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Macrovision Announces New Study Suggests Software Piracy By Consumer Casual Copying May Be Seriously Under-Estimated

Study Finds Increasing Penetration of CD-Recordable Drives Is Having Major Impact on CD-ROM Copying Activity Among Consumers

SUNNYVALE, Calif.--(ENTERTAINMENT WIRE)--April 5, 2000-- The total estimated value of unauthorized copies of PC application software CD-ROMs among consumer households is estimated to approach $675 million in 1999 in the U.S., according to a study sponsored by Macrovision Corporation (NASDAQ: MVSN) and conducted in February, 2000 by San Mateo, CA-based Merrill Research & Associates. In 69% of the cases where unauthorized copies were made or borrowed, respondents indicated they would have purchased the software if copying were not an option. Contact Macrovision at for a copy of the Merrill Research Report.

The survey found that 20% of surveyed households have a CD-recordable drive currently installed in their household/home office. This represents a dramatic 200% increase in one year over the percentage of households that reported owning CD-recordable drives in Merrill Research's March 1999 study.

The software industry's piracy studies only quantify losses due to piracy, more commonly referred to as packaged goods counterfeiting. Losses from casual copying quantified in the Merrill Research studies are additional losses to the industry. The first Merrill Research study was conducted in March 1999, which was the first to quantify that close to $830 million in interactive PC software has been copied in the U.S. in the same year.

The displaced retail sales loss of games and edutainment software was then estimated to be $480 million based on the respondents indicating that they would have purchased 58% of the games software if copying were not an option. This February 2000 study further estimated that casual copying of consumer software applications might represent additional displaced software retail sales of nearly $470 million (i.e., 69% of the estimated $675 million unauthorized software application CD-ROMs in consumer households).

These studies suggest that the software industry losses to piracy needs to be measured in two ways - packaged goods counterfeiting by "professional" pirates and unauthorized casual copying. In 1999, the Business Software Association (BSA)/ Software Information Industry Association (SIIA) reported a $2.9 billion software revenue loss due to piracy in the U.S. alone, representing a 25% piracy rate (or one in every four applications) in the U.S., coupled with a market that represents over 43% of the business software in use globally. The above was based on piracy loss due to packaged goods counterfeiting compared to an estimated $11.6 billion worldwide number.

Taken together with the Merrill Research casual copying estimates, the combined $4.4 billion loss demonstrates a much higher (38%) piracy rate than previously assessed by the software industry. This would suggest that `two in every five applications' might be pirated or copied in the U.S. The Merrill study supports that the true piracy rate can be reduced by 20% with the use of copy protection technology effective against unauthorized casual copying. The "Consumer Software Sold at Retail" for the past year in the U.S. is estimated to be $5 billion.

"We believe these casual copying study results may, if anything, underestimate overall losses due to consumer copying," said Dr. Joseph Wheeler, general partner at Merrill Research. "For instance, some respondents may not want to admit to involvement in unauthorized copying. Only 37% of respondents in the current study said they had not or would not copy application software. In addition, the study did not measure copying of application software in group-living situations such as college dormitories. Nevertheless, we believe the results provide an excellent benchmark from which trends in unauthorized copying can be evaluated."

It is estimated that U.S. penetration of CD-recordable drives will more than double by the year 2001. This means that by 2001, most PC owners will know someone with a CD-recordable drive or will have one themselves, and will have access to CD-ROM copying capability. A doubling of the penetration of CD-recorders, coupled with consumers' growing familiarity with the capabilities of these devices, will give rise to at least a doubling in software industry's revenue lost through unauthorized copying, unless aggressive copy protection measures are used.

CD-recordable drives have only become widely available at affordable consumer price points under $200 within the past two years. The worldwide installed base of consumer-priced CD- recordable drives is expected to reach over 77 million in the next two years, with 35% in the U.S. and 30% in Europe. The International Recording Media Association forecasts that the replication of CD-R discs will exceed 1.3 billion units this year compared to 850 million units in 1999 worldwide. Given the fact that these discs can be purchased at retail for $1.00 or less, it is easy to see why CD-recordable drives have become one of the most popular consumer electronics products to become available in years.

About Merrill Research

Merrill Research & Associates was founded in 1986 by Patrick Merrill and David Schneer. Dr. Joseph Wheeler joined Merrill Research as a General Partner in 1988. Together they have created a multi-methodological, full-service custom marketing research and consulting firm of professionals dedicated to serving the needs of high-technology clients worldwide.

About Macrovision

Macrovision Corporation develops and markets content copy protection and rights management technologies to prevent the unauthorized duplication, reception or use of video and audio programs and computer software. Macrovision provides its products and services primarily to the home video, consumer multimedia software, pay-per-view, cable, satellite, and video security markets. Macrovision has its headquarters in Sunnyvale, California with subsidiaries in London and Tokyo.

All statements contained herein, as well as oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company's behalf, that are not statements of historical fact, constitute "forward-looking statements" and are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties are outlined in the Company's Annual Report on Form 10-KSB for 1998 and its Registration Statement on Form S-3, both as filed with the Securities and Exchange Commission. The Company is not obligated to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

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