Software piracy costs billions in revenue

The Outlook

Applications are copied worldwide with impunity

June 13, 1999

ALMOST TWO-FIFTHS of all new business software applications installed worldwide in 1998 were pirated, two piracy watchdogs reported last week.

A survey conducted by the Business Software Alliance and the Software & Information Industry Association showed 231 million, or 38 percent, of 615 million new business software applications installed worldwide during 1998 were pirated. That adds up to an estimated $11 billion revenue loss.

The biggest offenders, the two groups reported, were Vietnam, with 97 percent; China, 95 percent; and Indonesia, 92 percent. The United States booked $2.9 billion in losses with a piracy rate of 25 percent, while Canada recorded $321 million in losses and a piracy rate of 40 percent.

How significant a problem is piracy to software companies? What software is the most likely to be pirated? Which are more affected -- large or small software companies? What are software makers doing to control it?

Peter Beruk

Vice President of Anti-Piracy Programs, Software and Information Industry Association, Washington, D.C.

If piracy is not software companies' No. 1 problem, certainly it is in their top 10. We represent both very large and very small companies. If you're a smaller company and someone is using your product illegally, it's more of a problem for you than it would be with Microsoft. However, in either case, piracy is a violation of intellectual privacy.

Right now we are looking at about an $11 billion loss to piracy for the world. Those numbers are only for business application software used in businesses. Software like Microsoft Office and Norton Utilities is generally used illegally far more in terms of dollars and units. There are just as large problems in the home -- people trade games or tax preparation programs.

We use both enforcement and education to try to convey to individuals that the industry can't stand idly by and watch people steal their product.

Evans K. Kissi

Director of equity research, Joseph Stevens & Co., New York.

I think piracy is quite significant, especially if you are Microsoft.

Large companies tend to have a lot of products in the marketplace, and it's difficult to keep track of pirates. Smaller companies can focus on the limited products they have. They can keep track of products and the effect on sales. Microsoft has a tendency to unveil products almost every year. Mainly, Windows products are likely to be pirated -- Microsoft Office, a lot of CD-ROM products, Microsoft Encarta, Quicken.

Richard Bernatchez

Chief executive officer, Microcomputer Applications Inc., maker of software piracy prevention systems, Littleton, Colo.

Generally your vertical market software specific to a particular industry will be more likely to be pirated as compared to word processing programs and things used across all industries. Within the business community, software that sells for more than $500 a copy is most likely to be pirated. Games are enormously pirated by high school and college kids.

If a software development company depends on revenue from sales of a product, it doesn't matter what size you are. With a bigger company, the more sales you have, the more risk you have. As far as percentage of sales affected by piracy, it's probably about the same for big and small companies.

Pam Salzer

East region anti-piracy and public relations manager, Microsoft Corp., Washington, D.C.

Counterfeit operators prey specifically on the small business. Small- and medium-size businesses have bought counterfeit products unknowingly and then had to turn around and buy the legitimate product, so they're sort of getting swindled twice.

States aren't getting tax revenue on pirated software. The U.S. economy is losing more money to software piracy than anyone can imagine. I think the industry is doing a fair amount to control piracy, but I would certainly like to see more.

Compiled by Rachel Sams

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