BSA Piracy Study Rehashes 1:1 Lost Sale Argument

BSA Piracy Study Rehashes 1:1 Lost Sale Argument

Business Software Alliance publishes new study claiming that reducing software piracy rate by 10% in four years would inversely create a 10% increase in spending on legal software, but critics point out that it’s highly unlikely that every pirate would otherwise pay for the product.

The Business Software Alliance has a long and sordid history history of making outlandish claims when it comes to software piracy, and it’s latest study – Piracy Impact Study: The Economic Benefits of Reducing Software Piracy – is no exception.

Earlier this year its Global Software Piracy Study claimed that $51 billion worth of software was pirated around the globe in 2009, and blamed the problem on expanding sales into emerging markets (i.e. poor countries).

The only problem with all of this is that the BSA uses a questionable methodology to determine the software piracy rate. It first calculates how many PCs there are in a given country, and then matches up the results of a survey it conducted of the software people said were installed on them. It then figures out how many licensed software units were purchased and divides the two.

Worse still, for countries where people were not surveyed it used an “emerging market measure called the Information Development Index (IDI) to come up with a figure. The study’s $51 billion figure also hides the fact that most piracy occurs in emerging countries where most are likely unable to afford the high cost of licensed software.

Now the BSA is trying to follow up that report with data it claims shows the economic benefits of reducing that $51 billion in global software piracy.

“Reducing the piracy rate for PC software by 10 percentage points — 2.5 points per year for four years — would create $142 billion in new economic activity while adding nearly 500,000 new high-tech jobs and generating roughly $32 billion in new tax revenues by 2013,” reads the study.

However, there are several problems with this claim.

The first is that the BSA assumes a 1:1 replacement value for pirated software.

“What the study is looking at here is really if you’re reducing the piracy rate and increasing the legal software market by 10 points, this is what you’d see in terms of economic return,” says Matt Reid, vice-president of communications for the BSA.

We all know this highly unlikely to happen. Many will either opt for open source software or none at all, and when we’re talking about $51 billion even a fraction of the total is quite large (Open Office anyone?).

“If this study is really nothing more than an analysis of a 10 per cent increase in spending dressed up as a 10 per cent reduction in piracy, that would be a shockingly misleading approach,” says Michael Geist, an Internet law expert at the University of Ottawa. “The suggestion that reducing unlicensed software use leads directly to great IT purchasing is demonstrably false, given the many examples where organizations lower piracy rates by turning to open source alternatives.”

The second problem is that the new jobs and revenue the BSA reports will be created by piracy reduction have to come from somewhere. What would actually take place is a shift in spending rather than new spending. It’s not as though people have been hoarding the money they would have otherwise spent on purchasing licensed software.

Another interesting criticism is that given the high paying nature of jobs in the IT industry compared with other sectors of the economy means that “switching a given amount of money from industries with lower pay to IT, with its higher wages, would again *reduce* the overall number of jobs, not increase them, as the report claims.”

“Now more than ever, governments must act quickly to address PC software theft within their borders,” said BSA President and CEO Robert Holleyman.  “At a time when economies around the world are emerging from one of the worst recessions in decades, this study clearly shows that aggressively fighting software piracy today means greater economic benefits tomorrow — for the entire global economy, not just the software industry.”

Not just the software industry? Again, where does he expect the money to come from and where does he expect it to go? It’s likely to come from poor, underdeveloped countries – Georgia, Zimbabwe, Bangladesh, Moldova, and Armenia are the top 5 countries with the highest rates of piracy – that need money the most, and flow towards companies in the US, the country that least needs new revenue the least.

So what the BSA seemed to accomplish best here is proving once again that piracy studies are usually not worth much more than the paper they’re written on.

Stay tuned.

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