Friday, May 30, 2008

The $48 billion lie

Once again, mainstream media are falling over themselves to parrot special interest group statistics. I'm referring to the annual study on software piracy published earlier this month by the Business Software Alliance, which alleged that piracy cost the software industry $48 billion last year, up by $8 billion from 2006.

Instead of questioning the reliability of these numbers and the methodology used to compute them, many mainstream media (including reputable ones like The Economist) simply bandied the $48 billion figure around like gospel. What BSA and software companies failed (or deliberately failed) to recognise is that their piracy statistics is based on the flawed assumption that people would have bought legal software if pirated versions were not available.

Nothing can be further from the truth. In many cases, people use illegal software because they can't afford the real thing. If the alternative to "free software" is "expensive software", many users would forgo that software altogether, or would opt for cheaper options. So unless you believe in the ludicrous economic premise that software purchases are inelastic, the $48 billion cost to the industry is unlikely to materialise.

The study also neglect to mention that many software companies have virtually no distribution channel in those countries with high piracy rates, probably because nobody can make a living selling software by asking for a month's wages for a few CDs.

To be fair, software companies are entitled to charge whatever they wish for their software. But to tout questionable research designed to persuade lawmakers and journalists of the need to crack down on piracy may cause software companies to mis-identify core problems to their growth.

Related post:
The $222,000 playlist


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