Software Piracy Sails Despite Rough Seas Ahead

Software piracy is costing the animation industry millions if not billions. Brett Rogers explains why the cost of software piracy goes beyond the losses suffered by the software manufacturers and affects everyone.

Knowing the difference between fakes and the real McCoy is getting harder and harder. BSA's Website offers advice, information and tutorials. Image courtesy of and © BSA.

Knowing the difference between fakes and the real McCoy is getting harder and harder. BSA's Website offers advice, information and tutorials. Image courtesy of and © BSA.

Editor's Note: Recently Claudio Mattei, managing director of Digital Video, alerted Animation World Network of a very serious problem facing many animation software and production companies the issue of software piracy. Fed by his passion for the subject, AWN decided to investigate a little further. Read his shocking letter to the editor now.

Your company needs software, but times are tough. In search of a bargain, you run a quick search online and find a sealed copy of Macromedia Studio MX, an $800 package of software, selling for $200. A few more clicks and Electric Image's $995 Universe 4 software is yours for $350. Too good to be true? It's all happening on a popular online auction site.

How can software sell for such bargain basement prices? It's simple. A high percentage of software for sale on auction sites is pirated. Some of the operators are sophisticated businesses that sell painstakingly forged software packages. Others are small outfits selling garbage bootleg copies that don't work at all. They've long been a thorn in the side of software giants like Microsoft, but increasingly pirates are harming smaller companies that create software for specialized fields like animation.

Information courtesy of BSA.

Information courtesy of BSA.

Victimizing Developers

When you buy software, you are almost always buying a license to use the software, not the copyright itself. Usually this means you can install the software on one computer and create a backup copy. Any further installations, copying, swapping or distribution of the software is a violation of federal copyright law.

Are a few extra installations of software on your animation company's computers really such a big deal? It's not a victimless crime. The intellectual and creative cost of developing software is extremely high. Programmers, writers, graphic artists and a host of other talent work as a team to create software, and just like a work of art, writing or music, software is protected. By denying software publishers their rightful income, you cost legitimate consumers money and take funding away from the development of better versions of software and more powerful software tools.

"Software theft is a major problem not only for our company but for everyone, since it affects jobs, wages, tax revenues and funds available for research and development," explains Sandra Boulton, director of Autodesk's anti-theft department, in a release that followed a six-figure piracy settlement with a customer who had installed software without the proper licenses.

Popular bootlegs range from desktop productivity to high-end graphics utilities. Image courtesy of and © BSA.

Popular bootlegs range from desktop productivity to high-end graphics utilities. Image courtesy of and © BSA.

A Global Problem

According to the Business Software Alliance (BSA), a nonprofit anti-piracy organization and trade group, the worldwide piracy rate was 40% last year. Legitimate software publishers lost $10.97 billion due to piracy. It's estimated that the United States lost 118,000 jobs and $5.7 billion in wages due to piracy in 2001. California alone lost $1.5 billion in retail sales.

The Asia and Pacific regions by far suffer the highest dollar losses due to piracy. In 2001, its loss topped over $4.7 billion. Western Europe was second with $2.7 billion and North America was third, with $2 billion in losses.

Eastern Europe and Latin America are perennial hotbeds of piracy, with rates of 67% and 57% respectively. Within the Eastern European region, Russia and the former Soviet states have an astoundingly high piracy rate of 87%. In other words, if you're purchasing your software from a distributor in Moscow there's almost a nine in ten chance the software copyright holder is not getting its fair share.

Saving a Buck?

Studies indicate that software piracy rose recently in response to cost cutting and pressure caused by the global economic downturn. Paying for legitimate software and keeping track of software licenses is seemingly considered an indulgence to be freely abandoned in difficult business climates. In competitive sectors like the animation industry there are indications that software piracy is used as a competitive advantage, allowing smaller companies to cut costs by ignoring software license restrictions or by seeking pirated software.

Even for companies struggling to stay afloat in difficult economic times, using unlicensed or pirated software isn't the bargain it seems. Pirated copies of software is a major source of destructive viruses, often avoiding detection by anti-virus programs designed to prevent infected files downloaded from the Internet. Illegal software is also much more likely to fail than legitimate software and when it does, there won't be any customer service or warranties to bail you out. Try explaining that to a client that wants to know why the animation you promised has been delayed or destroyed.

Smaller firms often consider themselves "under the radar" of software publishers, leading some to believe that the use of pirated software is a low risk, high reward practice. In reality, it's quite common for disgruntled employees to tip off software publishers to piracy. Often, publishers like Autodesk or Adobe will go after even the smallest firms with gusto to protect its software.

