Making money with FLOSS, really?

Martin just posted a lengthy critique of an article by Nick Fox on Linux business models. I’m not going to address Nick’s post but I do have a few issues with Martin’s.

Martin says regarding the idea that commercial software == closed-source software:

It also assumes that FOSS can’t possibly be commercial, a big mistake and a common myth. You can take a copy of a GPL licensed program and sell (that’s right, for money) the software to someone.

I would say it is a common FOSS myth that you can make money selling FOSS just because you are allowed to. This is why you will (almost) never find an company that actually sells just the open-source software. In an age when distribution of software is so cheap, why pay for something that you are almost guaranteed to be able to download for free?

Martin says:

The nature of the free market is that goods or services will be priced very close to the costs of replication and distribution.

In a free market the price is dictated by supply and demand. Supply depends on not only the cost of replication and distribution, but significantly in this case on the cost of production. It’s trivial give away something for free which cost you nothing to get! The reality is that software is not free to produce, even open-source software. You can ask Mark Shuttleworth about that. Additionally, there is currently high demand for closed-source, proprietary software products. This is mostly because this development model can still give good quality, professional software at a price that people don’t mind paying for. This is especially true in niche markets that don’t have a lot of interested FLOSS developers. The FLOSS development model can give better results, but that doesn’t mean it always or even often does, at least at this time.

I think there are a number of people out there in the Linux community that feel that open source would dominate the software world if only it wasn’t being “suppressed” by the big bad corporates and those odious, evil patents . I think that these definitely create an up-hill battle, don’t get me wrong. But I think our single digit market share still has more to do with the lack of quality software, quality support, and good money-making business models. It’s hard to be profitable in FLOSS (you essentially have to sell something other than the software), which makes it less appealing to big companies and mostly remains the land of “computer geeks”. I still love it, but it seems to me that FLOSS is more an academic and hobby enterprise that you’re lucky if you get paid for. Of course as time goes on, and the trend seems to support this, FLOSS could be come the dominate software development model for businesses. I sure hope so! But I don’t think it will come from selling software.

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9 thoughts on “Making money with FLOSS, really?

  1. My article was attempting to separate out the act of production of a copy (replication), with the act of producing the first copy.

    I should have made reference to the fact that the lowest price happens when there is over supply. In the case of infinite copies from media works, that’s pretty much the way it’ll always be.

    You say you can’t make money from FOSS, but I say you can. Just so long as we’re willing to follow the work and get money for producing the first copy and not convince ourselves that the only way to be profitable is to make money on every copy.

    • 1st copy or 125,563,634th copy, if it is GPL’d, if it is FOSS, the source is out there so how many copies or which copy # it is, is ill-relevant because once you have the source code it doesn’t really matter does it?

      How would you determine each copy’s number in a FOSS environment anyway?

      • I think what Martin is referring to is that in a truly competitive market, the price will be equal to the marginal cost of production. That is, the price will be precisely what it costs to ship the very next unit. In this case, that cost would simply be the cost of burning the cd and shipping it or the cost of the bandwidth used during the download.

  2. Pingback: Jordan Mantha: Making money with FLOSS, really? | TuxWire : The Linux Blog

  3. I don’t think this is a FLOSS problem but rather a problem of definitions.
    In fact, very few companies actually sell software. What you pay for is more or less a right to use the software, aka. a license. Quoted from Microsofts EULA: “The software is licensed, not sold.”
    If you want to talk about how to sell certain software, I think you should first address the topic of actually owning a software. I think this can be very easily summed up like this: you own a software if you and only you retain all rights to a software, as in source code and other things. So, “selling” a software product would actually mean to sell all these rights off to someone else. Since the core of FLOSS is to give these rights and licenses away freely, selling FLOSS software is per definition next to impossible.

    As a result of this, I concur with the thought that FLOSS software companies can not and should not focus on making money off the actual software but from services (support, enhancement on demand, etc.) and know-how (counseling/tutoring, high quality documentation, etc.).

  4. The problem with monetizing Free Software isn’t, as you say, that you can’t sell it, it’s that you can’t exclude people who haven’t paid.

    This, along with the fact that software doesn’t get used up, means it is in economic terms called a Public Good.

    http://en.wikipedia.org/wiki/Public_good

    This is not a unique situation. Radio and TV suffer the same problem (compare them with Theatre were each audience member takes up a seat, and needs a paid ticket to get in) and yet people made plenty of money from them, they just had to figure out how (answer in that case: advertising and/or government subsidies).

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