Thirty-five percent of the packaged software installed on personal computers worldwide in 2005 was illegal, amounting to USD 34 billion in global losses due to software piracy, research firm IDC reported. According to the study commissioned for the Business Software Alliance, one out of every three copies of software in 2005 was pirated.
But the sector is beginning to see the silver lining with some improvements in a number of markets. The study found that education, enforcement and policy efforts are beginning to pay off in emerging economies such as China, Russia and India and in Central/Eastern Europe and the Middle East & Africa.
"The progress made in reducing PC software piracy in several emerging markets provides some encouragement; however, much more needs to be done," said BSA President and CEO Robert Holleyman. "With more than one out of every three copies of PC software obtained illegally, piracy continues to threaten the future of software innovation, resulting in lost jobs and tax revenues."
According to the study piracy rates decreased moderately in more than half (51) of the 97 countries covered in this year's study, and increased in only 19. The global rate was unchanged from 2004 to 2005 as large developed markets like the United States, Western Europe, Japan and a handful of Asian countries continue to dominate the software market while their combined piracy rate hardly moved.
IDC said some positive changes could be seen in the rapidly developing countries of Russia, India and China. Russia saw a four point drop in its PC software piracy rate while India's piracy rate declined two points. China, with one of the fastest growing IT markets in the world, dropped four points between 2004 and 2005.
"This year marks the second year in a row where there has been a decrease in the PC software piracy rate in China. This is particularly significant, considering the vast PC growth taking place in the Chinese IT market," said Holleyman.
The study also found that 19 of the 26 countries in the Middle East and Africa declined somewhat, with 12 countries dropping two or more percentage points. In Central/Eastern Europe, the piracy rate declined in 15 of the 18 countries included in this year's study. Notably, Ukraine dropped six points to 85 percent during the past year.
There was an increase in global losses from software piracy by about USD 1.6 billion to USD 34 billion in 2005, from the previous year. In countries with very large software markets, comparatively low piracy rates can amount to huge losses.
While the United States had the lowest piracy rate of all countries studied at 21 percent, it also had the greatest individual losses – USD 6.9 billion. China saw the second highest losses at USD 3.9 billion with a piracy rate of 86 percent, followed by France with losses of USD 3.2 billion and a piracy rate of 47 percent.
Key findings of the research are:
- The four countries with the largest percentage point drop in their piracy rate during the past year were China (4 points), Russia (4 points), Ukraine (6 points), and Morocco (4 points).
- The countries with the highest piracy rates were Vietnam (90 percent), Zimbabwe (90 percent), Indonesia (87 percent), China (86 percent), and Pakistan (86 percent).
- The countries with the lowest piracy rates were the United States (21 percent), New Zealand (23 percent), Austria (26 percent), and Finland (26 percent).
The following chart illustrates average piracy rates by region of the world:
"Many factors contribute to regional differences in piracy – the strength of intellectual property protection, the availability of pirated software, cultural differences and IT-related market trends," said John Gantz, chief research officer at IDC. "There's no doubt that lowering software piracy takes constant work and investment, but those investments can unlock enormous benefits for the industry and local economies."
A previous IDC/BSA study showed that if the global piracy rate were to drop 10 points to 25%, it would create as many as 2.4 million new jobs, USD 400 billion in economic growth, and USD 67 billion in tax revenues worldwide.
"Stronger intellectual property protection and education and awareness are absolutely critical to stem the growth of piracy around the world," said Holleyman. "As broadband growth continues and the IT sector expands, the influx of new users and the increased availability of pirated software means continual efforts are required to reduce and keep software piracy down."
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