BSA Piracy Study: Quantifying Piracy Data Easier Than We Thought

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The Business Software Alliance (BSA), in conjunction with global market intelligence firm IDC, released its seventh annual study on software piracy on Tuesday. The study estimates that the commercial value of pirated software globally was $51.4 billion. According to the BSA, while losses due to piracy are hard to quantify, the $51.4 billion is most likely lower than the actual losses sustained due to piracy in 2009.

About a month ago, the Government Accountability Office (GAO) released a report on piracy, which claimed that data estimating piracy losses is largely unsubstantiated. The report cited several studies and basically argued that the data presented in said studies is exaggerated, inaccurate, and based on faulty premises.

One of the studies cited by the GAO's report was the BSA's 2008 software piracy study. According to the GAO, the BSA's study estimated $9.1 billion lost in software piracy in the United States alone--but came to this conclusion using a one-to-one substitution rate.

In other words, the BSA study assumed that each pirated copy of software would have otherwise resulted in a legitimate sale. The GAO pointed out that this premise was faulty, as it is unlikely that each person with pirated software would have otherwise bought the software at full price.

The BSA has fixed the wording in their most recent study [PDF]--instead of calling it a "loss," they're calling it the "commercial value." Still, John Gantz, the lead IDC analyst on the study, says that the substitution rate, while not exactly one-to-one, is pretty close.

According to Gantz, when countries were analyzed against each other based on piracy rates and software markets, almost every case showed a close to one-to-one substitution rate (lower piracy rates showed correspondingly higher software markets). There were a few outliers, but if the countries were lumped into cohorts (groups of countries with similar piracy rates/software markets), every single case showed a close to one-to-one substitution rate.

The reason for this close to one-to-one substitution rate is perhaps that a large portion of piracy is "business piracy," not internet piracy. In "business piracy," an enterprise has some legitimate licenses for the software they are using, but then downloads said software to many more computers. Were this not happening, businesses would likely be forced to buy the licenses for the software (e.g. Microsoft Office), in order to successfully do business.

BSA President and CEO, Robert Holleyman, suggests that using a one-to-one substitution rate actually underestimates the losses due to piracy.

"For every one dollar of software sold, another three or four dollars in revenue is created for the local distribution industry," Holleyman said in a phone call, "So IDC believes that we actually understate the value of software by looking at just its commercial value."

The BSA/IDC report also states that it was a pretty good year for the fight against piracy, despite the fact that the global piracy rate rose two percentage points (41 percent up to 43 percent).

The reason for this is that emerging software and piracy markets in countries like China, India, and Brazil are growing at such a rate that they have an effect on the global piracy rate--despite the fact that more than half of the countries in the world saw piracy rates fall.

Still, perhaps the MPAA and RIAA should give up their tirades--after all, the United States has the lowest piracy rate of any country in the world, at just 20 percent.

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