Subject: Re: Will freeware change the business forever?
From: kragen@pobox.com (Kragen)
Date: Fri, 26 Jun 1998 14:05:44 -0400 (EDT)

On 26 Jun 1998, Russell Nelson wrote:
> (quoting InfoWorld) Or have we reached a point where the actual price 
> of software is irrelevant compared to the cost of implementing and 
> maintaining that software?

Well, I can think of two possible interpretations for that question,
and the answer to both of them is obviously "yes".  Perhaps someone
else can enlighten me as to the actual meaning, which presumably has a
nonobvious answer.

Interpretation 0: Have we reached a point where the price a user pays
for licensing software is so small, compared to the cost of installing,
setting up, and babysitting that software, that the price of licensing
is irrelevant?

Well, obviously, yes.

Interpretation 1: Have we reached a point where the amount of money a
vendor needs to make per user to recover their investment costs (of
writing and bugfixing that software) is so small as to be irrelevant to
the decision of price?

Well, again, the answer is obviously "yes", except in small markets.
Most retail software is priced at $30-$100; if you sell at $30 after
investing $5 million in the software, you need to sell to less than 0.2
million people to recover your costs. Microsoft spent "tens of millions
of dollars" on Win98, and they can reasonably expect to sell tens of
millions of copies, so their R&D break-even point would be about $1 per
copy.

Kragen