App Store Piracy costs developers and Apple $450 million

Wed, Jan 13, 2010


24/7 Wall Street reports that piracy of iPhone apps has cost developers over $450 million in proceeds. This, of course, assumes that all pirates would have otherwise purchased the apps by legal means.

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.


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