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Piracy cost the global software industry a record $63.46 billion last year in lost sales, an increase of 8% from 2010, driven largely by a shift into emerging economies such as China as the biggest computer users.
Although the overall rate of software piracy held steady at 42% in 2011 after easing slightly the previous year, the head of the Business Software Alliance warned that the percentage of unlicensed software programs installed in computers is likely to increase unless governments in emerging economies crack down on theft.
"I think you can assume that, a year from now, the percentage going into developing markets will be even higher--with higher policy rates and higher policy losses," said Robert Holleyman, president and chief executive of the trade group that includes major software makers such as Apple Inc. (AAPL) and Microsoft Corp. (MSFT).
"Unfortunately, there is no good news in that assessment, absent some major change in getting more people to understand that there actually is a risk of getting caught or penalized if they're using unlicensed software," Holleyman said in an interview.
Piracy rates actually came down slightly in China and other key emerging economies, such as India and Russia. But the fast pace of growth in those markets drove up the cost of software theft, with emerging economies now accounting for more than half of computer use worldwide. As demand for computers and software continues to grow in those markets, that will likely pull up the global piracy rate, he said.
"In most places, there's just no sheriff in town who is causing people to stop and think that they might get caught," said Holleyman.
China continues to be the biggest challenge for the industry, with software losses climbing 14% to $8.90 billion to remain second only to the $9.77 billion cost in the U.S. While the piracy rate in China edged down by a percentage point to 77%, this still means nearly four out of five programs installed there are unlicensed--versus less one out of five in the U.S.
In disclosing last month that China once again made its watch list of the most egregious violators of intellectual-property rights, the U.S. Trade Representative's office said the high piracy rate among state-owned enterprises in China is particularly troublesome because it provides those firms with "an unfair trade advantage."
Earlier this month, U.S. officials secured a commitment from Beijing during annual high-level bilateral talks to expand a pilot project focusing on ensuring that state-owned enterprises use legal software, seeking to build on the modest progress made to promote legal software use at the government level.
If China's new initiative proves even half successful, Holleyman said, it could provide a significant boost in software sales and set an important precedent for companies throughout China. However, given that China has so far showed little interest in adopting globally accepted best practices in software asset management--or even provided much transparency in its legalization drive--"it's most likely to be a Band-Aid rather than the type of true correction we need," he said.
-By Tom Barkley, Dow Jones Newswires; 202-862-9275; email@example.com