Piracy Problem Sails to Rural China

Software piracy rates dropped in 11 Asia-Pacific countries, but increased on average across the region, due largely to a boom in Chinese PC sales

In a joint briefing Wednesday with research firm IDC, the Business Software Alliance (BSA) unveiled the findings of its fifth annual Global PC Software Piracy Study, which indicated that the average software piracy rate in the Asia-Pacific region, excluding Japan and Australasia, increased from 55 percent in 2006 to 59 percent last year.

This translated into a revenue loss of US$14 billion last year, up from US$11.7 billion in 2006.

Pointing to China's contribution to the overall increase, BSA President and CEO Robert Hollyman said in a statement: "The battleground [against software piracy] is now shifting to emerging markets where many of our collective challenges remain."

A global association that aims to represent the interests of top software developers, the BSA has members worldwide including Adobe Systems, Microsoft, Ansoft Taiwan and SAP.

Jeffrey Hardee, the BSA's Asia-Pacific vice president and regional director, said at the briefing that the region's PC software market is growing rapidly due to rising demand for PCs in emerging countries that are experiencing economic boom.

SMBs (small to midsize businesses) are also amongst the biggest consumers of illegitimate software. Hardee said: "The challenge is compounded because of the rapid growth in first-time [PC] users, from the high-piracy consumer and SMB sectors, which affect country averages even when PC software piracy drops in other market segments."

Victor Lim, IDC's vice president of Asia-Pacific consulting operations, said white box PCs, in particular, grew faster than the overall PC shipment growth in China.

Assembled by third parties, white box computers are typically sold with pirated software preinstalled, compared to bundled sets from brand-name manufacturers, said Lim.

As a result, Hardee noted that while China's piracy rate dropped by 10 percentage points over the three preceding years leading to 2006, it remained unchanged between 2006 and 2007 because of the increase in PCs shipped in the country.

The rate of piracy was "particularly pronounced" in China's "second and third-tier cities", Hardee said.

Economic growth in the country has also seen the emergence of a greater number of SMBs, which tend to own a higher amount of pirated software compared to large organizations, said the BSA.

According to Hardee, the healthy growth of software-as-a-service (SaaS) in the region could help drive down piracy.

However, he noted, the piracy problem in emerging markets is a concern. "[Downward piracy] trends among big companies may be offset by SMBs using illegal software," he added. "Don't be lulled into thinking the drop in piracy [in the region] will necessarily continue."

According to the BSA study, piracy rates improved in Vietnam, Pakistan, Indonesia, Thailand, India, the Philippines, Malaysia, Hong Kong, South Korea, Taiwan and Singapore.

However, piracy levels in Bangladesh and Sri Lanka—while unchanged from 2006—remained among the world's highest at 92 percent and 90 percent, respectively.

The global piracy average rate registered at 38 percent, up from 35 percent in 2006.

Before it's here, it's on the Bloomberg Terminal.