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App Store Piracy Losses Estimated At $459 Million
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.
I'm curious as exactly how piracy on the iPhone/iTouch works.
I don't own an iPhone, but how are these apps pirated? I thought that they were all digitally signed and so forth to prevent this? I know you can "jail break" phones, but I didn't realize it let you do this.....I am just curious.
I'd guess it's closer to 1%. In free-to-play online games, that's the average percentage of players that use the game stores to buy stuff with real life money.
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.
I'm suffering massive losses too - nobody gave a billion dollars yesterday! That's a billion dollar loss in a single day!
Looking around I have yet to see a single friend of mine with pirated apps. I'm just saying.
How much is that from non apple stores that you can buy apps from?
I call bullshit. There's no way that the tiny percentage of jailbroken iPhones could account for 75% of the apps in use.
If this isn't through jailbroken phones, then how are people pirating it? It's not like anyone has built a homebrew iPhone...
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Big made up number is still made up.
I have an jailbroken and unlocked iPhone, but I haven't even tried to pirate apps from the app store. Frankly, I didn't know it was possible. In the past I have pirated almost everything. I just dont see the benefit of piracy to save $5 especially since it's probably a p.i.t.a to pirate an app store app. These figures look like hot air to me.
--------- I have no signature
I love how software companies complain about losses. They lose out on possible sales. A loss to me is when you have a physical good. It gets stolen. You have to pay taxes and the people who sold you the materials that make up that good. Call me crazy but I don't see Walmart / Bestbuy ect in the news constantly about their stolen merchandise. Anyone have comparisons to how much they lose when you compound merchandise, tax liability, security expenses. I'm pretty sure walmart has full time security monitors and expenses that far exceed Apple's and have to deal with clepto maniacs, senile old people, kids, homeless ect...
I think the 10% figure is completely and totally made up, pulled from the aether, with very little to back it up. However, I was floored to see that this concept was even addressed at all in the "loss" estimation process. You know that MPAA and RIAA don't acknowledge the phenomenon that if someone finds something on the sidewalk, they're more likely to pick it up than if they find the same thing for sale, even if the price is just a nickel. I hope that with repeated exposure to the concept, the whole industry will finally concede this point, but let's just say I'm not holding my breath.
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I'm pretty sure that by tweaking a little their formula and figures, we can compute the probability of the article's authors to get laid with an alien life form.
I have discovered a truly marvelous proof of killer sig, which this margin is too narrow to contain.
Their figures assume that the users of the pirated software would have even bought them had they not been able to get them for free.
Negative $459 million. Assuming that 10% of the pirated stuff is use by people who would choose to go without if they couldn't pirate and use value equals the price. And that doesn't include the lower prices that competition from piracy always seem to bring, which increases the number of potential users among those who don't pirate.
Of course, I have made bullshit assumptions, but so did the article/story title, and my assumptions aren't really that far fetched. I could even be underestimating by a fair bit.
If you really want to talk about losses, I have spent quite a few hours making up for the deficiencies of the Iphone/Itouch lock down. Enough time that I am seriously regretting trying out an Apple product, even this once. Anyone who claims that Apple products are user friendly, seriously have no idea what they are talking about. When you have to spend hours working around the crippled photo application that Apple provides, or dealing with the sensitive video format (with the Itunes application having only the most basic converter that only works with very few actual files), or dealing with the crappy Itunes syncing interface (which is crappy because everything is built around the store). Or for that matter, not getting an application ported to the platform because it doesn't allow for Java.
Apple is idiot friendly, but that is it. That means that even people without brains can use it without problem for doing a few common tasks. But if you actually have more brain capacity than that, and can think of stuff that falls outside of those few tasks, Apple only gets in the way with their control-freak ideal.
Lets assume the number was accurate to the cost of the all the pirated apps...how then can they assume, given the ability to not be able to jailbreak the phone, that the pirate would pay full price for the apps that they would have potentially pirated?
