Six U.S. states account for half of national piracy losses, BSA says

A first-time study by the Business Software Alliance (BSA) shows that while the U.S. has the lowest rate of software piracy of countries tracked around the world, it still has a long way to go to end illegal software use.

In its "2007 State Piracy Report" (download file) released on Wednesday, the Washington-based software trade association found that six U.S. states -- California, Florida, Illinois, New York, Ohio and Texas -- make up $3.93 billion in pirated software losses, or almost half of the $8.04 billion in national losses to software vendors from pirated software last year.

Neil MacBride, general counsel and vice president of antipiracy at the BSA, said this marks the first time the group has looked at piracy rates within individual states in the U.S. The group also conducts annual studies of piracy around the world (download PDF).

"We wanted to focus on the states that appeared to be the ones with the highest reports of piracy that are called into the BSA annually," MacBride said. "We felt like these six cover a significant portion of the software piracy in the U.S. Certainly not all of it."

The 12-page BSA study, conducted by research firm IDC on behalf of the organization, also included two western states, Arizona and Nevada, to round out the study's geographic analysis, according to the BSA. With the two western states included, the total piracy losses was $4.2 billion.

The amount of piracy measured in the eight states in 2007 totals:

  • Arizona 21%
  • California 25%
  • Florida 19%
  • Illinois 22%
  • Nevada 25%
  • New York 18%
  • Ohio 27%
  • Texas 20%

And while the piracy losses to the software vendors was $4.2 billion for the year, there were also losses of about $11.4 billion to software distributors and service providers, according to the BSA.

In addition to the business losses, the pirated software also resulted in losses to local and state governments, which missed out on about $1.7 billion in tax dollars on software that was stolen and not properly sold, the study said.

"Piracy gives companies less money to reinvest and grow their businesses," MacBride said. "This is revenue that was never received, but it could have been deployed for that purpose, and we don't have any reason to believe that it wouldn't."

Overall, the news is mixed, he said.

One encouraging sign has been that the piracy rate in the U.S. "has been on a downward trend over the last three years," MacBride said.

The BSA's 2007 global piracy report showed that the U.S. software piracy rate was 22% in 2003, 21% annually from 2004 through 2006, then down to 20% for 2007. "It's not dramatic, but it's something," MacBride said.

This compares with 2007 piracy rates of 73% in Russia and 82% in China. In Armenia, the highest of all the countries tracked, the rate was 93%.

The bad news was that even as the piracy rate went down, the dollar value of industry losses in U.S. went up anyway. As the price of software rises and more software is being sold, more dollars are lost, MacBride said.

In 2003, the loss to software vendors was $6.5 billion, in comparison with $8.04 billion last year.

The BSA goes after businesses that use pirated software and that violate the terms of their licensing agreements using reports that come in from whistle-blowers. The group offers rewards for turning in scofflaws. About 3,000 reports come in each year to the group.

"Those who decide not to comply with the law are sort of one phone call away from being reported to the BSA," MacBride said. "A high percentage of our calls are from people in the industry who don't like what they're seeing. Less than half of the informants who call in ask for the reward. A high percentage of them are just really offended [about piracy]."

The BSA hopes to do its U.S. state piracy report on an annual basis, he said. Until then, the group will continue to be a watchdog for the industry.

"We're not going to rest until that rate comes down to zero," he said. "In the meantime, we're doing what we can."

Copyright © 2008 IDG Communications, Inc.

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