Estimate Places Total App Store Piracy Cost at $450M

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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.

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