Subject: Re: Free *Network* Software Business?
From: "Stephen J. Turnbull" <stephen@xemacs.org>
Date: Wed, 03 Dec 2008 17:42:10 +0900

Ben Tilly writes:

 > I think you're drawing a needless distinction.  The data and formats
 > are complements of each other.  If he thinks he can make money from
 > creating data, then he has a revenue incentive to create the
 > format.

Sure.  But the original post presented only the issue of the format.
It turns out that the format is not interesting (except that a war of
proprietary formats might kill the market).

 > There is a critical difference here.  Tom created a distributed
 > version control system (arch), but never tried to make money by
 > supplying data that people would want to put *into* arch.

Sure.  My point is that being the creator of the format has nothing to
do with making money from it, except that if you are going into the
distribution business, you can hope to avoid the mistake of killing
the goose with a proprietary format by starting with a dominant, open
format.

 > If he has the skills and talents to deliver the content successfully,
 > I don't think he needs any more of a first mover advantage than being
 > the name associated with the project, who created the free samples
 > that everyone first sees.  (Which, if they are good enough, will
 > probably continue to be standard examples for some time.)

True.  However AIUI, he doesn't believe that he personally can create
excellent content.  He wants to be the guy with his hand on the valve
for others' excellent content.

 > [T]he fact that he's thinking about [the content that he wants to
 > deliver] means he's already doing something better than Tom ever
 > did.

You misunderstand Tom.  Tom *did* think about content delivery,
although he was never able to make the content he had in mind concrete
enough to convince others.  Nor was he willing to go into the
distribution business to prove his point.  GNU Arch, we hardly knew
ya.  RIP.

 > > Why would a premium content provider pay you, rather than use your own
 > > free format as a threat to support charging you a franchise fee as a
 > > distributor for their content?  More fearsome yet, do you think you
 > > can beat Amazon, iTunes, and Rhapsody at this game if the format is
 > > free for them to use?
 > 
 > The content providers are not his target audience.

No, they're the suppliers of the premium content that is going to
provide for his kids' college education.  Their price is the marginal
cost of his product.  If the format is free, then competition with the
second-movers is going to jack up that cost, and is greatly to the
advantage of second-movers because he pays the cost of original
development of the format and they don't.  Furthermore, he now has to
play innovation leapfrog with them, unless he gets it really right the
first time.

The only example I know of of getting the data format right the first
time is git, and even there Linus cheated.

 > The copyright on your implementation of how to access the data.
 > However I must admit that if the format is designed for easy exchange
 > of data, it would be easy to reverse engineer and that wouldn't be a
 > very good barrier to entry.
 > 
 > >  > Part of why I'm being coy is that it actually won't be particularly
 > >  > difficult to devise a format for this new purpose
 > >
 > > Ah, so it's not about the format after all.  It's about the content.
 > 
 > He said that several paragraphs ago.

Yeah, but he never repudiated his original post where he said it was
about the format.

 > As natural as that seems to you, it took some time for the shareware
 > market in desktop themes to go away.  A temporary opportunity of that
 > size could easily repay the effort of creating the market.

And a fizzle could leave one in substantial debt.  The theme and
screen saver formats were volunteer efforts, and the business free
rode on the format.  Micheal is talking about investing in creating a
format, then investing in a service of connecting content providers to
users.  Seems very risky to me.

I'd take out a patent, first. ;-)

 > > Screen savers are even more so.
 > >
 > > Ring tones, on the other hand, are part of the way you present
 > > yourself to the world.  They're heavily tied to your self-image, and
 > > to fashion.  Many (most?) popular ring-tones are currently popular
 > > music themes, which are backed up by heavy handed titans like RIAA,
 > > and they have a natural proprietary distribution channel.
 > 
 > The ring tone market is heavily dependent on artificial barriers to
 > discourage people from making their own ring tones from mp3 files.

Which is what I just said, except for the gloss "artificial".  With
said gloss I do somewhat disagree. ;-)

I agree with your assessment that those of us whose taste in music
froze in 1969 will within a few years be in a position to install our
own MP3s in our handsets.  However, (1) people who want their ringtone
to be this week's Billboard #1 pop song will still often find it
easiest to pay for it, and (2) the feature where *your* chosen
ringtone plays on *my* phone will be controlled by the telcos
indefinitely, if they want to.

 > I'd agree with that.  This sounds to me like it would create a
 > probably transient business opportunity.  But if he's good at creating
 > this kind of content, he should be able to transfer to other kinds of
 > content creation.

Again, he already said that content creation is not his bag.  He wants
to get a share of the profits from the distribution channel.