Analysts make up numbers on Apple piracy

Figures on how much cash that Jobs’ Mob lost to application piracy seem to have been obtained by thinking about a really big number, dividing by your shoe size and adding a couple of zeros.

Analyst outfit 24/7 Wall Street hit the headlines yesterday, claiming that Apple and third-party developers have lost $450 million due to App Store piracy since the store launched in July of 2008.

All great for a Thursday, but on Friday many of us are wondering how this figure was reached.

24/7 Wall Street takes a realistic number, which is based around an estimate from a Bernstein analyst that 510 million of the three billion applications downloaded from the App Store were paid downloads, and that the average application on the store costs $3.

The outfit then reasons that since there are 7.5 million jailbroken phones and iPod Touches,  40 percent of those use pirated applications.

Then using a figure which appears to have come from thin air, the report estimates that, for every one application downloaded legally, three are pirated.

Where did this come from?  The 75 percent piracy rate was apparently based on a “handful of developer accounts”, which in this magazine is a term which means “we asked a bloke in a pub”.

The report adds that 1.53 billion applications have been pirated at an average of $3 per unit, equalling $4.59 billion in lost sales.

24/7 realises that not every pirate would buy the application if it had not been otherwise available for free and thinks that 10 percent of pirates would have purchased, resulting in in $450 million in lost sales.

What is wrong with this is assuming that all applications are popular enough to pirate.  Some might be cracked while others are sitting inside Apple’s App store in the corner, getting drunker and not being looked at twice even by pirates.