Reducing software piracy by just 10 percentage points worldwide would generate 1.5 million jobs and add US$400 billion to the world economy, according to a study released Wednesday by the Business Software Alliance (BSA) and IDC.
BSA, made up of giant software vendors such as Microsoft Corp., IBM Corp., and Apple Computer Inc., pegs the amount of software programs pirated globally at 40 percent. The IDC study, commissioned by the BSA, says that by reducing that number to 30 percent, nations could collectively add US$64 billion to their tax coffers.
In the study, IDC assessed the impact of information technology on 57 countries that make up 98 percent of the world's IT market. According to the BSA, about two-thirds of those 57 countries have reduced piracy by 10 percentage points since 1996, making another 10 percentage point drop a "realistic and achievable goal." A drop of one percentage point would raise $6 billion in new tax revenues, according to the study.
"Strong intellectual property protection spurs creativity, which opens new opportunities for businesses, governments and workers," Robert Holleyman, president and chief executive officer of the BSA said in a press release sent out before the official announcement. "When local entrepreneurs have a legitimate way to sell their innovations and make a profit from their programming, they can grow their own businesses and hire more people. That, in turn, drives up spending in the local economy and increases tax revenues that help fund important public sectors."
Holleyman, during a press conference, noted that the study says those countries with the highest piracy rates could see the biggest benefits with just 10-point reductions. The report suggests, he said, that local software and services vendors, not the multinational software vendors that make up BSA's membership, benefit most when piracy is reduced, and those local vendors create high-paying jobs.
"Piracy reductions could help jump-start today's stagnant economy," Holleyman said. "All of this has the effect of speeding up local economies and increasing tax revenues at a time when every government is looking for funding."
Holleyman called for governments to "lead by example," by speaking out against piracy and creating public awareness campaigns. Most governments, including the U.S., need more law enforcement resources dedicated to protecting intellectual property, Holleyman said, but he praised the U.S. for pushing for free-trade agreements with other nations and including piracy reduction goals as part of those agreements. He predicted the study would be well received by governments across the globe.
Based on estimates from the Organization for Economic Cooperation and Development, a full 10-point drop could provide money for any one of the following:
-- More than 30 million computers for schools;
-- College degrees for 6.9 million people;
-- Primary education for about 4 million children.
The IDC study claims China's IT sector could grow by five times in the space of four years with a 10-point drop in its 92 percent piracy rate. A 10-point drop in the U.S. would add US$150 billion to its gross domestic product.
John Gantz, chief research officer and senior vice president for IDC, said his group's researchers tested the assumption that reduced piracy equals more software spending, and found it to be true in places where piracy has already been reduced.
The study argues that consumers benefit when piracy is reduced because pirated products can be defective or lack security features. The study doesn't look at any potential negative impact to consumers, such as paying higher prices for non-pirated software. Gantz admitted that some economic benefit to no-cost software exists, and consumers could be affected by law enforcement actions.
The hidden cost of pirated software is fewer legal software choices for customers, Gantz added, and the benefits of a legitimate software market had more impact on the economy than any benefits from consumers using pirated software.
"My fear is with children in their teen-age years, there's almost this climate of being able to get music on the 'Net for free and software on the 'Net for free," Gantz said. "Pretty soon they'll get intellectual content for free, including their (school) papers. There's a sociological negative impact to piracy."
The study doesn't address the costs of piracy enforcement efforts, Gantz said, but some benefits it doesn't track, including increased productivity from workers using non-pirated software, would outweigh the costs of enforcement, he maintained.