A Case Study Of Digital Piracy Issues Information Technology Essay

chapter 1

This study of digital piracy covers the infringement of copyrighted content (such as music, films, software, broadcasting, books etc) where the end product may involve the use of hard media, such as CDs and DVDs.Software piracy is the unauthorized reproduction of copyrighted software. The unauthorized copying may be done for personal use, business use, or it may be done to sell copies of the pirated software. The problem can be found wherever computers are used: in businesses, schools, libraries, and homes. The Business Software Alliance puts it bluntly when they point out that making unauthorized copies of software or downloading unauthorized copies of software via the Internet is against the law (Anonymous 2001a).

The rise of broadband Internet access and cheap storage, along with the growth of digital content, has enabled digital piracy to flourish around the world. Piracy enables the unauthorized distribution of music, movies, television programs, software, video games, books, photos, and periodicals quickly and easily, to the detriment of creative artists and legitimate rights holders.

The problem of making illegal software copies has been recognized in the computer industry for decades and has increased to match the growing use of computers (Wood 1998). The study highlights the unique market dynamics of digital piracy, where the existence of a large number of suppliers willing to provide pirated content at virtually zero price pose new and difficult challenges to copyright owners and policymakers in combating that piracy.

Digital piracy cost the country economy money, jobs, and tax revenue. For example, Malaysia’s software piracy last year declined by one percentage point to 58 per cent but the commercial value of losses from pirated software rose to US$453 million or RM1.457 billion, the Business Software Alliance (BBA) said.

According to BBA’s partner International Data Corporation (IDC), the Asia-Pacific continued to be the region with the highest dollar losses from piracy.The United States, Japan and Luxembourg continued to hold the lowest piracy rates of economies surveyed with rates of 20, 21 and 21 per cent respectively. (Bernama 2010).In the United States lost more than 100,000 jobs and over a billion dollars in tax revenue in 2000 due to software piracy (Anonymous 2001b; Johnston 2001). A study of Internet software auctions by the Software & Information Industry Association in March-April 2000 found that illegal copies accounted for 91 percent of the software being auctioned (Anonymous 2000a). It is predicted that if the rate of piracy continues unchanged, the U.S. economy will lose a total of 175,700 jobs and $1.6 billion in tax revenue by 2008.

The available data on software piracy understates the total losses because the data is limited to corporate users and does not include illegal software used in homes and

smaller business enterprises worldwide (Weiss 2000). The National Retailers Federation estimates total retail sales at $3 trillion and places the total for all categories of inventory shrinkage (employee theft, shoplifting, vendor fraud, and errors) at $25 billion (Anonymous 1999a). The United States Census Bureau’s economic census places the total revenue for software publishers at approximately $62 billion (Anonymous 2000b) and the Business Software Alliance has found that the worldwide cost of software piracy reached $11.75 billion in 2000 (Anonymous 2001c). Thus, the theft of software as a percent of total software revenue far exceeds inventory shrinkage as a percent of total retailsales.

It can be said that, digital piracy is an illegal activities and purchasing or downloading with concern means that purchaser is supporting the illegal activities. Mostly, counterfeiters do not pay taxes because the fake products were brought in the country without the local enforcement knowledge. Herewith, counterfeiters gain profits and use it for funding their organized crime and drug trafficking. Therefore, consumers that indulged in buying illicit goods has become part of the cycle of counterfeiting unconsciously.

1.2 Problem Statement

Today, the Internet and new communications technologies have made digital piracy of copyrighted works a serious global problem. Of all the industries that have been revolutionized by the rise of digital technology and the global Internet, few have been hit as hard as the content industries for examples the producers of music, movies, television programs, software, video games, books, photos, and periodicals.

Studies by (e.g. Lau, 2006) also suggest that perceived excessive pricing is a factor in the decision to act illegally. Lau (p. 410) found that price factors was found to be a dominant factor driving people to use pirated software since people can choose either originals or copies, they probably choose the cheaper option of pirated software. People use pirated stuff in all economic situations. Some people used economic recession as an excuse for their involvement in pirate activities. It is partly true as they can’t afford to pay a high price for the originals during the recession. However, they will still select pirated stuff even when the economic situation is getting better. For example, a pirated CD-ROM disk costs you less than RM20, but it contains software worth a hundred ringgits. It is not a matter of the economic situation. Prices for the pirated stuff are the main reason. The combination of lower cost and equal product quality created the digital piracy product.

