GigaOM » Apple

Estimate Places Total App Store Piracy Cost at $450M

Darrell Etherington — Wed, 13 Jan 2010 15:45:13 +0000

An interesting article at the financial blog 24/7 Wall St. today estimates the total cost of pirated apps to the App Store, for both Apple and developers, to be somewhere near the $450 million-mark. That number depends on a revenue estimate of between $60 million and $110 million per quarter, which is probably less than the actual number since those figures are based on a slightly older report by Bernstein analyst Toni Sacconaghi.

The article also notes that finding good solid numbers related to both the number of jailbroken iPhones that are out there, and the number of those devices that are actually pirating games is difficult to do. After reviewing numerous sources of information, 24/ Wall St. arrived at the conclusion that an estimate of 75 percent piracy rates for paid apps was most accurate.

That means that for every paid app download, there have been three pirated downloads of the same app that result in no revenue. Given that the researchers behind the report also estimated that around 17 percent of the 3 billion app store downloads, or 510 million, were paid apps (though we found 1 in 4 in December, so that number seems to be growing), that means that the number of pirated apps is somewhere in the neighborhood of 1.53 billion apps. Not a number you’ll see Apple using in its promotional material anytime soon.

Even considering that only around 10 percent of those who pirated apps would’ve purchased them instead if the illicit option was not available, this represents a loss of around $459 million for both Apple and the app developers working with the Mac maker. Doesn’t seem like an insignificant number.

Insignificant or not, Apple isn’t doing much to quell piracy rates, either. Sure, it counters the most recent jailbreak exploit every time a new model of the iPhone is released, but those countermeasures are usually pretty easily overcome. Apple could do more on the software side, with apps themselves, but that would only spark another arms race-type situation between the company and the hacking community, and allowing users to jailbreak and pirate frankly helps Apple sell hardware, which is the real cash cow.

It’s a troubling report for developers who can’t afford to just eat these kinds of losses the way Apple can. But it also makes the assumption that piracy will continue to grow, which I think is a false one. Yes, it’s easier than ever to jailbreak your iPhone, but as Apple continues to work on the operating system behind the platform, there is less and less reason to do so.

Many users only jailbreak to get some extra functionality out of their device that already exists there, rather than being set on trying to get software for free. As long as iPhone 4.0 introduces true multitasking, I think we’ll see overall jailbreak rates fall off considerably, and likely piracy numbers will follow, too.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Security Exaggeration or Real Threat: Is This the End of an Apple Era?

Darrell Etherington — Fri, 17 Apr 2009 22:00:41 +0000

Security scares seem to be coming up all too frequently for Mac users these days. First, there was the devastatingly fast hacking of a Mac thanks to a Safari exploit at PWN2OWN, and now the first-known botnet to exploit OS X appears to have been activated, according to two security researchers at Symantec. If true, it means the sense of security and superiority that so many Mac users maintain over their PC-using counterparts might be coming to an end.

The botnet is a result of users having downloaded and installed pirated copies of iWork ’09 way back around the time of its initial release. Accompanying those pirated versions was a trojan called iServices, a variant of which was also packaged with a pirated copy of Adobe Photoshop CS4. iServices remained dormant until just recently, when it was implicated in at least one Denial of Service (DoS) attack. Though the install base of the trojan is at present not large enough to pose a major threat, the researchers warn that this is likely only the beginning.

Symantec researchers suspect that software piracy will only trend upwards as the economic crisis continues, which is a very good thing for opportunistic hackers. The easiest way for them to distribute their malicious code is via pirated programs, since they aren’t QA’d or regulated in any real, consistent way. And if Macs continue to increase their presence, hackers will begin more and more to target OS X users, because it makes financial sense from their standpoint to do so.

In response to the report, network security firm McAfee, another anti-virus maker, spoke up. They claim that there’s nothing new about the iServices trojan that wasn’t already apparent and active in January, and that it represents only a low level of risk now, just as it did then. In other words, they think Symantec is blowing things out of proportion. Not that they’re saying you should just relax and pretend nothing’s wrong. Far from it.

