Software piracy declines in emerging markets; no decline globally: IDC-BSA

24 May 2006

1
Mumbai: Thirty-five per cent of the packaged software installed on personal computers (PC) worldwide in 2005 was illegal, leading to $34 billion in global losses due to software piracy, reveals an annual global PC software piracy study released today by the Business Software Alliance (BSA), the international association of the world's leading software developers.

The independent study, conducted by IDC, the IT industry's leading global market research and forecasting firm, however, finds some improvements in a number of markets as education, enforcement and policy efforts show signs of paying off in emerging economies such as China, Russia and India and in Central / Eastern Europe and the Middle East and Africa.

The BSA-IDC Global Software Piracy Study covers all packaged software that runs on PCs. The study does not include other types of software such as that which runs on mainframes or servers or software sold as a service. IDC used proprietary statistics for software and hardware shipments, conducted 5,600 surveys and enlisted IDC analysts in 38 countries to confirm software piracy trends.

"The progress made in reducing PC software piracy in several emerging markets provides some encouragement; however, much more needs to be done," says Robert Holleyman, BSA president and CEO. "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.

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.

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.

"It's heartening to see a 2 per cent drop in the Indian piracy rate," commented Ajay Advani, co-chair of BSA India Committee. "We are moving in the right direction albeit slowly. Hopefully, we will see more support from both state and federal governments to help reduce the piracy rate. Only then can we see major drops in the piracy rate like some other Asian countries, notably China, have enjoyed.

Advani also said, "According to an economic impact study by the IDC and published last December, if we are able to reduce the piracy rate from the current 72 per cent to 64 per cent by 2009, India will see some 115,000 new IT jobs, an additional $5.9 billion pumped into its economy and increased tax revenues of $386 million."

Holleyman adds, "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."

Commenting at the Asia regional launch Jeffrey Hardee, vice president and regional director for Asia, said, "While the average Asia piracy rate increased by 1 point to 54 per cent this year, the piracy rates in six Asia economies declined.

China led the way with a four-point drop, followed by India, Singapore and Vietnam with two point reductions. The reason for the rise in the average rate for the region lies in the growth of the PC markets in China and India, which grew from a combined 27 per cent of the Asia-Pacific market in 2004 to 29 per cent in 2005. Hence, despite the reductions in many Asian economies, including China and India, a higher percentage of PCs shipped into these two countries had the mathematical effect of dragging the Asia Pacific average upward toward the China / India average."

"The reductions we have seen show that efforts made by governments in addressing software piracy through sound policy initiatives, educational outreach and enforcement programs bear fruit and we think most economies in the region are well-positioned to bring about significant reductions in piracy in the coming years if these efforts are sustained. The IDC Economic
Impact Study released in December 2005 clearly illustrates the economic benefits to be gained from reductions in software piracy in terms of job creation, IT penetration, and GDP growth and we are excited about the prospects for the region," added Hardee.

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 per cent during the past year.

Global losses from software piracy amounted to $34 billion in 2005, an increase of $1.6 billion over 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 — $6.9 billion — China saw the second highest losses at $3.9 billion with a piracy rate of 86 per cent, followed by France with losses of $3.2 billion and a piracy rate of 47 per cent.

Other key findings:

Countries with the largest percentage point drop in their piracy rate were:
China 4 points
Russia 4 points
Ukraine 6 points
Morocco 4 points

Countries with the highest piracy rates were:
Vietnam 90 per cent
Zimbabwe 90 per cent
Indonesia 87 per cent
China 86 per cent
Pakistan 86 per cent

Countries with the lowest piracy rates were
United States 21 per cent
New Zealand 23 per cent
Austria 26 per cent
Finland 26 per cent

"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," John Gantz, chief research officer at IDC, says. "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 per cent, it would create as many as 2.4 million new jobs, $400 billion in economic growth, and $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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