The pirated market is grossly misrepresented. Most pirated movies/music/games are pirated because of availability. If it wasn't available, the pirate still wouldn't pay the original price for it. Recent success in said industries proves this.
Yet someone else regurgitating the music industry's same old, tired, phony claims and bogus madeup numbers about "losses".
Just because someone doesn't buy, doesn't make it a loss. It could be a 100% piracy rate, and it still wouldn't matter, because the vast majority wouldn't have purchased anything anyway, so there is no loss.
And yet more writeups that show how stupid these phony claims and their madeup numbers are:
http://www.techdirt.com/articles/20100113/1434217734.shtml
http://arstechnica.com/apple/news/2010/01/450-million-iphone-piracy-figure-not-grounded-in-reality.ars
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.
www.hackzilla.org - because I can
How about refunding apps the people do not use anymore, i am sure there is plenty of those.
The thing that these articles fail to realize is that just because an app (on any platform) has been pirated it does not mean it is a lost sale.
Many times, the people who have "pirated" the software would have never paid money for it. And out of these some people actually find they really like the app and go back and buy it.
Not saying piracy is all like this. But a large number of these "lost sales" are sales they were never going to have anyway.
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".
Techdirt did a nice deconstruction of the 24/7 Wall Street analysis. In a nutshell, 24/7 Wall Street applied the Drake Equation to iPhone apps, piling on layers of hand-waving to come up with their figure.
And, to show off his geek cred, Techdirt's Mike Masnick included the xkcd Drake Equation comic.
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First of all, all of the numbers they have are pulled out of their ass. Second, there is no recognition of the fact that curiosity is not the same thing as a lost sale in the digital realm.
For me, I know that when I was younger I pirated all kinds of software, just because I wanted to see what it did. As I got older, I paid for it when I could afford it. This was the only option for those of us who didn't have an edu e-mail address to get the "taste" that the companies provide at ridiculously low prices.
I sincerely hope that Microsoft, Adobe, and Autodesk get together and create an unbreakable DRM scheme. Open source projects would immediately improve as the user base started to explode. Their marketshare would begin to reflect what everyone else already knows - that "piracy" is a vital part of their product cycle. It allows people to learn their software without burdening their support team, and hooks them into that workflow. When that person begins depending on the workflow, or begins work for a company, they are very likely to buy that product.
If they really wanted to see sales improve, they would charge according to the age of the user. If the price steadily increased from $50 to $1000 or whatever, with no upgrades unless you paid full price, and flattened once you hit age 30, there would be constant pressure to buy each year before your birthday. Companies would get thousands of curious new users every year to resell to, and they would get money, and the whippersnappers wouldn't have to worry about going to jail over the greed of some fat men feeding in Silicon Valley.
http://keboch.wordpress.com/2008/11/09/please-accept-this-spider-as-payment/
While I'm glad to see someone finally NOT assuming 100% of pirates are potential customers, I don't see any justification for the 10% estimate they give here. Anyone have any sources? (Yes, I did RTFA!)
Digital property isn't like physical property. It's not lost when someone steals it. So unless you can show that those same pirates would have paid for that same app if stealing it wasn't an option, then it's not really a loss.
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.
Few months ago Apple changed the rules and they now allow in app purchasing from free apps. before you had to charge for an app to so in-app purchasing. This allows companies to give away stripped down demo type apps with limited functionality and charge for features, new levels, weapons or whatever. And from what i'm reading on the internet it's very easy to detect jailbroken iphones and not allow them to do in app purchasing. pretty much all the piracy that was out there was on jailbroken iphones because it was easy to rip out the app DRM. the solution is to not allow any jailbroken iphone to purchase in app content
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?
45 5F E1 04 22 CA 29 C4 93 3F 95 05 2B 79 2A B2
"Apple and third-party developers have lost $450 million due to App Store piracy since the store launched in July of 2008, according to an analysis by 24/7 Wall Street. This number might seem shocking at first, but the buzz generated by this report is misleading—the estimate is based on questionable numbers and an optimistic assumption that pirates would otherwise buy the software they steal."
