Apple App Store Has Lost $450 Million to Piracy--Or Perhaps Not

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Estimating the financial impact of software piracy is always a tricky business. Data needed for accurate number-crunching is often impossible to obtain, a fact that leads to fair amount of guesswork on the part of the researchers. As a result, any dollar figure attributed to piracy is often highly debatable.

A new report on Apple App Store piracy is no exception. According to analysis by 24/7 Wall St., Apple and App Store software developers have lost more than $450 million to piracy since the store's launch in July 2008. Who's to blame? Jailbreakers. Users who jailbreak their iPhones can do a number of things that Apple doesn't approve of, such as modifying the operating system or installing programs that don't come from the App Store--programs that they would otherwise have to pay for.

Since Apple collects 30 percent of revenues from App Store downloads, piracy has cost it $140 million--a sizable but manageable loss, considering the company's healthy profits. Developers, unfortunately, take the hardest hit with a $310 million loss.

The new study was greeted with some skepticism in the blogosphere, where critics and readers alike challenged the researchers' assumptions. Christina Warren of Mashable expressed her doubts:

"The biggest red flag is that 24/7 Wall St. assumes that paid iPhone applications have a piracy rate of 75 percent. How did they come to this conclusion? Using some past piracy usage examples from apps from Fishlabs and other developers, they came to the conclusion that for every app purchased, three more were downloaded from cracked sources."

Warren points out that while some developers are hit hard by thievery--Fishlabs recently reported a 95-percent piracy rate for one of its iPhone games--the problem is probably less severe for most of the 28,000-plus App Store developers.

And over at MacRumors, reader "speedfreak007" posted a similar--if less eloquent--concern: "3 pirated downloads each time someone purchases an app? that's just ridiculous! how can you calculate such important statistics with such few data?"

The 24/7 Wall St. report does admit that it's difficult to gauge piracy rates. We'll probably never know the full extent of the problem, but certainly this new report is another indication that piracy isn't going away anytime soon.

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