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No matter how much money the pirates actually earn, and they feel justified in pirating data because they think that original digital media is overpriced. Price is an important issue as it guides the individual in ascertaining value and fairness i.e. evaluating what comes out of allowing another individual to copy original products, as compared to what was put into the exchange.

1.3 Research Objectives

The research objectives are as follows:

To identify why price factor factor that attract consumers’ attitude in buying piracy CD,DVD or downloading piracy material.

To identify the satisfaction level of consumers using digital piracy product.

To identify the consequences of digital piracy.


The research questions of this study are as below:

Why price factor attract consumers’ attitude in pirating or using digital piracy?

What is the satisfaction level of consumers using digital piracy product?

What are the consequences of digital piracy?

1.5 THE Importance of Study

This study will be beneficial for:

1.5.1 The Academician

This study will help the academician or other researchers that focusing on piracy topic. This study will provide the information needed towards piracy. This study will enhance other researcher to do an in depth review pertaining on the piracy issues.

1.5.2 The Marketers

Digital piracy is a serious threat to marketers. Marketers have come up with many strategies to overcome the problem. However, all of the strategies seem not working. This study will help marketers to understand the consumers’ attitudes and their intention in using digital piracy product.

1.5.3 The General Public

There are consumers that willingly to buy counterfeit product. In order to keep up their status within luxury brand, they intend to buy counterfeit product without taking concern on the lawfulness towards counterfeit products. There are also consumers that buying counterfeit product unknowingly. They buy it because of low knowledge towards counterfeiting. This study will be a good reference to the general public. This will help to boost their knowledge about counterfeiting. They will be more concerned about their rights and also will help to reduce counterfeit products.


The terms used in this study are defined for ease of understanding.

1.6.1 Consumer

Consumer is persons who buy a products or services. There are two different kinds of consumer which are personal consumer and organisational consumer. Personal consumer is a person who buys goods and services for his or her own use, for household use, for the use of a family member or a gift for a friend. While, organisational consumer is a business, government agency, or other institution either profit or non-profit, buys goods or services and equipment necessary for the organisation to function.

1.6.2 Price

Market value, or agreed exchange value, that will purchase a definite quantity, weight, or other measure of a good or service. As the consideration given in exchange for transfer of ownership, price forms the essential basis of commercial transactions. It may be fixed by a contract (such as sale of goods contract), left to be determined by an agreed upon formula at a future date, or discovered or negotiated during the course of dealings between the parties involved. In commerce, it boils down to what a buyer is willing to pay, a seller is willing to accept, and the competition is allowing to be charged. With product, promotion, and place of marketing mix, it is one of the business variables over which a firm can exercise some degree of control. It is a criminal offense to manipulate prices (see price fixing) in collusion with other suppliers, and to give a misleading indication of price such as charging for items that are reasonably expected to be included in the advertised, list, or quoted price. Called also sale price and selling price.

1.6.3 Purchase

Purchase is the action of consumers buying something in order to fulfil his or her needs and wants. Marketers categorised three types of purchases done by consumer. First is a trial purchase which the consumer purchases a product for the first time in a small quantity in order to explore the product though direct use. Second is repeat purchases ,it is a type of purchasing behaviour that closely related to the concept of brand loyalty. A product that meets with the consumer’s approval, he or she will intend to buy it again in the future. Third is long-term commitment purchases,it is a type of purchases whereby consumers usually moves from evaluation to a through purchase without the opportunity for an actual trial.

1.6.4 Copyright Infringement – Software Copyright

Copyright laws provide an exclusive right to reproduce, distribute, prepare derivative works, or otherwise control the product

1.6.5 Digital piracy

Digital piracy is not limited to music files; all types of media, including movies, television shows, and videogames, have been illegally downloaded from the internet.

chapter 2

Literature Review

One of reason for digital piracy is to save money, no matter how much money the pirates actually earn, and they feel justified in pirating data because they think that original digital media is overpriced . Price is an important issue as it guides the individual in ascertaining value and fairness i.e. evaluating what comes out of allowing another individual to copy original products, as compared to what was put into the exchange . Past studies has acclaimed that reference price has been an important factor that affects consumer’s purchasing behaviour. Rajendran and Tellis (1994) found that the lowest price is a cue for a reference price, whereas over time, pat prices of an actual brand seem to become the most important cue.

