Russia Is Proving Fertile Ground for Software Pirates : Technology: Last year nearly 94% of the programs bought by cash-conscious PC users had been illegally copied and sold, one trade group estimates.
Russian com puter shoppers have nev er had it so good. Mainly because Western computer and software suppliers rarely have had it so bad.
The reason isn’t just a vigorous free market for computers and software, but equally vigorous software counterfeiters and pirates.
Legions of Russian hackers and hucksters, cloaking themselves as robotic Robin Hoods, are illegally duplicating what they see as rich Western companies’ software for what they say are poor Russian computer users.
As a result, almost 94% of software sold in Russia last year was pirated, according to the Business Software Alliance in Washington.
“I know several places where programs are sold by the megabyte, like sausages by the kilogram,” said Yevgeny Veselov, developer of the grandfather of Russian word-processing software, Leksikon. “It’s the factor that frightens the Westerners from this market.”
The Russian personal computer market is “booming,” said Steven Frantzen, an analyst with International Data Corp. “It’s already larger than all the Eastern European markets combined.”
With an estimated 2 million PCs installed in the country--a “minuscule amount”--Russia has an “enormous potential,” Frantzen said. The Russian PC market is expected to grow at 600,000 to 700,000 units a year, or about $850 million to $1 billion annually. Sales of computer software also have been strong, he said.
Three years after Western countries ended a ban on high-technology exports to Russia, the country’s annual Comtek computer trade show is attracting hundreds of exhibitors and thousands of visitors, at an entrance price pitched at 5% of the average monthly salary.
“Four years ago there wasn’t a market,” said Oleg Mikhailov, vice president of Diasoft, a Russian software company. “Now it’s a huge sector of the economy in which it’s possible to make really big money.”
IBM, Compaq Computer Corp., Dell Computer Corp., Hewlett-Packard and AST Research are among the companies that have established offices in Russia in recent years.
“The biggest success story of last year was Acer, which from virtually nothing grew to sales of $23 million,” said Robert Farish, a Moscow-based industry consultant. Acer Inc. is a Taiwan-based computer and software manufacturer.
Although demand for computers is growing, many potential buyers say they can’t afford the hundreds of dollars it can cost to buy software, Veselov said.
Software piracy is so accepted that kiosks openly sell illegal software copies for discounts of as much as 85% of the Western retail price.
For instance, LucasArts Entertainment Co. sells its TIE Fighter computer game for 49.99 pounds ($80) in the United Kingdom. The Star Wars-inspired software is sold in Moscow for 50,000 rubles, or less than $10. That includes extra software and instructions explaining how to beat anti-copy protection written into the software.
The answer, Veselov said, is to teach computer users that copying software shrinks the developer’s profit, and that’s theft. “It’s necessary to improve the whole culture of informing people,” Veselov said. “Newspapers should avoid frightening people by saying that in this country live only pirates who occasionally shoot each other.”
Russia’s 94% piracy rate for 1994 software sales represents a loss of $540 million to software companies, said Robin Burton of the Business Software Alliance. For the rest of the former Soviet Union, 97% of software is stolen, he said.
Piracy is a worldwide problem. It was such a problem in China that the United States threatened trade sanctions until China took steps in February to crack down. The piracy rate in Europe is 58%, representing a loss of more than $6 billion for 1994, according to the Software Alliance.
“I don’t know of any industry in the world that tolerates that kind of theft,” Burton said.
The growth of the market is increasing competition, squeezing Russian vendors who sell for the major computer makers, Farish said.
“There are two kinds of sellers: authorized dealers and other dealers who sell at lower prices, but it’s often junk,” said Vadim Shliakhov, computer systems manager at the Russian-American Investment Bank, a joint venture. “They’re often working out of basements with prices as much as 30% lower or more.”
There can be a catch to such bargains. “The poor buyer says, ‘I’ll save some money,’ and then his Windows NT crashes and he runs to an official dealer for an expensive repair,” Shliakhov said.
