This week the Business Software Alliance published a new study which purports to estimate the economic gain from a ten percent reduction in piracy of business software. For Canada, the BSA claims that the reduction would create over 6,000 new jobs and generate billions in GDP and tax revenue. Given such impressive claims, it is not surprising that some media reported on the study and the BSA’s emphasis on new laws and tougher enforcement.

When IT Business’s Brian Jackson asked me for a comment, I noted that such estimates were notoriously speculative (see Glyn Moody on this) and that the BSA would do far better to tell us how much Canada has gained from its recent significant reductions in piracy. Last year, the BSA said the Canadian rate dropped by three percent to 29%, the biggest drop among developed countries and – the BSA noted – an all-time low. In fact, since 2006 the BSA says that there has been a five percent drop in Canada. Has that created thousands of new jobs and generated billions in new revenues and taxes?

The BSA did not have answer to this question, but it did reveal how it arrived at the initial estimate. It turns out that it is actually based on the economic gains from a ten percent increase in proprietary software spending. Notes a BSA spokesperson: “what the study is looking at here is really if you’re reducing the piracy rate and increasing the legal software market by 10 points, this is what you’d see in terms of economic return.” The BSA admits its estimate is based on the presumption that every dollar “saved” by using unlicenced software would now be spent on proprietary software. I termed this approach “shockingly misleading” given that I don’t think anyone can credibly claim that there is a direct dollar for dollar correlation between piracy and proprietary software spending. As the IT Business article points out, many shift to open source alternatives when confronted with the issue. Others may cut back on spending altogether given the new costs. In fact, as a commentator notes below, the BSA estimate is actually a shift of economic spending, not new spending at all. The BSA’s claims are so speculative as to be worthless and ultimately undermine the credibility of those trying to better understand the marketplace impact of addressing copyright infringement.