Instead, the solution offered by both the Symantec team and McAfee is the one you’d likely suspect: install anti-virus software in order to protect your computer. And it may be the best solution, although after years of running both Windows and Mac machines without any virus protection that wasn’t built into them, and with no major issues to report at this time, I’d say that safe and intelligent browsing (i.e., don’t download risky pirated files) is still your best bet for avoiding these kinds of attacks, Mac or not.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Crackulous Defeats App Protection

Darrell Etherington — Mon, 02 Feb 2009 23:27:18 +0000

I debated covering this, because in no way do I or TheAppleBlog endorse the cracking and/or illegal distribution of software, but it definitely deserves attention because of the potential implications it has for the future of Apple’s App Store. A new app available for jailbroken iPhones called “Crackulous” now allows owners of phones running the hacked firmware to remove the copyright protection from any app available legitimately through the official App Store. Push-button simple cracking means that torrent sites will likely soon be flooded with .ipa files installable via iTunes on any iPhone or iPod Touch, jailbroken or not.

Until now, getting cracked versions of apps onto Apple handset devices has required jailbreaking, and there is probably a significant portion of their userbase who avoided trying for just that reason. The availability of easy-to-install, free versions of any and all apps currently in the App Store does not bode well for sales, at least not if piracy rates in comparable areas like PC games and software are any indication.

Likely this will spark a cat-and-mouse game between Apple and would-be pirates, with Apple introducing new, more difficult to crack copyright protections, and Crackulous developers updating their software to counter as necessary. The problem in this case is the issue of legacy software. Apps already approved and downloaded by users will lack any protection updates unless Apple conducts a total overhaul and upgrades the protection on the existing 15,000-plus applications. This would obviously be extremely time-consuming, and annoying for iPhone users, unless Apple can find a way to quietly push a fix to all devices without requiring action from individual developers and/or users.

Speaking as an iPhone user, the only reason to even worry about this app is because Apple still refuses to implement a trial or demo infrastructure into the App Store. That means it’s up to developers to release a “lite” or stripped-down version of their apps if they want to offer users a preview. Not being one to part with my hard-earned money very easily, I see the appeal of getting to try out an app before spending even $2 or $3 on it, and cracked apps, though unethical and illegal, offer that possibility.

Hopefully Apple waits to see how many iPhone users end up actually crossing over into using cracked apps before making any moves that might alienate and inconvenience those of us who continue to use the App Store legitimately. An overreaction on Apple’s part could do more damage than the inroad Crackulous creates for piracy.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Serial No Longer Required for iWork ’09

David Appleyard — Tue, 20 Jan 2009 15:58:47 +0000

Interestingly, Apple has made the decision to no longer require a serial number for the retail copy of iWork. It doesn’t require any online activation, and — in the same fashion as iLife — would seem to have no piracy prevention as such.

Apple notes that:

iWork ’09 retail boxes no longer come with a serial number. Install iWork ’09 from the enclosed disc and you’re ready to go.

Obviously a serial is still required if you choose to download and activate the iWork trial via the Apple website.

Though retail versions of iWork ’09 no longer come with serial numbers, you will need a serial number if you are using the iWork ’09 trial version and decide to purchase the fully-functional version of iWork ’09

Potential Reasons Why

There are a number of different reasons why Apple may have chosen to take this route. Firstly, it could simply be that the method of using a serial key is a fairly ineffective anti-piracy tool. Serials soon become widely available online, making it easy to steal the software without purchasing a license.

Secondly it could be that Apple is planning to take iWork down the same route as iLife, bundling the application as standard with a new Mac. This is a move I would have already expected Apple to make, as it’s a logical step towards generating widespread use of their software. When faced with a choice between iWork and Microsoft Office for Mac, consumers are likely to choose the option they are already familiar with. If iWork is bundled for free, however, it is a no-brainer to at least give the software a try before electing to purchase Office.

Why Does This Matter?

It may seem as though this change in policy is a fairly trivial concern, and one not likely to make any difference to you. However, this type of minor shift can tell a story about what is happening behind the scenes at Apple. In this case, they would seem to be accepting that anti-piracy isn’t worthwhile (if people see their software worth stealing, it must be a sign that it’s good!). This puts them in a very different camp to Microsoft, who has been inventing ever more elaborate methods of protecting Windows Vista and Office in recent years.

