Apple App Store loses $459 million to pirates

Piracy rate as high as 75 percent on iPhone store, which sees 3 billion downloads, costs developers US$310 million, according to report.
Written by Victoria Ho, Contributor

Piracy rates of as high as 75 percent on Apple's App Store have translated to US$459 million worth of iPhone apps pirated, to date, according to a new report.

Quoting Bernstein analyst, Toni Sacconaghi, an analysis from 24/7 Wall St this week said the average price of an app is US$3, with App Store revenues hitting between US$60 million to US$110 million each quarter, or about US$440 million a year. However, 24/7 Wall St estimates that US$459 million worth of iPhone and iPod Touch apps have been lost due to piracy, to date. The App Store has been in operation since June 2008.

The report pointed to the total number of downloads on the store, which has risen to over 3 billion, out of a stock of over 100,000 apps listed on the site.

In order to gauge the level of piracy, the report took figures from an August 2009 interview with Cydia creator Jay Freeman, estimating that 10 percent of iPhones are jailbroken, referring to the process of hacking the iPhone's OS. Cydia is an app store for jailbroken devices.

This 10 percent translates into some 7.5 million jailbroken iPhones, a projected 40 percent of which use pirated software, the 24/7 Wall St report said, citing statistic from Pinch Media.

Furthermore, developers peg the piracy rate at about 75 percent, with some such as Neptune Interactive and Smells Like Donkey, estimating that 90 percent of their app downloads are pirated, it said.

Putting all the figures together, the report estimated a loss of US$459 million in revenue. This is split into a loss of US$140 million on Apple's end, which takes 30 percent of sales, with the remaining loss of US$310 million from developers' pockets.

A report from Ars Technica, however, questioned the estimated 75 percent piracy rate, noting that less popular apps are unlikely to reach such a high figure. It added that some developers limit the number of times a cracked app can be run, before it gets locked down. Some developers, it noted, have also managed to convert pirates into paid users by turning cracked apps into trial versions.

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