PROFILE	TECHNOLOGY	INDUSTRY

Buccaneers of the 21st Century

By Alexander Ushakov

It's no secret that in the markets of Vilnius, Riga and Tallinn, you don't have to try too hard to find just about any pirate computer program or game you want. The price for these pirate CDs ranges between 4 and 10 USD. Manufacturers suffer major losses from witty 'businessmen' who make mints from the illegal trade. Datamonitor, an international company, recently carried out research in the field of piracy and losses amounted to software manufacturers and governments in the Baltics by these enterprising buccaneers of the hi-tech age.

Monitoring authors believe that manufacturing of computer programs is one of the most steadily developing branches in the Baltic States. For example, in the Latvian economy, one programmer is 11 times more effective than a worker of the agriculture sphere. But piracy cripples honest competition and negatively affects development.

Andrius Yoskauskas, Coordinator of BSA Lietuva. The level of piracy in Lithuania is very high. But I think that the change of over five percent in a single year - a very good indicator. But the general situation still worries us much. Currently, we hold specialized seminars with the employees of institutions, dealing with justice and taxes; we are co-operating with the government and parliament. As for legislation, enough has been accomplished in the copyrights sphere - even experts from the EU approve of this. The penalty for the use of illegal software is up to 2,000 litas (500 USD). And as for criminal liability - imprisonment for up to 2 years."

The level of piracy falls.

Over the past year the Baltic states made a progressive leap towards the legalization of their software supply markets. Nevertheless, this announcement should not be taken too optimistically.
What really happened is that the usage of illegal software is only no longer so crucial. In the year 2000, the first to consider this question was Latvia - 77 per cent of the programs used in the country are not official copies. Comparatively: in 1999 the number was around 90 percent.
The most ground has been covered by Lithuania, which two years ago was the leader among the Baltic states in terms of piracy (92 per cent of the total). The country has now dropped back to second place at 76 percent. Estonia, considered to be almost the European leader as far as the number of Internet users per capita, managed within a year to narrow the distribution of illegal software copies by 7 per cent, and recent data shows that the number is 69 percent.
Various reasons for peaks and lows in the piracy situation are to be named. Firstly, the government clampdown on violators of copyrights. So now, thanks to the perseverance of services dealing with taxes and laws, it is almost impossible to find a Windows program without an official registration number within state institutions and large companies. Additionally, reasonable prices have emerged for the possibility of legalizing programs earlier purchased in the black market copied off the global net.
Secondly, in recent years the difference between the legal program supply and its illegal brother has significantly decreased. Here not only manufacturers made an effort by cutting their prices, but pirates too were forced to think more of conspiracy issues following government interest in their businesses. In result - the higher the expenses, the higher the price for the pirate goods.

Niluta Marcinkusa, Executive Director of BSA Latvija. "The numbers, of course, are impressive, but the situation will change for the better from year to year. I think that, at the given stage, the main thing is to inform society more about what advantages the use of legal programs gives. People have to understand that they are offered a wide range of services, connected with updating, support, and training, as well as discounts for buying new programs; that they can avoid troubles, connected with the use of pirate programs. We are working hard on increasing the level of knowledge in society and on improving the legislative basis. My opinion is that this is the right way, and probably the only way to improve the situation. Particular attention should be paid to legislation, and to the Criminal Law, where software is not mentioned at all. In the Administrative Law, software is mentioned, but superficially. The possible fines are between 50 and 250 lats (80 - 400 USD), but in certain cases, for example, in the extensive use of illegal programs, this may not be enough. Additionally, the laws have loops that in certain cases allow trespassers of the law to rid themselves of responsibility. Criminal liability is possible - imprisonment for up to 5 years."

.but the manufacturers and governments still  incur losses.

