Piracy's global economic impact debated

There's no question that software piracy is a global problem with a heavy financial impact. But just how heavy it is is a matter of debate.

A May 2009 report by the Business Software Alliance and IDC estimated that 20% of software programs installed in the U.S. last year were unauthorized copies. Worldwide, the figure is 41%, with an estimated financial impact of $53 billion -- a figure based on the retail value of the pirated PC software.

But critics of the study say it fails to account for the possibility that pirated software could be replaced with Linux or other open-source options. If it were, the BSA's global loss figure of $53 billion would drop sharply, they maintain.

"Obviously, not every piece of pirated software will be replaced immediately with legitimate software if underlicensing is addressed or sources of pirated stuff dry up," acknowledges Dale Curtis, the BSA's vice president of communications. But he says that over the years, IDC has found "a very strong correlation between piracy rates and software sales. In country after country, as the piracy rate falls, legitimate sales go up."

A second criticism of the report is that its country-by-country figures are partly based on the results of an annual survey that in 2009 covered 24 countries. One country that wasn't included is Canada -- and that doesn't sit right with Michael Geist, a professor at the University of Ottawa.

"What the BSA did not disclose is that the 2009 report on Canada (whose piracy rate declined from 33% to 32% in the study) were guesses since Canadian firms and users were not surveyed. While the study makes seemingly authoritative claims about the state of Canadian piracy, the reality is that IDC . . . did not bother to survey in Canada," Geist wrote in a May 27 blog post.

Curtis responds that the study "is not a guess, nor is it a scientific measurement, nor is it based primarily on a survey of software users, as Geist suggests." A survey of 6,200 users is only a piece of the model, Curtis says. Further, he says Canadian users were surveyed the previous year, and "there is no reason to assume large changes in results from one year to the next."

Ivan Png, a professor of information systems and economics at the University of Singapore, says the BSA and IDC should explain how they applied the results from the 24 countries surveyed to all of the other countries not surveyed. "IDC should make the methodology transparent," Png says.

Copyright © 2009 IDG Communications, Inc.

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