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With regard to digital media, there is some evidence that pirates perceive the prices for digital goods to be high, and view this as inequitable, particularly given the economic success of some of the copyright holders. Pirates use this disparity to justify their illegal behavior (Gupta, Gould, & Pola, 2004; Harrington, 1989; Hinduja, 2003). Additionally, Freestone and Mitchell (2004, p. 126) found, in their study of Generation Y attitudes towards e-ethics and internet-related “misbehaviours”, that Generation Y consumers [those aged between 8 and 24, in 2004] seem more permissive of software piracy and many commented they feel that they are doing no direct harm to sellers as they cannot see the direct economic consequences of their actions, and said that they are the victim of inflated software, music or movie prices, blaming the industry for keeping prices artificially high.

Levin et al. (2007, p. 121), who found that attribution of harm had no impact on students’ intentions to download in the future. It is quite possible that college students, who are typically not yet financially independent, have a hard time believing that music artists or companies truly need the money that is lost due to downloading music. Student usually has only option to use pirated software because they could not afford the originals. The need is well summarized by Lin (1995, p. 88) who noted: It’s just a matter of necessity. We want the software and we want it now. We need it. But we can’t get it any other way: the real stuff is overpriced, and there’s zero support.

As Pagell (1990, p. 5) stated the basic idea as follows: Adherence to copyright may be expected only when the originals are easily available in a timely manner at a reasonable price. Similarly, a study of 243 undergraduate business students in Hong Kong examined availability of pirated software, censure towards software piracy, and the cost of original software as predictors in the level of self-reported software piracy (Moores and Dhillon, 2000). Greater availability, less perceived censure, and higher costs were correlated with increased piracy.

Glass and Wood (1996, p. 1191) state, “Individuals determine the equity or fairness of their relationships or exchanges with others by assessing the ratio of what they receive from the exchange (outcomes) to what they bring the exchange (input)”. Glass and Wood (1996) examined the applicability of the equity theory to software piracy in a study of 271 undergraduate business students in the USA Six factors were tested, included the cost of the software, the social outcomes of lending or giving software to others, the repayment of financial debt by lending software to others, desirable favours obtained in return for lending software to others, the benefit obtained from an altruistic act, and the negative outcomes of software piracy. It was found all these factors had significant effects on respondents’ intentions to commit software piracy.

Another reason because they consider price factor when using digital product is because of the quality. As Chiou et al. (2005, p. 164) point out, “the performance of a pirated CD or files on the internet normally can have quality as good as the original one. Therefore, the performance risk is not very strong”. In other words, there is a very low risk that a pirated copy of a digital object (music, software, etc.) will perform poorly. Performance risk has been examined in the literature. It was positively correlated to willingness to pay for software products (Hsu and Shiue, 2008, p. 730).

In the case of a copyright product, such as computer software, video games and sound recordings, duplication technology is so advanced that it is often impossible to distinguish between legitimate and counterfeit products as the quality are almost the same, which in many cases are clones of the original. In the case of high quality counterfeits, neither the packaging nor the product quality provides any clues as to the products authenticity. (McDonald & Roberts, 1994). Any need which is visible, characterized by discouraged demand, and for which the marketplace is unable to provide a legitimate supply at affordable prices, openly invites supply from an alternative source. So, pirated product may be seen as alternative competition, with the advantage of a substantial mark-down on prevailing prices. Using this argument, piracy becomes no more than an attempt by some operators to address imbalances in the marketplace .


Figure 1 shows the theoretical framework of this study. It can be identified that the dependent variable is price factor influencing consumer attitude toward digital piracy. Where else the independent variables would be divided to affordable and quality. These are the factors that could influence consumers’ perception on piracy thus supporting out dependent variable.

