http://story.news.yahoo.com/news?tmpl=story&cid=1510&ncid=1510&e=1&u=/afp/20040707/tc_afp/us_it_software_piracy

I read this in the paper today and I got pretty upset.

"Some 36 percent of the software installed on computers worldwide in 2003 was pirated, representing a loss of about 29 billion dollars to companies, a survey showed."

Now, we all can pretty much agree that piracy is bad. I don't claim otherwise. But why isn't it considered fraud when a company claims millions of dollars in losses by counting the price of the software that wasn't purchased?

I know people who pirate mainstream computer games, about $50 a piece. If they pirate 10 new games in a year, that would supposedly be $500 in losses. Now, if they had no way to get the software for free, that doesn't mean that they all of a sudden have $500 a year to spend on video games, does it? Nor does it mean that they WILL spend that money on games they otherwise have gotten for free.

So how does the industry claim monetary losses on software that they have no idea would have been purchased in the first place?

Arguments can and will be made to the effect, "I worked hard on making that game, and when someone pirates it, they are cheating me of revenue." Once again, I would like to point out that I don't think piracy is justified or ok, so don't think I am claiming that it is. I just think that the argument that you actually lost money in sales is monkey logic. A number of people would agree that the crackers and hardcore pirates wouldn't purchase the games they pirate anyway. If there was some magical way to prevent piracy, it wouldn't necessarily mean an increase in sales. If you can claim otherwise, please do. Arguments like "I don't want someone to be able to play my game for free" doesn't change the fact that you didn't actually lose money in sales here. This statement should apply to any software, so how does the news report on losses, and how do major software companies like Microsoft get away with making such claims?

And if someone claims that this is going to be basically a flame war, I'd be perfectly ok with the thread being closed.

They make those claims because they are of no consequence. Nobody is harmed by those claims. There's no fraud involved by simply advertising a number. Now, if they were actually going to try and sue someone for all of those $29 billion... THEN the figure can be contested. Which is what the RIAA might have to go through for those people that refuse to settle in their little reverse-class-action thing.

That number DOES represent an "upper bound" of loss, though... and when you are the victim, that's the number you are going to use. Really it's a range... since the theft of software is really only a 'potential' loss from a world-that-might-have-been and doesn't represent an actual expense on the part of the victim, the loss is "somewhere between $0 and $29 billion." But naturally if you are the victim, you are going to tout the top end of the range, and if you are the guilty party, you are going to try and convince people that the lower end of the spectrum is more realistic.

So how does the industry claim monetary losses on software that they have no idea would have been purchased in the first place?
What else do you base it on? Nobody has a crystal ball that gives them a picture of what their profits would be like in a near-utopian society where everybody was honest. In a sense, it's advertising --- they are TRYING to draw attention to the severity of the piracy problem, in hopes of getting lawmakers, law enforcement, and the average citizen to do more to curb the practice.

I was reading an article a few weeks ago by a guy who was talking about the piracy rate for a particular multiplayer (non-MMO) game his company had created. They tracked the licenses that appeared online, and discovered that for every legitimate license, there were FIFTEEN (IIRC) pirated licenses in use. Now lets say that if piracy were magically eliminated, only one in five of those pirated games would have been purchased. That's still QUADRUPLE your sales!

But you can't know for sure what 'might have been,' all you know for sure is than there are 15x the number of illegal copies of your game out there compared to purchased copies. When you find yourself out of a job because your company went bankrupt a year later, it'll be hard NOT to think how responsible those cracks floating out on the Internet might have been.

My point is that the news articles and the companies are claiming losses, not potential losses, or maximum losses. If they can claim these losses as actual losses on their taxes, wouldn't that be fraud?

And as for the example, why assume 1 in 5 of those pirated games would have been purchased? You can't even assume 1 in 100. I understand the very real impact of piracy on revenue, and therefore the bottom line and job security, but it upsets me when someone says (pirated product value == monetary loss).

Now, if it is as you say, that the numbers can be claimed as optimal or worst-case loss, it still doesn't mean that it is their actual loss. Yet, when you read the articles and the claims, it is always stated as if these are hard numbers.

If one person purchases a $10 game, and then gives away 5 copies (ignoring what may result from all this and keeping the example limited to just those 6 copies), I can claim that I lost potential sales of $50...but that doesn't mean I can claim a $50 loss. Perhaps those 5 other copies may have been legitimately purchased in a perfect world, or perhaps none of them would have been. I can't guarantee that one of them would have bought it at the very least.

Of course, maybe the tax code allows such "losses" to be claimed, but not being an accountant or deeply familiar with obscure tax laws, I don't know if that is the case. I personally see a problem with that if it is.

I don't think they are actually claiming those losses on taxes. I didn't see that anywhere in any of the articles I'm reading. AFAICT, they are simply touting those numbers to show just how badly the software industry is being hit by piracy.

While you can claim that the effect is probably more like 1%, that claim has no more validity than Microsoft claiming 100% loss. Bottom line is that it's very widespread, and there's the very real probability that it is responsible for killing a lot of smaller development houses.