TCS Daily

Pirates of the European

By Jeremy Slater - July 29, 2004 12:00 AM

Pirates aren't what they used to be. Ask Captain Hook who (along with Peter Pan and with other JM Barrie created characters) is celebrating his centenary this month. Piracy no longer has much to do with the high seas and avoiding the cannon heavy frigates of the Royal Navy. These days it is much closer to home. And this sort of piracy has the potential to do as much damage to the economy as England's privateers did to the Spanish in the 16th century.

It is estimated that software piracy costs Europe 9.1 billion euros a year in lost revenue, according to a recent study by the business group Business Software Alliance. The report also claims that even a 10% reduction in software piracy would help create around 200,000 new jobs in the European Union and such a cut would produce 18 billion euros in taxes for Europe's national governments.

The BSA says the problem is apparently rife throughout Europe with the Danes being the good boys -- pirated software there is only 26% of the total market -- while the Greeks are amongst the worst, with 63% of all software being pirated. However, despite the average piracy levels in western Europe being lower than eastern Europe (36% against 70%) there are surprising exceptions: the Czech Republic has less of a problem than France.

The report also says that 36% of the software installed on computers worldwide was pirated in 2003, representing a loss of nearly $29 billion in revenues for businesses globally. The study found that while $80 billion worth of software was installed on computers around the globe last year, only $51 billion was legally purchased.

According to another report by the Software and Information Industry Association the industry loses in the States alone between $11 to $12 billion (nearly 10 billion euros) in revenue to software pirates every year. Of the billions of dollars lost globally to piracy, nearly half of all such offences are committed in Asia, where China and Indonesia are the biggest offenders. The SIIA agrees with the BSA report saying that piracy is a big problem in western Europe, where it estimates losses are between $2.5 and $3 billion dollars (2.1-2.4 billions euros) a year.

Both groups rather gloomily say that there is little evidence that software piracy will radically decrease or be eliminated in the near future. While many countries have made efforts to improve intellectual property protection for computer software, high rates of software piracy and losses to software developers around the world demonstrate that the problem remains a critical one that can slow the development of the both large and small economies. However, there is one ray of hope as SIIA says there is evidence that education and law enforcement can cut the rate of the crime. In the US, it claims piracy levels have been reduced from 48% in 1989, when the market was much smaller, to 25% in 2002.

It's worth noting that while companies think they may be saving money when using pirated software, they face some risks as a result such as:

  • there is an increased chance that the software will not function properly or will fail;
  • little chance of upgrades, training, or fixes for glitches;
  • have no warranty to protect themselves;
  • an increased chance of exposure to viruses that can destroy data.

Losses suffered through software piracy directly affect the profitability of the software industry as publishers have fewer resources to devote to research and development and fewer opportunities to lower prices as piracy affects company margins. This means they are forced to pass on the costs caused by piracy on to their customers.

The problem for the software industry is that compared to other forms of intellectual property such as literature, music and movies, computer software is relatively new and therefore many people do not seeing that the copying of codes as a crime. But software is protected under the very same laws that govern music, literature and movies and copying software illegally is no different than copying any other form of intellectual property illegally. If this form of crime continues unhindered all of us will pay a price in the end.


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