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.

Comments

STFU about Apple for a moment

[BadAnalogyGuy]

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

[jonpublic]

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

Re:How do you pirate?

[DJRumpy]

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?

What about multiple iPhones on the sames account?

[ofdan]

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.

Used once and thrown away

[tepples]

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".

Re:Is there an app for bullshit?

[KitsuneSoftware]

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.

"Losses"

[Spad]

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

[SharpFang]

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?

Re:10000 apps $3 each

[arkenian]

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.

Good point

[langelgjm]

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.