See http://arstechnica.com/apple/news/2010/01/450-million-iphone-piracy-figure-not-grounded-in-reality.ars for details.
Lost Income, now you're starting to sound like the Record & movie Companies. Worrying about what they lost. Better spend a billion on DRM quick.
So, 510 million paid apps at $3 each. That's $1.53 billion
Piracy costs $4.59 billion dollars dollars dollars.
So that means losses of some $3.06 billion. It's amazing the app store has survived this long.
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.
"Anyone who [rips a CD] is probably engaging in copyright infringement." - David O. Carson
One point as well is that many of these folks who would download a bunch of pirated apps for their phone would not purchase them in the first place. I think it is more accurate to say that the income was unrealized and not lost.
If you put something on the market for $1000 and only two people think it is worth the price to pay for it but six hundred people would have purchased it for $100 then you have significantly overvalued your product and lose money. I think that the prices on the app store are all inflated. This is a similar model to the entire music and movie industry. Most people steal your product because they do not believe that what you are asking for it is reasonable, not because they would not pay anything at all for it.
Tisha Hayes
Simply put, no money was lost due to piracy. Stop putting these retarded articles on slashdot, all you do is justify the morons who write this crap.
Statistics have shown that I've lost about 30 billion dollars while reading retarded articles about piracy. Interestingly enough, another set of statistics shows that both myself and the guys writing about how much money is lost to piracy have about the same ability to talk out our asses and lie through our teeth. I have a slightly higher amount of sarcasm.
Persistent Volume manager for Kubernetes - https://github.com/dwimsey/openshift-pvmanager
Do you even know anyone who rips or trades cracked software?
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%.
My experience with people who do this is that your estimate is at least a factor of 100 higher than reality. I mean, these guys have everything from ten buck games up to Maya, Photoshop CXSDwhatever, Windows Server Ultimate with Oracle Everything. And they don't buy *any* software. Their whole thing is getting the goods.
My friend got an iPhone and never paid a single dollar for an application.
I just saw the applications he used that I really liked (education related, not games), I ended up buying an iTouch and the killer apps I wanted.
Sometimes piracy is just free publicity.
We're all missing why this was posted to slashdot. I too was outraged by the numbers and finally realized that this post was about the *RESPONSE* to the Wall Street article, not the article itself. I'll bet not one of us has read the response at http://mashable.com/2010/01/13/app-store-piracy/ . Let's do that before hanging someone.
Since when was failing to gain something the same as losing it?
No-one has actually lost $459 million (= had it once, don't have it now), they just haven't gained it. If they've lost anything, it's the opportunity to gain the money, which is a rather different thing...
It's official. Most of you are morons.
There's another nice deconstruction by the Right Rev. Stuart Campbell, games journalist and iconoclast: http://wosblog.wordpress.com/2010/01/15/the-most-spurious-piracy-figures-ever/
I'm sure a person with such a mindset would always offer a calm discussion of the facts without using inflammatory language, weasel words, or unsubstantiated facts.
Erik
There are only so many apps to go round and the overhead costs of storage are going to drive developers and businesses alike to the poor house.
I guess they will have to plant more application bushes and wait till harvest or the bank will foreclose on the farm. Then there will be no applications for all the phones. That'll make 'em sorry.
I guess they could start making cases to protect fragile apps or sell polish to shine them up but the thieving pirates will probably walk off with those too.
They really need some cameras and armed security guards in those app stores. Like gold, they are a limited commodity.
Bet someone learns that open source business models are nearly the only ones not outdated.
*Repent!Quit Your Job!Slack Off!The World Ends Tomorrow and You May Die!
