Software Piracy Deprived California Economy of $2.5 Billion in 1997

Microsoft Announces that Piracy Cost California 18,900 Jobs

SANTA MONICA, Calif. - Sept. 14, 1998 - Microsoft Corp.'s Southern California office today released statistics revealing that software piracy caused the loss of an estimated 18,900 jobs in California and more than $2.5 billion in combined lost wages, tax revenues and retail sales in 1997.

The information was released as part of an educational effort by Microsoft to raise awareness of the fact that software piracy hurts more than just the software industry. The data underscores how software piracy - the theft of software through illegal copying of genuine programs or through counterfeiting and distribution of imitation products - adversely affects local businesses and economies. International Planning & Research Corp. of Redmond, Wash., utilized data from a 1997 international piracy study published by the Business Software Alliance (BSA) and the Software Publisher's Association (SPA) along with additional data and analysis of piracy in California.

According to Microsoft, California's software piracy rate of 21.8 percent in 1997 cost the state's workers approximately 18,900 jobs, translating into over $815 million in wage and salary losses. In addition, the data shows that California lost over $74 million in state tax revenues that could have instead contributed to local and state improvement projects.

"It's disturbing to see that piracy had such an impact in a state that is known worldwide for its contributions to the software industry," said Ed Ginty, vice president of sales for VLSystems Inc., a California software reseller and systems integrator. "To mitigate harmful effects to our state's economy and continue contributing to the success of the state's software industry, it is imperative that businesses work together with consumers and government to fight software piracy."

Microsoft today also released information showing the impact of piracy on the state of Arizona. Over the next several months, Microsoft will release statistics on the negative impacts of software piracy for every state in the United States.

"Contrary to what some people may think, software piracy is not a victimless crime," said Sam Jadallah, vice president of the organization customer unit at Microsoft. "It hits people in their pocketbooks and where they live. It robs them of jobs, and reduces the amount of tax revenue that our communities can share in and benefit from. Piracy weakens the local as well as the national economies, and we're hoping that this educational effort will help get the word out."

The software industry is a significant driver of the current economic prosperity in the United States, accounting for the creation of more than 2 million jobs, $102.8 billion in software and software-related services, and payment of $7.2 billion in taxes. However, software piracy threatens the ability of the industry to continue to contribute to the American economy. According to a 1997 study by Nathan Associates of Arlington, Va., commissioned by the BSA, software piracy in 1996 resulted in the loss of 130,000 jobs in the United States, $5.3 billion in wages and salaries and nearly $1 billion in tax revenues.

Microsoft encourages consumers to become familiar with the warning signs that can help identify counterfeit or illegal software.

• Prices that are "too good to be true." This may be counterfeit product, or product that has been misdirected, such as product authorized for distribution only to educational institutions but is being offered to the general public.
• Back-up disks or CD-ROMs with handwritten labels or components that appear to be of inferior quality
• Manuals that appear to be photocopied or are of inferior quality
• Products marked with a phrase, such as "For distribution with a new PC only," "Special CD for licensed customers only," "Not for retail or OEM distribution" or "Academic price - not for use in a commercial environment," that does not describe the transaction

In addition, when users acquire a new computer system, it will include operating system software. If that software is the Microsoft® Windows® 98 operating system, it will be accompanied by a user's manual that incorporates a Certificate of Authenticity as the cover. The customer will also receive a CD-ROM with the software program. There must be an end-user license agreement (this may be seen online when the program is first run). If any of these elements is missing, the product is suspect.

Customers or resellers with questions about the legitimacy of Microsoft products should contact the Microsoft anti-piracy hot line, toll free, at (800) RU-LEGIT (785-3448), or send e-mail to piracy@microsoft.com. More information about software piracy can also be obtained by calling the Business Software Alliance anti-piracy hot line at (888) NO-PIRACY (667-4722) or sending e-mail to software@bsa.org.

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