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By Phil Wainewright May 29, 2002 One of the unexpected side-effects of moving computing onto the Internet has been the increasing pressure for software to be free. Not in the dot-com sense of users never having to pay for anything, but in the open-source sense of developers having free access to a shared knowledge store of accumulated software programming.
Open Source, Closed Minds To anyone who has sought to build up a thriving software business over the past decade or two, the rise of open source must look like grossly unfair competition. It rewrites the rules of the game, handing advantages to newcomers that could wipe out revenue streams that previously seemed secure. But then that's always the way with disruptive technology. Complaining about it is as futile as the big media companies complaining that Internet distribution is undermining their fat revenues from DVD and video sales. The author Robert Heinlein has been much quoted in relation to this topic recently, for he nailed this issue once and for all, back in 1939: There has grown up in the minds of certain groups in this country the notion that because a man or a corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary public interest. This strange doctrine is not supported by statute nor common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back, for their private benefit.The Margins Are a Changin' The clock of history is ticking for the software industry today, and one way or another, the Internet will in time demolish today's still absurdly inflated software prices. Those prices are a consequence not of the inherent value of the software, but of the way in which the distribution process has protected software developers' margins. Those margins are disappearing today because the Internet has swept away the high barriers to entry that once existed:
Hiding Behind Intellectual Property Laws Although I'm an author, and therefore my livelihood depends absolutely on the protection of intellectual property rights, I believe it's possible to take a good thing too far. The past hundred years has seen a series of extensions to intellectual property rights that have now reached alarming proportions. U.S. copyright once lasted 14 years; it now extends for 70 years after the death of the author. Patents, once restricted to the protection of specific designs, are now issued by the U.S. Patent Office with near reckless abandon for all kinds of processes, many of them far from innovative (for just one example, see No Justice In McAfee's Patent). As I argued in that earlier article, intellectual property owners have to be careful to strike a balance. Too much protection is a barrier both to creativity and to distribution. In the end, it ends up hurting both individual profits and common prosperity. Yes, authors, inventors and software developers should be able to earn a fair return for their original creations. But they should not be too greedy. They're going to find it very hard indeed to give up the disproportionate rewards that the current system guarantees them, but they must either do it voluntarily now or else end up yielding far more (perhaps too much) some time down the road. (A worthy example was set two weeks ago with the formation of the Creative Commons, a group set up to foster the vountary sharing of copyright material).
Pricing Like It's 1999 In just eight days that August, the cost of software had been sliced a hundredfold, from a monthly subscription of $500 to just $5. Eight months later, it reached zero, when design collaboration service Alibre announced it would give away its client software to customers who signed up for its service. "We're giving away the software, we're selling the service," CEO Paul Grayson told ASPnews (see ASP gives away CAD package). In retrospect, we know that dot-com financing and optimism meant that those companies were premature in being so aggressive. Adoption has been slower than they assumed it would be at the time, and their prices have risen in the meantime. But the day of reckoning for the software industry has merely been delayed. Lower development costs, cheaper distribution, higher volumes and more efficient competition inevitably mean that prices will plummet. Individual developers will still receive fair and generous compensation for their efforts, but the potential to accumulate billions of dollars of personal wealth through developing software will become a curiosity of a bygone age. In the future, the real money will be earned by service providers.
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