Thursday, January 14, 2010

Apple App Store Has Lost $450 Million To Piracy

Apple and the companies that sell software for the iPhone and iPod touch at the App Store have lost over $450 million to piracy since the store opened in July 2008 according to an analysis by 24/7 Wall St. There have been over 3 billion applications downloaded since the App program began. Bernstein analyst, Toni Sacconaghi, estimated that between 13% and 21% of those downloads are from paid applications. According to this analysis, the average price of an application purchased at the App Store is $3. Sacconaghi estimated that Apple’s revenue from the App Store is between $60 million and $110 million per quarter. That amount has certainly increased since this research report was published because of the rapid growth of the number of applications.

However, behind all this success lies an insidious force that has plagued the music, software, and movie industry for decades. Developers of iPhone applications have reported alarming piracy rates for their software, and the ease with which users may obtain pirated versions of paid applications for free is only increasing. The total number of applications available at the store, including those which are free and those which require payment, is in excess of 100,000.

Anyone who is familiar with the iPhone is likely to know that these phones can be “jailbroken” or, to use the more common term “unlocked”. Jailbreaking an iPhone modifies the OEM Apple iPhone OS. This allows the user to circumvent the limitations put on the phone by Apple. Apart from the ability to modify the OS itself to allow for customizing of icons, backgrounds, functionality and processes, a jailbroken iPhone permits the installation of applications from sources other than the iTunes store. It is even possible to use an unlocked phone for access to carrier services other than AT&T and the Apple-assigned retailers outside the US. The great majority of iPhones sold in China are unlocked and Apple partner, China Unicom , have only begun to sell locked phones in the last three months

Most iPhone users have not jailbroken their phones. This is likely a result of the perception that this process is incredibly technical for many non-tech savvy owners. Others may fear that Apple might retaliate. No rabid Apple fanatic would risk being placed on a DO NOT SELL list! However, the technical barriers to jailbreaking an iPhone or iPod touch are rapidly decreasing. The original process required at least some programming ability. The most recent jailbreak software makes the process accessible to even most Luddites, so the number of jailbroken iPhones will only increase.

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