Affordable pricing plays on the most important roles in the perceptions that consumers build towards piracy. Pirated goods play a role as a price advantage. Consumers get to enjoy the same products at a cheaper cost and most importantly has almost the same level of qualty. Therefore lower price has a positive influence on customers’ perception.

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Another reason because they consider price factor when using digital product is because of the quality. The performance of digital piracy on the internet generally can have quality as good as the original one. Therefore, the performance risk is not very strong. In other words, there is a very low risk that a pirated copy of a digital object (music, software, etc.) will perform poorly.

Independent Variable

Dependent Variable




Price factor (purchase of digital piracy goods)


Figure 1: Theoretical Framework



The research methodology is important to get the precision about the topic of this research and to achieve the objectives of this study. Research methodology refers to what types, where, when, and how data are collected, gathered, analysed, and translates to make the research complete and serve its purpose. The research methodology for this research divided into two methods, which are data collection and data analysis.


There are two types of data collection method that used in this study which are primary data and secondary data.

3.1.1 Primary Data

According to Malhotra (1999), primary data is a data that “Originated by researcher for specific purpose of addressing the research problem”. The method of primary data collection used is through questionnaire and interview with the consumers. A set of questionnaire will be distributed by the researcher to the particular sample that being chosen. Questionnaires

Questionnaires contain the question that simulates the respondents to provide required responses. Researcher design the questionnaire aligns with the research objectives and the theoretical framework. Two languages used by researcher which is English and Bahasa Malaysia. Both languages used for the ease of understanding of respondents. Questions will be constructed using the structured question such as multiple-choice, dichotomous and likert-scale question. These structured questions are constructed to be simple and short.


3.2.1 Target Population

According to Malhotra (1999), target population is the collection of the elements or objects that posses the information sought by the researcher and about which inference are to be made. They are the specific and complete group that relevant to the study. The target populations of this study are consumers’ within Kota Kinabalu areas which possess the ability in purchasing illicit goods.

3.2.2 Sample Size

Sample size refers to the number of elements to be included in the study Malhotra (1999). Determining the sample size is important because it may help the researcher to collect more accurate data from respondents. It also helps the researcher reduce the fatigue and errors in collecting data. According to Uma Sekaran (2003), as a rule of thumb, sample size between 30 and 500 could be effective depending on the type of sampling design used and the research question investigated. Therefore, researcher will use 125 samples for this study. Researcher will use 120 samples exactly to obtain the data. The exceeding of 5 samples will be use to cover error data that acquire from the 120 samples.

3.2.3 Sampling Design

Non-probability sampling was used for this study, meaning the populations have no probability for being selected as sample subjects. The type of probability chosen was convenience because the response obtained quickly and efficiently.

3.3 scope of study

The study will be carried out within Alamesra and 1 Borneo Hypermall. Within this area, there are a lot of organization or premises that may using some particular software to handle their job. For example like cyber cafés, offices, and many others. Off course in this area have many students from UMS, UiTM, Politeknik and others that aware about information technology and utilize the internet for their own benefit. They usually looking for entertainment sources from the internet such as mp3 songs, movies, softwares and many more. Many of them taking a short cut by just downloading the media through website that providing pirated media for free of charge or much lower prices compared to the prices from the genuine sources.


The data that gathered from the completed questionnaires will be analysed using the Statistical Package for Social Science (SPSS) version 17. The SPSS will help researcher to gain the descriptive statistics which include the frequency distribution, percentage analysis, and cross-tabulation. The descriptive statistics then will be analyse and interpreted to acquire the information needed.

3.3.1 Descriptive Analysis

The objective in this analysis is to identify the pattern of respondents’ demographics. Demographic includes are respondent’s gender, age, education level and personal income. This analysis will help researcher to explore the data collected and to summarise the data. Summarised data will be easier to be described.

3.3.2 Cross-tabulation Analysis

Cross-tabulation is a statistical measurement that depicts two or more variables concurrently. The statistical measurement will be resulted in tables that reflect the joint distribution of two or more variables with a limited number of categories or distinct values. Consequently, researcher may assess the variables that related with other variable. By using cross-tabulation analysis, researcher expecting to know the value and level of factor of why the consumer using digital piracy as a means to get digital product.

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