. By reducing China’s piracy rate by 10 percentage points over three years, $864 million in losses were saved, according to IDC.

The reduction in the piracy rate and the savings are the result of government efforts to increase the use of legitimate software within its own departments, vendor arrangements with PC suppliers to use legitimate software and increasing industry and government education and enforcement efforts. The legitimate software market in China grew to nearly $1.2 billion in 2006, an increase of 88 percent during 2005. Since 2003, the legitimate software market in China has grown 358 percent.

“Considering the vast PC growth taking place in the Chinese IT market, this continued decline in China’s software piracy rate is quite promising,´ said Holleyman. “BSA is encouraged by the commitment from the Chinese government to ensure legal software use. We look forward to continued dialogue between the U.S. and China aimed at addressing issues that affect both economies.”

In Russia, the piracy rate decreased by seven percentage points since 2003, down from 87 percent in 2003 to 80 percent in 2006.

In addition, the study indicated that even relatively low piracy rates can amount to huge losses in large markets. For example, while the U.S. had the lowest piracy rate of all countries studied, it also had the greatest total losses at $7.3 billion. China saw the second highest losses at $5.4 billion with a piracy rate of 82 percent, followed by France with losses of $2.7 billion and a piracy rate of 45 percent.

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