Losses in the software industry due to piracy in the Philippines reached $202 million in 2008, a new study by the Business Software Alliance and IDC revealed Tuesday.

The Sixth Annual BSA-IDC Global Software Piracy Study revealed that 69 percent of personal computers in the country used pirated software in 2008, which is the same rate registered in 2007. However, dollar losses caused by software piracy in the Philippines increased from $147 million in 2007 to $202 millin in 2008.

The study revealed that worldwide software piracy rate rose for the second year in a row, from 38 percent to 41 percent, because PC shipments grew fastest in high-piracy countries, overwhelming progress elsewhere.

It said many countries have made progress in reducing the illegal use of software products although piracy remains a serious problem worldwide. Out of the 110 countries studied, the rate of personal computer (PC) software piracy dropped in about half (57) of the countries, remained the same in a little over a third (36), and rose in just 16.

Atty. Bienvenido A. Marquez III, BSA Consultant for the Philippines, said the failure to reduce software piracy rate in the Philippines highlights the need for more intensified educational and enforcement efforts of the government and private sector

He cited an 2008 IDC study, which stated that reducing piracy by 10 points over four years could generate 600,000 new jobs, and a stronger economy for everyone. That projection has been confirmed by actual experience in China and Russia, the study said.

“Losses in the software industry due to piracy further hurts our local economy. Filipinos should realize that whenever they buy a pirated copy of a software program, or when a business decides to use more copies of a software than they had bought licenses for, they are not only stealing the intellectual property of the software developers. They are also causing many of our countrymen to lose job opportunities as a result of lost revenues in the industry,” Marquez said.

Marquez emphasized the importance of strengthening the country’s anti-piracy laws and improving the prosecution and judicial system to complement the all-out enforcement operations being conducted by the Pilipinas Anti-Piracy Team (PAPT), a government-led initiative to combat software piracy in the country, composed of the National Bureau of Investigation (NBI), the Philippine National Police (PNP) and the Optical Media Board (OMB).

He particularly lauded the ongoing educational and crackdown campaign of the PAPT as having been helpful in preventing software piracy from going up despite the increased sales of computers in the country.

Global piracy breaches $50-B level

The BSA-IDC Global Software Piracy Study also revealed that the monetary value of unlicensed software – “losses” to software vendors – broke the $50 billion level for the first time.  Worldwide losses grew by 11 percent to $53 billion in non-adjusted dollars, although half of that growth was the result of the falling US dollar.  Excluding the effect of exchange rates, losses grew by five percent to $50.2 billion.

The global economic recession has been having a mixed impact on software piracy, the study said.  Victor Lim, Vice President, Asia/Pacific Consulting Operations at IDC, said consumers with reduced spending power may hold on to computers longer, which would tend to increase piracy because older computers are more likely to have unlicensed software loaded on them. 

However, pocketbook pressures are spurring sales of inexpensive “netbooks,” which tend to come with legitimate pre-loaded software; and spurring businesses to implement software asset management (SAM) programs to increase efficiencies and lower IT costs.

“Reduced buying power is only one of many factors affecting software piracy,” Lim says. “The economic crisis will have an impact – part of it negative, part of it positive – but it may not become fully apparent until the 2009 figures come in.”

Aside from its economic implications, software piracy also increases the risk of cyber crime and security problems such as the recent global spread of the Conficker virus, which has been attributed in part to the lack of automatic security updates for unlicensed software.

Among the study’s other key findings:

    * China’s piracy rate has dropped 10 points in the last five years, a result of more vigorous enforcement and education, as well as vendor legalization programs and agreements with original equipment manufacturers (OEMs) and resellers.  The government, for instance, has mandated that PC manufacturers in China only ship PCs with legitimate operating systems.

    * India’s rate has dropped 6 points in five years, despite its sprawling PC market, of which consumers and small businesses account for 65%.  While consumer PC shipments grew more than 10% last year, shipments to other categories dropped 7%.

    * Hong Kong’s PC software piracy rate declined by 3 percentage points in 2008, the largest drop in the region, while  the piracy rate in Australia and Japan, two of the more mature markets in the APAC region, dropped by 2 points.

    * While emerging economies account for 45 percent of the global PC hardware market, they account for less than 20 percent of the PC software market.  If the emerging economies’ PC software share were the same as it is for PC hardware, the software market would grow by $40 billion a year.  Lowering global piracy by just one point a year would add $20 billion in stimulus to the IT industry.

    * Lowering global piracy by just one point a year would add $20 billion in stimulus to the IT industry.

    * Spreading Internet access will increase the supply of pirated software.  Over the next five years, 460 million people in emerging countries will come online.  The growth will be highest among consumers and small businesses, which tend to have higher rates of piracy than businesses and government agencies.

    * The lowest-piracy countries are the US, Japan, New Zealand, and Luxembourg, all near 20 percent. The highest-piracy countries are Armenia, Bangladesh, Georgia, and Zimbabwe, all over 90 percent. 

“Fortunately, experience has shown that we can reduce software piracy through a combination of consumer education, strong intellectual property policies, effective law enforcement, and legalization programs by businesses and government agencies. The progress seen in many APAC economies is proof that this anti-piracy blueprint works – and that governments, businesses and consumers all benefit,” said Hardee.

The BSA-IDC Global Software Piracy Study covers piracy of all packaged software that runs on personal computers, including desktops, laptops, and ultra-portables. The study does not include other types of software such as server- or mainframe-based software.