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Piracy Games Apple

App Store Piracy Losses Estimated At $459 Million 202

Posted by Soulskill
from the arrr-me-hearties dept.
An anonymous reader passes along this quote from a report at 24/7 Wall St.: "There have been over 3 billion downloads since the inception of the App Store. Assuming the proportion of those that are paid apps falls in the middle of the Bernstein estimate, 17% or 510 million of these were paid applications. Based on our review of current information, paid applications have a piracy rate of around 75%. That supports the figure that for every paid download, there have been 3 pirated downloads. That puts the number of pirate downloads at 1.53 billion. If the average price of a paid application is $3, that is $4.59 billion dollars in losses split between Apple and the application developers. That is, of course, assuming that all of those pirates would have made purchases had the application not been available to them for free. This is almost certainly not the case. A fair estimate of the proportion of people who would have used the App Store if they did not use pirated applications is about 10%. This estimate yields about $459 million in lost revenue for Apple and application developers." A response posted at Mashable takes issue with some of the figures, particularly the 75% piracy rate. While such rates have been seen with game apps, it's unclear whether non-game apps suffer the same fate.
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App Store Piracy Losses Estimated At $459 Million

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  • by BadAnalogyGuy (945258) <BadAnalogyGuy@gmail.com> on Friday January 15, 2010 @08:38AM (#30778068)

    Look at the bigger picture. There are hundreds of thousands upon millions of smartphone users out there who want applications for their phones.

    Who is next to set up a viable store? Microsoft? Google? A carrier?

    Piracy is a minor problem. Monetizing users is the major problem. Can you interest users into buying your phone? What sales model can you use to get them to part with their money?

    Who cares about Apple? They are just another player.

  • looking around (Score:5, Insightful)

    by jonpublic (676412) on Friday January 15, 2010 @08:45AM (#30778124)

    Looking around I have yet to see a single friend of mine with pirated apps. I'm just saying.

  • by DJRumpy (1345787) on Friday January 15, 2010 @08:52AM (#30778210)

    That's exactly how it works. Unfortunately, the article makes a few (ok, a lot) of very bad assumptions (how many times can you use Assume and Estimate in a story?). They used a very popular app that 'phones home' as their yardstick, and then applied that yardstick to every app purchased in the store, all the way down to the dregs like the fart apps. Although copyright infringement on popular apps may indeed be that high, I find it very hard to give this credibility that every app in the store would have an 75% infringement rate.

    "Assuming the proportion of those that are paid falls in the middle of the Bernstein estimate"

    Do they even realize how ridiculous this sounds?

  • by ofdan (609938) on Friday January 15, 2010 @09:00AM (#30778288) Homepage
    I have 2 iPhones on the same iTunes account. Apple legally lets me installs app's bought on my first iPhone for free on my second. My guess is this would trigger piracy flag, as they would now see 2 iPhone unique ids for one purchase.
  • by tepples (727027) <tepples@[ ]il.com ['gma' in gap]> on Friday January 15, 2010 @09:04AM (#30778324) Homepage Journal
    The statistics in a lot of these stories are such that if a pirated app is used once and thrown away, it's been "used".
  • by KitsuneSoftware (999119) on Friday January 15, 2010 @09:05AM (#30778340) Homepage Journal
    It could be that pirates have significantly more apps installed than anyone else - not an unreasonable possibility, as they won't be wondering if they *really* want to spend their money on, for example, fifteen almost identical clones of the same miniclip game.
  • Re:'Losses' (Score:1, Insightful)

    by Anonymous Coward on Friday January 15, 2010 @09:09AM (#30778368)

    I think the point GP was trying to make is you can't really call it a loss of revenue when you likely wouldn't have received the money in the first place, irregardless of piracy.

  • "Losses" (Score:5, Insightful)

    by Spad (470073) <slashdot@spad.YEATSco.uk minus poet> on Friday January 15, 2010 @09:17AM (#30778462) Homepage

    These losses from piracy are always talked about in terms of the damage they do to the economy, but I have to take issue with this; that money that isn't spent on pirated apps doesn't just vanish, it's still there to be spent on other things. Now, you might argue that maybe it won't be spent or will be spent on things that transfer money out of the economy (such as overseas businesses), but if you're spending money on the App store and don't live in the US then that's really the case anyway.

    If I pirate a $10 app, that's $10 I can spend on a CD or going to the cinema or getting a takeaway or whatever, it's not $10 that magically disappears from circulation.

  • 10000 apps $3 each (Score:5, Insightful)

    by SharpFang (651121) on Friday January 15, 2010 @09:20AM (#30778502) Homepage Journal

    So if I download a torrent .zip of 10,000 paid apps, $3 each on the average, AppStore just lost $30,000 in sales?
    Like, I would purchase them all otherwise?

  • by arkenian (1560563) on Friday January 15, 2010 @09:30AM (#30778614)
    RTFS. They suggest that if you do that you MIGHT have paid for as many as a hundred of them, so the app store lost $300. I actually admire this examination of piracy insofar as its the first one trying to figure out 'losses due to piracy' that puts a number in for 'percentage of people who would've bought the app otherwise'. That percentage may be low, it may be high (actually 10% sounds like a good number to plug in to what is essentially a pile of guesses) but at least they're trying.
  • by yabos (719499) on Friday January 15, 2010 @09:38AM (#30778730)
    The numbers are probably not close to the true value but I've read cases where 50% of the users of some apps are people who pirated the app within the first few weeks of it being released. Some apps rely on a back-end infrastructure and having to support the load of people who haven't paid for the app cuts into your profit.
  • by Anonymous Coward on Friday January 15, 2010 @09:39AM (#30778732)

    But Apple will allow you to install your purchased apps on multiple iPods. In my house, I have 5 iPods and they are all synced through 1 computer, thus 5 copies of the application for 1 purchase.

