Revulytics Blog

Piracy Estimates Inadequate - So Now What?

April 15, 2010



There's been a lot of commentary on the GAO's recent report, "Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods." Ars Technica reported that the "US government finally admits most piracy estimates are bogus," while PC World was somewhat more measured, noting that the "Government Says Data Estimating Piracy Losses is Unsubstantiated."

The GAO's report addresses a wide range of infringements - covering both the counterfeiting of tangible goods (pharmaceuticals, auto parts, toys, etc.) and the piracy of intellectual property (software, music, etc.).

The GAO reported that:

"Three widely cited U.S. government estimates of economic losses resulting from counterfeiting cannot be substantiated due to the absence of underlying studies. Generally, the illicit nature of counterfeiting and piracy makes estimating the economic impact of IP infringements extremely difficult, so assumptions must be used to offset the lack of data." (emphasis added)

The GAO concludes that "despite significant efforts, it is difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the economy as a whole."

A couple of points come to mind when trying to put this in context:

  • Surveys and studies do their best to put boundaries around large problems, issues or questions, but they still represent estimates (shaped by their chosen methodologies) and we need to be careful not to treat them (and quote them) as hard facts.
  • These studies had broad goals - including measuring the impact of counterfeiting and piracy on the U.S. economy and specific industries. Beyond confirming that piracy is a "big problem," it is hard for individual companies to use these macro-level studies to make data driven decisions on how to address their own piracy problems.

It is useful to know that the GAO found that "Counterfeit or pirated software may threaten consumers’ computer security. The illegitimate software, for example, may contain malicious programming code that could interfere with computers’ operations or violates users’ privacy."

But what are individual software vendors supposed to do with this knowledge (beyond educating consumers about this risk)?

Software vendors to address piracy need to measure and quantify the specific impact of piracy on their businesses. While the widespread availability of their cracked software in piracy channels is a good indicator of demand, ISVs need to know which businesses are actually using their software and whether they could pay for those licenses. Adopting a piracy business intelligence approach gives ISVs empirical evidence of unlicensed use so they can make better decisions on anti-piracy and revenue recovery strategies. We know piracy is a big problem (and can argue about "how big" it really is). The bigger question for individual software vendors is "What are are we going to do about it?

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Michael Goff

Post written by Michael Goff

Marketing Director at Revulytics
Michael is Marketing Director at Revulytics where he is responsible for corporate marketing, content, and social media. He has helped to educate the industry on the benefits of software usage analytics for compliance and product management through the company's blog and contributed articles in trade publications. Michael was previously a marketing programs manager at The MathWorks and principal at Goff Communications. Michael earned a J.D. from Boston University School of Law and a B.A. from Colgate University.