Cost of App Store Piracy Pegged at $450 Million

[MacRumors]

24/7 Wall St. reports that Apple and App Store developers appear to have lost approximately $450 million to piracy since the marketplace for iPhone and iPod touch application opened in July 2008. The rough number is based on several estimates regarding the proportion of downloads that are paid applications, the piracy rate for paid applications, and the proportion of pirated app users who would have paid for the applications had pirated versions not been available.

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.

Based on Apple's take of App Store sales of 30%, the report concludes that piracy has cost Apple itself in the neighborhood of $140 million over the past year and a half, a significant loss for the company, especially considering Apple's estimated total App Store revenue of $500-$700 million.

The report also notes that Apple has remained silent about the issue and taken no significant steps to address the issue beyond the initial security measures deployed in the App Store. Assuming Apple's true goal is to sell iPhones and iPods, then like the original iTunes Music Store, the App Store may very well be viewed as a means to that end. Consequently, the hit to Apple's bottom line may be considered somewhat acceptable to the company if it continues to drive device sales, leaving developers to bear the brunt of the revenue loss.

Article Link: Cost of App Store Piracy Pegged at $450 Million

 

[powerbook911]

What are they talking about???

I didn't even know App Store piracy existed. This story seems a bit wild.

 

[dmmcintyre3]

Who cares, how many of the people who pirated software would have really bought it? What about the people who pirate it before they buy it to know if it's any good?

 

[funkyp56]

huh? you can pirate iphone apps?

 

[miketcool]

Could free, ad-based apps stop pirating?

 

[jglavin]

for every paid download, there have been 3 pirated downloads.

What?

Edit: The most-snatched app on the site which I know of, has only been snatched 500 times. I'm not sure where they found these 1.5 billion downloads...

 

[ata]

I wonder how they came up with 10% as the number of illegal app downloads that would otherwise have been sales... whether it is based on any empirical data or if it is just an estimate (i.e. made up). I know it's probably meant to be a conservative estimate, but I would think it's likely even lower than that.

 

[ThunderSkunk]

Cost? I would love to see an itemized detail of this cost. Show me where it has cost anyone anything.

Not making money, is not the same as being cost it.

Get your language right.


And no, I don't pirate apps.

 

[HaXoR7Om]

Well what do they expect at the prices that some developers charge

 

[DTphonehome]

I understand that iPhone piracy is theoretically possible, but how can they possibly suggest that 75% of all apps in circulation are on the devices of users who are savvy enough to figure out how to do it?! That's simply absurd. You can't simply download an iPhone app like you would download a copy of Windows or Photoshop. The authors of this report obviously don't know that.

 

[Stella]

What?

A ratio 3 to 1 is very surprising. I wouldn't have imagined there were so many jail broken devices around for that kind of ratio to be so high.

 

[ChazUK]

That does look quite bad.

How can they tell what has been pirated out of interest?

EDIT: Another thing, don't articles do more harm than good by making people aware that you can pirate apps?

 

[aristotle]

What are they talking about???

I didn't even know App Store piracy existed. This story seems a bit wild.

Piracy among the jailbreaking community is rampant. That is one of many reasons why I am now opposed to jailbreaking. The other reason is because jailbreaking destroys the security model leaving the iPhone vulnerable to malware.

I would rather see carrier customers pressure carriers in countries like Canada and the US to work with Apple to offer legal/official unlocking of iPhone after completion of a contract, sale of iPhones off contract and offer official unlocking to existing customers for a nominal fee.

I never installed pirated apps when I did jailbreak my previous iPhone (3G) but I can see how some people get tempted into going down that road after the jailbreak to unlock their phones.

I think Apple needs to work with carriers to offer unlocking without a jailbreak and also start banning IMEI's of jailbroken phones found to be running pirated apps.

 

[baryon]

How the hell can one pirate iTunes apps? And how come two thirds of all downloaded apps are pirated and I haven't heard about this at all? The whole iTunes thing is such a closed system I thought there wasn't a way to pirate it...

 

[jlasoon]

How can you lose money to piracy when most pirates wouldn't think twice about buying the product?

 

[paradox00]

huh? you can pirate iphone apps?

With a jailbroken iPhone, yes.

Deleted the rest as it was inaccurate.

 

[aristotle]

Well what do they expect at the prices that some developers charge

Like 99 cents? If you can afford an iphone and data plan, then you can afford to buy apps. A lot of pirates hoard apps that they never use.

 

[nickXedge]

I also didn't know that piracy of apps existed. I feel like we would have heard about this by now. Do they mean that if for example I buy an app, and I share it with my brother, I pirated it to him? Because as far as iTunes is concerned, we authorized both our computers so we could share music and thats perfectly okay in terms of Apple's policies, so that's not pirating. I think the author of this article is confused, and possibly stupid.

 

[WildCowboy]

I absolutely loathe reports like this though. They assume that each pirated application represents a lost sale, which simply isn't true. Perhaps if you took that number and divided by 10 ($45 million), you might be a little closer to reality.

That's exactly what they did...they estimated that only 10% of pirated downloads would have been a sale.

 

[funkyp56]

I also didn't know that piracy of apps existed. I feel like we would have heard about this by now. Do they mean that if for example I buy an app, and I share it with my brother, I pirated it to him? Because as far as iTunes is concerned, we authorized both our computers so we could share music and thats perfectly okay in terms of Apple's policies, so that's not pirating. I think the author of this article is confused, and possibly stupid.

As far as the section I quoted, wouldn't it be 1 in 3 apps are pirated at 75%? If it was 3 apps pirated for every 1 paid, it would be 300% right? Am I wrong here?

As far as I know, apple does not think that is piracy

 

[ShiftyPig]

Cost? I would love to see an itemized detail of this cost. Show me where it has cost anyone anything.

Not making money, is not the same as being cost it.

Get your language right.


And no, I don't pirate apps.

Exactly. People download things from the App Store when the price of it is lower than or equal to what they are willing to pay. If someone downloads a pirated copy of Madden instead of paying the 99 cents, that just means they weren't willing to pay 99 cents, not that they stole 99 cents from EA.

 

[Digital Skunk]

Like 99 cents? If you can afford an iphone and data plan, then you can afford to buy apps. A lot of pirate hoard apps that they never use.

A good deal of the people buying the phone can't afford either! I've sold many a phone to customers with cold hard cash, full price, and some with terrible credit yielding deposits of $500 or more.

I am a Pro Developer kind of guy, but with the money that the App store IS making, I could care less about that $0.99 that just left some devo's pocket.

 

[eawmp1]

A media outlet with piracy issues...really? Can DRM be far behind?

 

[fergwad]

Based on our review of current information, paid applications have a piracy rate of around 75%.

I read that as "we made an arbitrary decision about this figure".

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%.

That may be a "fair" estimate, but it doesn't mean it is accurate.

Not making money, is not the same as being cost it.

A very important distinction. Thank you for making it!

 

[Buschmaster]

Dear pirates,
Don't try to justify it. You're stealing. Just stop.

Love,
Me