It is not hard to guess what stands behind the statistics - awaited profit not gained by manufacturers, official trade representatives and governments. The experts from Datamonitor have calculated that in the year 2000, pirate software caused the manufacturers of programs losses of USD 160 million in Lithuania alone. In Latvia this figure stood at around 86 million USD and in Estonia - 60 million USD. Weird may it seem, but these numbers would not be so serious, if we were not expecting even more shocking data by the year 2004. Specialists point out that, if in three years time the level of piracy does not change, then software manufacturers will annually lose 333.25 million USD in Lithuania, 254 million USD in Latvia, and - 127 million USD in Estonia.
It is even more unpleasant to realize that not only the manufacturers suffer losses, but governments too. The forecasts suggests that, if today the Estonian budget looses out on around 18 million USD annually from expected taxes, then in three years time this figure in Estonia could grow to 40.8 million USD, in Latvia - its 23 million today and 65.5 million USD three years from now, and in Lithuania - 41.5 million and 85.75 million USD, respectively. By summing up the tax losses which the Baltic States will incur from the supply of pirate software in the time period between 2000 and 2004, its not hard to get a number - over half a billion USD. With such money, it would be possible to make the painstaking and sought for reforms in medicine and education for all three countries at the same time.

Ahti Leepik, Coordinator of BSA Estonia. BSA Estonia's point of view is that the level of piracy in companies and organizations is approximately 55 - 60 percent, while among individual users the figure is more like 95 percent. There are many ways how to struggle with piracy, one of them, of course, is the involvement of big law enforcing bodies and the implementation of police actions, but the police can not at times prove the fact of a crime. Another way is spending on countless seminars and training the final consumer, in order to prevent people from buying pirate products because for lack of knowledge, and to not ignore the legal manufacturer. In such a way, decreasing the demand should automatically decrease the pirate supply. To my mind, the existing situation with administrative and criminal penalties corresponds to a suitable level. The Civil Law should be revised in parts that concern the definition of incurred damages and the size of indemnification to the author. Preventive punishment used upon organizations and penalties for private persons should be looked at separately. An organization bears the administrative responsibility and pays a penalty of 7,500 - 500,000 croons (USD 400 - 28,000 depending on the level of crime). Privates persons are threatened with a penalty or imprisonment of up to 3 years."

.nevertheless, Latvia looks best for now.

Of course, on the other hand, the situation and its development perspectives must not be taken so tragically, because the above mentioned has been forecasted, taking into consideration that the piracy level will remain the same as today.
At the same time, Datamonitor specialists have studied the software manufacturing industry in the Baltic States in fine detail. Going even further, it is worth mentioning that so far in the Baltic States, it is seemingly more profitable to distribute software illegally than to actually manufacture it. At least it doesn't need tens of thousands in investments.
Results in the year 2000 show that the entire share of the program supply industry in Latvia contributed around 25.7 million USD to the country's GDP, of which 6.25 million USD was tax revenue. This is the lowest index among the Baltic States. Software manufacturers in Estonia have a share of 27 million USD towards the GDP (8.2 million USD in taxes), and for Lithuania - 50 million USD for the country's GDP (12.5 million USD in taxes).
Experts actually look to the future rather optimistically and hope that the situation in this industry improves from year to year. Additionally, the biggest potential for development is seen in Latvia. According to their calculations, the three coming years will see Estonian and Lithuanian indices double, while the Latvian figures will increase at least two and a half times.

.and there are even benefits from the black market.

On the other hand, all these above mentioned numbers can be called real only in a very abstract way. For example, all revenues not received would not even be possible to collect, supposing that all users buy only legal software. In such a situation the number of users would simply be much less, as not everybody can afford to buy a Windows program package for, say 200 - 300 USD. The black market partly fills the losses that the companies could suffer from additional marketing actions. Yet in the early Nineties, the managers of Microsoft realized that pirates were even doing a part of their job - advertising Microsoft products. Let them distribute the software, Bill Gates' colleagues were saying, the main thing is not to let them earn any money with our products. In additional, all the big manufacturers - Microsoft Corporation, Sun Microsystems, Oracle - have never kept it a secret that they're mainly aiming on corporate clients, not the individual user. But nowadays big companies simply can't afford illegal programs anymore.
All this talk of revenues for both the manufacturers and government tax bodies in the next three years' time, supposing that the Baltic markets develop favorably, shouldn't be taken as the whole truth either. It could go either way and all depends on the development of computer technologies. The very same Microsoft giant has already approved that it is not far from the day when it will no longer be necessary to actually buy programs. This firstly concerns professional and mainly expensive programs. It will be enough to access an Internet site and pay a certain sum of money for a certain time to use the program needed in a so-called remote regime. So, in the near future, piracy will have to plunge into the Internet, and once in the global net, continue the endless war for survival.

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