  • Good point (Score:4, Insightful)

    by langelgjm (860756) on Friday January 15, 2010 @09:47AM (#30778830) Journal

    That's an excellent point, and something that is often forgotten when talking about numbers surrounding piracy.

    So an iPhone user doesn't spend $20 on a couple apps because they pirate them. Apple and software developers lose out on $20. Then, the iPhone user buys four mochas at Starbucks with the $20 they didn't spend on apps. Net loss to economy = $0.

    Even if people "save" money instead of spending it, if that saving consists in investment, it's often providing capital for those who want it elsewhere in the economy. These "losses" are almost never actual "loss" to the economy as a whole, they simply result in a different distribution of the same amount of money.

    The same goes for all the piracy statistics thrown about for foreign countries. I was recently discussing this with a colleague; sure, maybe country X pirates $20 million worth of CAD/CAM software. Then, they turn around and spend $20 million purchasing CNC machines from US companies.

  • by non0score (890022) on Friday January 15, 2010 @11:32AM (#30779970)
    You are totally correct. In addition, there's also the problem that the JVM (for Java devices) implementations on these phones are complete shit where the libs don't work accord to spec, even for the commonly used libs (think on the level of 1+1=3). Furthermore, the phones' computing power range in the orders of magnitude from each other. This results in code that can't run anywhere other than the target platform that the developer coded on. This is why there are huge porting houses, and why small time developers can't "break into" the market (since they need the funds to port the apps to the plethora of phones).

    I know BREW devices (and maybe Windows Mobile) devices are better, but they still have their share of problems to this day. But this is exactly why the iPhone/iPod touch is so much better to work with: essentially a very limited set of platforms that work exactly as advertised, cutting out the costly middleman.
  • by SmallFurryCreature (593017) on Friday January 15, 2010 @12:20PM (#30780676) Journal

    Lets assume I have sex with a different woman each day, then that means I am so good, I can charge for it. Say, a thousand euro per bonk. That makes 5000 euro per evening. But because I instead posted on slashdot to comment on your post, I missed tonights income. You owe me 5000 euro.

    Check is acceptable. Thank you.\

    Anyone bothered to read the article when the second sentence of the summary starts the argument with "lets assume". Lets assume the moon is made of gold, why is NASA then not rich?

  • Re:Good point (Score:3, Insightful)

    by PeanutButterBreath (1224570) on Friday January 15, 2010 @01:21PM (#30781636)

    So an iPhone user doesn't spend $20 on a couple apps because they pirate them. Apple and software developers lose out on $20. Then, the iPhone user buys four mochas at Starbucks with the $20 they didn't spend on apps. Net loss to economy = $0.

    That assumes that software is fundamentally without value (unlike, I assume, lattes which would incur a net loss to the economy if they were stolen, even if the iPhone user gave the $20 to an illegal gun seller so he could hold up the coffee shop).

    Dev loses $20. That is $20 that he doesn't have to spend on latte's. Keep piling up these "Net loss to economy = $0"'s and Dev will be out of a job. Eventually, the whole industry is no longer viable. Where are the jobs going to come from now?

    Your logic is fine as long as there is no difference between an economy based on selling lattes and an economy based on creative and highly skilled labor.

  • Re:Good point (Score:3, Insightful)

    by Wildclaw (15718) on Friday January 15, 2010 @01:44PM (#30781964)

    That assumes that software is fundamentally without value

    Copies of software are fundamentally without value. That is why we have copyright laws in the first place.

    Dev loses $20. That is $20 that he doesn't have to spend on latte's. Keep piling up these "Net loss to economy = $0"'s and Dev will be out of a job. Eventually, the whole industry is no longer viable. Where are the jobs going to come from now?

    Most development moves towards a service based way of receiving payment (which is already the case). There is less development of generic applications, but as we don't need 200 clones of every software application, the damage is minimal. If a specific type of software doesn't exist, but there is a real demand for it, someone will find a way to make money on it.

  • by langelgjm (860756) on Friday January 15, 2010 @02:02PM (#30782208) Journal

    That assumes that software is fundamentally without value

    More precisely, it assumes that the marginal cost of producing software is zero.

    Dev loses $20. That is $20 that he doesn't have to spend on latte's. Keep piling up these "Net loss to economy = $0"'s and Dev will be out of a job. Eventually, the whole industry is no longer viable. Where are the jobs going to come from now?

    The only way the industry will no longer be viable is if everyone (or some critical mass of people) pirate. Clearly, enough people are paying for software to make the current industry viable.

    Second, if someone steals a latte, Starbucks has lost the marginal material and labor that went into producing that latte, which is a significant portion of its cost. If someone pirates software, the developer's lost marginal material and labor costs are effectively zero. (Of course, this means the up front costs of material and labor are spread over fewer units sold, and if everyone pirates, then the developer has no incentive to invest material and labor in the first place).

    Your logic is fine as long as there is no difference between an economy based on selling lattes and an economy based on creative and highly skilled labor.

    My impression is that my logic relies precisely on the difference between an economy based on selling tangible goods and one selling intangible goods.

    The whole point is the difference in the marginal cost of a latte versus some piece of software. In both cases, if you steal, the producer has to swallow the marginal cost. But the marginal cost of much commercial software is zero.

    Many software companies have a complex relationship with piracy. In some cases, the network effects of a certain amount of piracy can outweigh its costs. Or, to bring up a different point, to what extent does piracy drive the sale of large capacity storage devices, media writers, portable music players, high-speed internet subscriptions, etc.?

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