I’m going to lead with an off-the-beaten-path story today. Reporting in the Hustle focuses on the world of counterfeit software. The piece focuses on Nigeria, where 80% of software packages are unlicensed, making it one of the largest. And Worldwide, ~37% of installed software is unlicensed, according to the Business Software Alliance, comprising a market of $46B. (Terms like “unlicensed,” “counterfeit,” and “pirated” are often used interchangeably to describe the production and sale of illicit software.)
In the US, ~15% of software is unlicensed. But it is an exception. In most countries, there is more counterfeit software than authentic software.
Why? One key reason is disproportionate costs. Looking at the price of Microsoft 265 around the world, in the US, USD 69.99 represents 0.10% of per capita GDP, and it’s .12% in Canada. In Zimbabwe, USD 59.99 is 3.38% of per capita GDP, and in Bangladesh, it’s 2.71%.
Besides, it is a fascinating read about the dynamics of the software – and services markets – in developing countries; I didn’t know that the US had as much as 15% of software unlicensed. If you’d asked me to guess, it would have been more like 5%.
But how about this passage:
Experts have questioned whether the counterfeiting problem can be eradicated without massive companies like Microsoft changing their sales models.
According to researchers at the University of Bechar, Algeria, these companies’ proprietary software leads to high prices, creating a barrier for people in developing countries and furthering a digital divide. While the researchers say software pirates “divert the labor of others,” they argue that “multinationals block the propagation of knowledge.”
Pricing choices matter, and they drive market dynamics. With the long weekend ahead, this is a good set of insights into how emerging markets respond.