Has piracy cost the App Store $450 million?

Reports have suggested that App Store piracy has cost Apple and contributing App Store developers in the region of $450 million (275 million) in lost revenue since the App Store opened in July 2008.

The claim is made by online financial news site 24/7 WallSt, whose reporters Garrett W McIntyre and Phil MacDonald filed an in-depth report on app piracy earlier this week.

The quoted figure is extrapolated from estimates on the total proportion of downloads that are paid apps, the reported piracy rate for those apps, and the proportion of pirated app users that would have been willing to pay had a pirated version of the app not been available.

If the figures are accurate, Apple's 30 per cent share in all app revenues means it has lost out to the tune of $135 million (82.5 million) in the 18 months the App Store has been around.

The report's authors say the problem hasn't been helped by Apple's apparent indifference to the issue of app piracy. "A conservative estimate of the average piracy rate is that for every paid application developed and sold at the App Store three more are pirated," they noted.

"Despite this fact, Apple has been mute on the subject and done nothing to prevent acts of piracy, which is not unlike the stance it has taken on illegal music downloads to iPods."

However, the methodology used to calculate the figure has already attracted plenty of naysayers, who say the number could potentially be significantly wide of the mark.

The headline data of three billion downloads from the App Store - 17 per cent of which were paid for - are established fact, but the piracy rate of 75 per cent, and the average $3 price of paid-for apps are both estimates, as is the assumption that only one in ten app pirates would have been willing to pay for the app in the first place.

And when you factor in the site's estimate that 10 per cent of iPhones and iPod touches are "jailbroken" to potentially free them from the shackles of the App Store, 24/7 WallSt's own figures suggest each jail-broken device is responsible for 510 illegal app downloads a theoretically possible but massively unlikely figure.

Naysayers have been quick to point out that this doesn't diminish from the very real problem of app piracy, but say potentially overinflated figures are more likely to hinder the cause of getting it taken more seriously than help it.

"There's no question that App Store piracy is a huge problem, especially with some developers noting that as much as 90 per cent of downloads of their apps are pirated versions," Apple site The Unofficial Apple Weblog wrote in response today. "But 24/7 WallSt's numbers seem outlandish to say the least.

"It's hard to believe that even a company as stuffed with cash as Apple would simply look the other way and twiddle its thumbs over $140 million in lost revenue."

Apple had not responded to our request for comment at the time of publication.