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The cost of digital goods piracy

Posted by Michael Bloch in ecommerce (Sunday November 11, 2007 )

Piracy doesn’t just affect big companies like Microsoft or major music labels. Digital goods theft wreaks a heavy toll on smaller publishers selling information products such as pdf’s, ebooks, video, audio and software titles.

According to the Business Software Alliance’s Fourth Annual Global Software Piracy Study released earlier this year, the total estimated value of pirated software installed on computers in 2006 was nearly $40 billion.

Other key findings:

– On a global scale, an average 35% of software installed on computers has been illegally obtained

– Total losses from 2005 to 2006 were up nearly 15%

– Countries with over 90% pirated software rate were Armenia, Moldova and Azerbaijan

– Countries with lowest pirated software rate were USA, New zealand and Japan

– In over half of the 102 countries studied, the piracy rate exceeded 60%.

While the European Union, USA and Canada have comparatively small piracy rates, given that the market is so large in those regions, the dollar loss amount is significant.

I was talking with a software author the other day who said that you know your product is a success when hackers bother to make and distribute cracks for it :). It’s an unfortunate benchmark.

While many software programmers have the capabilities of securing their products, it can be a war of attrition at times. Even with a basic registration or license key in place, these are quickly distributed. Securing premium digital products such as PDF’s and video without manually intensive systems is even harder.

I’ve just been checking out an interesting new service called Product Padlock (7 day $1 trial) that has been designed to provide an automated licensing system that’s within the reach of most information product merchants and is really easy to use. Additionally, it allows for tracking, remote de-activation of licenses which renders the product unusable and can be integrated painlessly with existing ecommerce systems – read more in my review: Digital Goods Security.


1 comment for The cost of digital goods piracy
  1. Uniloc ( also produces an interesting software copy protection technology as part of their SoftAnchor business intelligence package for publishers. The technology and thought behind it promotes fair use and customizable licensing strategies. Publishers no longer have to establish strict licensing and actually have the opportunity to use warez and bit torrents to expedite the viral marketing of their software because of the new flexibility. The thought behind this is to partner with experienced pirates to promote viral-driven software adoption. India’s piracy ultimately create a huge market for Windows, so the approach has proven to work. It starts by rewarding users for sharing by creating affiliate programs which reward users for distribution of previous generation software to spike interest in the newest versions. Developers should allow warez sites to host these affiliate versions of their software, allowing partner sites to make money by promoting sharing of previous versions and sales of the new titles. Developers should also reward peer-to-peer networks who join their affiliate programs with the same approach used for warez sites. Uniloc licensing technologies support this approach.

    Beyond the copy protection capabilities, Uniloc also provides intelligence such as hardware platforms running software to assist with future development efforts; data on software feature usage and license activation metrics.

    Comment by Paul Harris — July 30, 2008 @ 2:15 am

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