The effect of national culture and economic wealth on global software piracy rates

Abstract

According to a recent survey on global software piracy [9], the Business Software Alliance estimated that the illegal duplication, distribution, or sale of commercial business software cost the U.S. software industry $11.75 billion in lost sales in 2000, and brings to $71.6 billion the losses incurred since the surveys began in 1994. Software piracy rates are calculated by estimating the demand for software based on the worldwide number of PC shipments and the sale of U.S. business applications. By assuming that for each new personal computer sold there will be a set of accompanying software sales, the difference between expected demand and supply (in the form of sales) is attributed to software piracy. The global piracy rate—calculated by combining the data for all countries and treating the world as a single market—increased for the first time from 36% in 1999 to 37% in 2000. Averages across individual countries continue to decline, however, from 61% in 1999 to 58% in 2000 (see Figure 1). The highest regional software piracy rates are in Eastern Europe, with rates of more than 60%, suggesting six of every 10 software packages in use are pirated copies. Eleven countries are estimated to have a software piracy rate of 80% and above, with Vietnam (97%), China (94%), the Ukraine/other CIS (89%), Indonesia (89%), and Russia (88%) at the top of the list. Because of the size of their respective software markets, however, the greatest financial losses occur in the U.S., Japan, China, Germany, the U.K., France, and Italy. These seven countries account for $7.5 billion or 60% of lost sales worldwide in 2000. Although the U.S. has the lowest piracy rate in the world at 24% for 2000, the U.S. software market is four times that of any other country, and so the U.S. alone accounts for more than $2.6 billion in lost sales. Most countries protect software copyright using copyright and intellectual property rights legislation. In the U.S., such legislation includes the 1997 No Internet Theft (NET) Act, the 1998 Digital Millennium Copyright Act, and the 1999 Digital Theft Deterrence and Copyright Damages Improvement Act, the latter raising the maximum fine to $150,000 for each instance of willful copyright infringement.