There are counterfeit pirates (CP's), and then there are those who are the lone individual pirates (IP's). IP's are not lost sales because THEY'RE NOT CUSTOMERS or are they even potential customers. If they could and wanted to buy the stuff, they would of paid for it. And from a business science perspective, you CANNOT count them as lost revenue. Lost revenue can only be truly counted if CP sell you items at and keep all the profits, either passing it off as the real McCoy or a cut-throat street-corner price. I really wish these idiots stop including IP losses when the issue are the counterfeiters.
Management is doing things right; leadership is doing the right things. - Peter F. Drucker
Big problem with their numbers.
TUAW has a break down of the numbers and the problems with their assumptions.
http://www.tuaw.com/2010/01/13/pirates-make-away-with-450-million-in-app-store-booty/
canadian here. recently i bought an ipod touch and looked forward to making it my own because 'there's an app for that'. like many here though, i prefer not to file a credit card with a profile for long terms. so, i thought i'd get a gift card for itunes.
as it turns out apple will not honor itunes gift cards for app purchases, and further claims that there is a canadian law that forbids them from doing so. turns out it's not true: http://www.jimwhitelaw.com/2009/09/itunes-credit-in-canada.html
so, if apple won't let me buy them, and itunes is the only storefront available for legitimate purposes, then what exactly should i do to allow the functionality i paid for to begin with?
I do occasional consulting, and people are pirating my services with free online support forums. Based on my estimates, I'm losing hundreds of millions in consulting fees every year. I wonder why these pirates aren't shut down? Oh, that's right, I forgot to buy a government official. My bad.
Can You Say Linux? I Knew That You Could.
The description states that the lost revenue is not just Apple's: "This estimate yields about $459 million in lost revenue for Apple and application developers". Apple keeps only 30% of the sale price, if we accept this $459M figure then $321 is for the developers.
For Electronic Arts and Activision, but for small developers and startups piracy is a major problem. I've worked for many years at a big well funded developer and a few years at startups and small developers. Piracy disproportionately harms the small developers and startups, it can easily make the difference between success and failure. I witnessed this in the 80s, the 90s, ...
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Perpenso Calc for iPhone and iPod touch, scientific and bill/tip calculator, fractions, complex numbers, RPN
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?
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Your argument is diminished by the fact that many of these apps are $0.99 USD, we're not talking about $50 - $60 PC games. I've observed many individuals who are willing to experiment with a $0.99 product, few with a $60 product.
Personally, in a University bookstore/computer store environment, I've witnessed piracy occurring merely because it was possible. When a vendor producing software accompanying a textbook added copy protection their sales became comparable to textbook sales. Previously sales were a very small fraction of textbook sales.
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Perpenso Calc for iPhone and iPod touch, scientific and bill/tip calculator, fractions, complex numbers, RPN
75% is a low number. On my games, I estimate that 85% of the users did not pay for the game. But, what ever.
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.?
"Anyone who [rips a CD] is probably engaging in copyright infringement." - David O. Carson
I’m sorry? Could someone explain to me, how my above comment can be seen as a troll? Because I don’t get it? :)
I’ll gladly take back if I insulted anyone or told something not true. But I don‘t think so. I rather think that some uninformed troll or infiltrating media industry guy got mod points, but no arguments (because he’s wrong).
Be grown up. Share your opinion. :)
And yes: Openly calling something “losses” which are in fact not losses at all, because they were never earnings, would never have been, equals being “full of shit” (= a deliberate liar), if I can assume, that the writer knows this fact.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
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.
No. The app would still be signed by your account and still be encrypted. Developer check for a number of things in their code to determine whether a copy is legit or pirated.
1. Is the app still encrypted.
2. Is the app still signed with a valid iTunes account.
3. Does the app's CRC or MD5 check match the expected hash.
Jesus was a compassionate social conservative who called individuals to sin no more.
The Original iPhone was never sold in New Zealand, I bought an imported, Jailbroken and Unlocked iPhone off the internet. Its turned out to be one of the best purchases of my life, I got it for about 600 USD, it had been jailbroken etc for me, and I run it on a prepaid plan. I only have a Jailbroken and Unlocked iPhone because it needs to be that way, without that, I would be stuck on the "please activate" screen, stuck to only ringing an emergency number (and, it might be "911" which is pretty much useless in NZ where we use "111"!)