Information courtesy of BSA.

Information courtesy of BSA.

Zero Tolerance

"It's not uncommon in both the 3D graphics world and the computer software industry to find companies and individuals using pirated software," reads Zkad Production's piracy policy, "They do it to reduce their costs. This is both unnecessary and simply unacceptable."

Vynny Ward, a co-owner and executive producer at Zkad, says, "We have a clear 'no pirate software' rule to the point where it's publicly stated on our Website (http://www.zkad.com/antipiracy.htm). Unfortunately, I'm aware that other animation houses may not have such a rigorous policy in force."

All of Zkad's employees are told of the company's piracy policy when they're hired and software audits are conducted regularly. Zkad has even terminated an employee upon discovering "illegitimate software." "To make matters worse...the pirate software that person installed on four of our systems came with a virus," recalls Ward.

Doing the right thing doesn't come cheap, however. Can small animation companies survive when competitors cut costs by illegally using software? "[We] try to do the best job we can for the lowest price using legitimate registered purchased software," says Ward.

Ward continues, "Naturally [avoiding pirated software] can sometimes result in getting under-bid by other firms due to their lower production costs caused by lax attitudes to piracy. We're a small outfit, and this issue becomes especially true of jobs that require specific, often expensive, plugins and software -- where the job itself wouldn't even cover the cost of the additional tools. Unless we can envisage the re-use of the plugin(s) for different commissions, we simply can't afford to consider taking the project on. Others, who turn a blind eye to piracy, wouldn't have such concerns."

Tackling the Problem

North America enjoys the lowest piracy rate on Earth at 26%, perhaps due to increased education efforts and the threat of legal repercussions. Software publishers are trying to educate computer users about software copyrights and the risks of using pirated software through groups like the Business Software Alliance, which operates piracy hotlines in over 65 countries and investigates over 500 companies in the United States for piracy each year.

A few extra unlicensed copies of your favorite animation software around the studio can cost you dearly. Statutory damages can be as much as $150,000 for each program copied if you're sued in a civil action. The recent passage of the Net Act allows for criminal prosecution of software copyright infringement, whether you make any money from the activity or not. Bolstered with new federal sentencing guidelines that make it more likely abusing software licenses will land you behind bars, the government is stepping up actions to curtail piracy.

Information courtesy of BSA.

Information courtesy of BSA.

Consumers Suffer

If the threat of criminal prosecutions that can bring fines of $250,000, five years behind bars, or both doesn't do the trick, there are other, more severe remedies on the drawing board. Congressman Howard Berman, a California Democrat, has introduced a bill that would allow copyright holders to use hacking practices to enter peer-to-peer file-sharing networks and halt illegal trading of their copyrighted materials. No files could be deleted or changed on your computer, but the copyright holder could use denial-of-service or other attacks to prevent the exchange of pirated software.

Whether the flurry of new anti-piracy tactics used by software publishers will lower piracy rates further remains to be seen. Undoubtedly, software users will suffer some inconveniences as the battle continues. For companies that meticulously follow software licenses and shun pirates, increased precautions taken by software publishers can be annoying. Says Ward, "Naturally [piracy] pushes the price of legitimate software up for us all, but software piracy can also 'punish' those legitimate users since developers are increasingly introducing more and more complex registration methods to attempt to protect their products. Whilst I can appreciate why they do it, some of these policies and procedures seem overly convoluted and time consuming for the genuine licensee, and don't particularly seem to be stemming the problem any way."

Unfortunately, as long as high piracy rates persist, legitimate consumers and software users will be exposed to increased cost, scrutiny and nuisance. Software publishers, law enforcement and governments are resolute in their efforts. "[Piracy] is not a sport. This is a serious crime. These people should do some hard time," U.S. Department of Commerce undersecretary Phil Bond said after an international anti-piracy bust that shut down an operation that spanned over 20 countries. Included in the software discovered were copies of a high-end animation program that costs over $10,000 per legitimate copy.

The success of these efforts will depend in part on the willingness of businesses to manage their software use responsively. As competition increases in the animation industry, competitors will have less tolerance for rivals who are able to win business through illegal software use. At the same time, developers of software are lashing out with greater frequency at loyal customers who misuse their licenses. It may take more time and money to keep your company piracy-free, but it's increasingly worth the effort to avoid the difficulties of ignoring the problem.

Brett Rogers is a freelance writer based in Baltimore.

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