Subject: Re: "Reasonable Profits"
From: hecker@netscape.com (Frank Hecker)
Date: Tue, 01 Sep 1998 12:31:59 -0400

Russell Nelson wrote:
> Frank Hecker writes:
>  > ... that being libre directly drives being gratis or near-gratis,
>  > at least for the actual software in question.
> 
> Does it?  Has this been tested or is it a supposition?

Well, I guess it depends on the way we're using "libre" and "gratis" in
this context; the added condition "at least for the actual software in
question" is also key here.  From my point of view "libre drives gratis"
proceeds as a logical argument from the nature of libre software and
that argument is confirmed by historical experience based on the world
of libre software vs. the world of commercial proprietary software.  To
expand on this:

If you define "libre software" as software that is licensed under a
license consistent with the Open Source Definition, then (from paragraph
1 of the OSD)

  The license may not restrict any party from selling or giving away
  the software as a component of an aggregate software distribution
  containing programs from several different sources. The license may
  not require a royalty or other fee for such sale.

This to me implies that you can't charge a traditional "right-to-use"
license fee for libre software, and the software is "gratis" in that
sense.  The OSD as quoted above actually addresses right-to-distribute
and not right-to-use, but I think it's a reasonable conclusion that
charging a right-to-use license fee is incompatible with the OSD and
with the concept of libre software as it's historically evolved.

So when I say "gratis" or "near-gratis" I do _not_ mean that an FSB
can't charge for software in some way; I mainly mean that that charge
won't be in the form of a right-to-use license fee.  But in the
commercial software industry such license fees have traditionally been
the major mechanism by which customers have compensated the vendor for
the perceived value of the software.  Also, with proprietary software
often a major part of that "value" is that the software in question is
available only from the vendor in question.  (Because the software is
considered intellectual property, use of which requires a contract,
i.e., the license, etc., etc.  The standard drill.)

(I put "value" in quotes above deliberately because of course from the
customer's point of view the "exclusive source" aspect of proprietary
software is not real value; in this context I'm simply using "value" as
a code word for "those aspects of a product X which lead a customer to
pay money for that product over and above the incremental cost of goods
for that product."  Those aspects are usually positive but need not be
so.)

If you eliminate right-to-use license fees but still want to charge for
the libre software itself (as opposed to selling services like technical
support), and if the product in question is available from someone else
(because of unrestricted distribution) then you have to justify to the
customer the price that you want them to pay.  (If you can't justify
your price then of course people won't pay it.)  So you either price
based solely on cost of goods (e.g., how much it costs to make a CD and
manual and put them in a box), or you try to go beyond that and price
higher based on other value you can generate around the product.

It's certainly possible to do that successfully as an FSB; for example,
I've been motivated to purchase two boxed copies of RedHat Linux thus
far, based on added values like convenience of installation (having a CD
vs. downloading), convenience of buying (distributed through a bookstore
I often visit, buyable online), brand value (known and respected company
in this area), value of being "part of the crowd" (lots of other people
in my company use RH), and so on.  I suspect that in doing so I paid a
price somewhat higher, and perhaps significantly higher, than the actual
cost of goods (at least for Bob Young's sake I hope so :-).

However although I might pay (say) $50 for my copy of RH or some other
libre software product, I can't see company Foo paying $50 per user, for
every user, for their copies of RH or any other libre software product
_considered purely as a piece of software and nothing else_ (i.e., with
support, etc., being extra).  But this per-user license fee model is
exactly what traditional software businesses are based on, and $10-100
per user just for a right-to-use license is well within the standard
range of commercial software pricing.  Compared to that any amounts
chargable and any revenue realizable for libre software in and of itself
are trivial.

That's a long explanation for why I think libre software (as compared to
proprietary commercial software) is typically and even necessarily
gratis or near-gratis for the software considered as software itself,
i.e., divorced from any accompanying services or goods.  It may be that
you and I are thinking in different terms here; if so I hope I've
clarified my argument at least a little.

Frank
-- 
Frank Hecker          Pre-sales support, Netscape government sales
hecker@netscape.com   http://people.netscape.com/hecker/