It will be interesting to see how long companies continue the cat and mouse game of copy protection before accepting that it is a phenomenon of the software world that they will struggle to battle against.

iWork Details

At present, purchasing iWork costs $79, and includes Keynote ’09, Pages ’09 and Numbers ’09. I expect that the price will remain the same for a reasonable period on account of the new version just being released; it could be another year before any move to bundling it with a Mac is considered.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

DRM Still Strong With Apple, Just Different

Darrell Etherington — Tue, 13 Jan 2009 22:00:25 +0000

Many hailed the removal of digital rights management (DRM) from the vast majority of iTunes track, a move announced and acted upon last week at the Macworld trade show.

The removal applied to 90 percent of Apple’s library, and plans are to extend it to the rest in short order. Many suspect that record labels agreed to going DRM-free after iTunes agreed to be more flexible with its pricing options, moving from 99 cents per song, to between 69 cents and $1.29.

What many might not realize, however, is that this isn’t an open invitation from Apple to go totally nuts and start freely copying, sharing, and distributing music like crazy. It’s called “Social DRM” and it makes sure there’s a little bit of you in every iTunes Plus file you download via your iTunes Store account. That little bit of you isn’t your sparkling personality or winning charm, either. It’s your email address, and it’s hard coded into each and every purchase.

The purpose of including the email address is to track anyone who might get the bright idea of uploading their library to, say, a torrent site, thus stepping well into the realm of the illegal. Social DRM, in this regard, may actually be about preventing piracy, something which is not necessarily true about traditional forms of DRM, depending on who you ask.

In case you forgot, the Electronic Frontier Foundation has a nice list of examples of why Apple’s still very much in the DRM game, even if it has relaxed a bit in the music department. Among the most suspect uses: the authentication chip in newer model iPods and iPhones that third party manufacturers are required to buy a license for.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

When The Cracked and The Cracker Meet: An iPhone Tale

Darrell Etherington — Wed, 07 Jan 2009 19:34:48 +0000

Imagine sitting down to talk with the guy who just broke into your apartment and stole your TV. You might ask him, “Why did you steal my TV?” and he might answer “Because I wanted it.” or “Because I wanted to sell it.” In the real world, a thief’s motivations are generally not very complicated. On the internet, though, those who crack or otherwise pirate software usually aren’t after money, since they generally give away the fruits of their labour. Since that’s the case, a conversation between thief and victim might prove a little more useful.

And it did, for iPhone developer James Bossert, who together with his wife, Constance, developed the Whack’em All game, which is based on the concept of the popular carnival Whack A Mole game. According to an article at TorrentFreak, James took matters in to his own hands when he noticed one day that his user base had spiked, gaining over 400 users in one day, compared to the usual ten. Excited, he looked into the purchasing numbers via Apple, only to find out he’d only sold 12 copies, which was pretty much par for the course.

As it turned out, Whack’em All had been cracked and distributed to users with jailbroken iPhones. At this point, most people would’ve just sighed and gone about their business, but James contacted the cracker responsible for pirating his app via email and asked him why he’d done what he’d done. The answer was an outright condemnation of the App Store, and suggestions as to how, as a developer, James might avoid being cracked by offering free trials or ad supported releases. Here’s a quote from the cracker, via TorrentFreak:

As many iPhone and iPod touch owners have discovered, Apple’s iTunes App Store has many flaws which render it useless to the common user. Apple has chosen to allow a multitude of ridiculous, worthless, poorly-represented applications through its ’strict’ screening process, nearly all written by mediocre programmers with a dream of getting rich quick. Many of these programmers game the reviews system, misrepresent their application in the description, and generally try to swindle the honest buyer.

Regardless of what you think of his methods (i.e. stealing and distributing stolen software), the pirate in this case makes a number of valid points. He goes on to point the finger at Apple for refusing to allow users to download apps for an initial free trial period to test out the game and see if it’s worth the money. And we’ve seen review gaming in action.

Do you see this kind of thing as a valid form of protest against the sometimes tyrannical App Store? Or is this software cracker just going out of his way to justify what is still essentially just the basic desire to get something for nothing?

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.