:)
I've never wanted to "steal" apps, not at all, I totally think the developers deserve to make money, and hey, I mean, lets get serious, most paid apps I look at cost a DOLLAR OR TWO....who would steal that? It would be like mugging a busker for the change in his hat. Pathetic.
HOWEVER: I can never seem to be able to buy tracks from Tap Tap Revenge 3, I can buy song packs, but NEVER individual songs. I've seen this mentioned on the developer, Tapulous' site, that JB iDevices wont work? Its very strange, I cant even SEE the songs, if I go to say, browse the "easy" tracks, it just says "no items in this category". I can see ALL the artist names, but cannot see a SINGLE track from ANY of them. I suspect there is someway to detect Jailbroken iDevices, and its locking me out somehow?
I really cant unjailbreak or unlock my iPhone, it simply will not work here. I really want to buy TTR3 tracks though
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Note: Speaking only for myself, here...
Like DVD "region coding"...
When an application is available in a given countries App store, it's not necessarily available in every countries App store. In most cases, in fact, it's not. So the only way to get the app is to jailbreak your phone, and install it fom one of the pirate installer applications, which only run on jailbroken phones.
In order to get an account on the US App store, and therefore have access to all the Apps there, you have to establish an account with a US credit card with a US address; the account is fairly easy, but to set up a US billing address on the thing is impossible, unless you are willing to rent a trans-shipping PO Box, or unless you have a friend in the US willing to let you use their physical address as a residence address for the credit card.
So even if you wanted to pay for the thing, there's no way you could possibly do so, without a huge amount of risk and hassle.
I imagine most of this "piracy" is down to "people whom we are unwilling to enable to buy the App getting ahold of it despite the obstacles we are placing in their way".
-- Terry
Hoookay, assuming the NYTs is correct that only about 6.7% of touch screen Apple devices are jailbroken, out of some 37 million, this piracy figure is just bizarre. The actual economic losses are only the delta between what the jailbreakers would have bought, if they didn't have the "free-as-in-shoplifted" option.
In a buy-or-bust scenario, I find it very difficult to believe that these users would be in the market to buy much more or less than the median user, once their micro-economic motivations adjusted to the new reality.
Hell, back in the days when I bothered to jailbreak my Touch, it was only to use Cydia to install capabilities beyond what any AppStore app would be allowed to enable, all of it free-beer/speech. Given the cost of most apps compared to the cost of the platform, or to most PC/console shrink-wrapped products, why would I bother to pirate, unless for my BBS days rationale: collect 'em all, run 'em once.
Luke, help me take this mask off
There's a great detailed analysis of the figures here by a professional videogames writer:
http://wosblog.wordpress.com/2010/01/15/the-most-spurious-piracy-figures-ever/
Different company, but I recently downloaded a cracked version of a popular 3D application. I have found that I am really enjoying using it and have now order a legitimate copy.
Going by the logic Apple has used to calculate the losses stated in this article, this would count as a lost sale.
The people releasing these figures know they are bogus. It doesn't matter though, so long as the majority of people (notably politicians) who read them don't think to question where the figures came from.
Is that most people here in Mexico couldn't pay for software even if they really, really wanted to. When the minimum wage is around USD$3.5 daily, the average income is USD$9 daily, there is not enough spare money to pay USD$200 +16% VAT for commonly used software. I personally, pay for almost all the software that I use, but then, I have a good enough income that could keep honest people honest. The shameful and stupid failure (I still think that this was made on purpose to kiss Bill Gates ass, even the panistas aren't that incompetent) of the Fox's administration to successfully promote the use of Linux in Mexico's schools in the early 2000's kept Microsoft entrenchment in the OS and apps arena in the country, making rampant piracy and corruption the norm in computer use.
Mexico: 100% conservative's America now!