Subject: Re: Free *Network* Software Business?
From: "Michael R. Bernstein" <michael@fandomhome.com>
Date: Tue, 02 Dec 2008 22:04:43 -0700
Tue, 02 Dec 2008 22:04:43 -0700

On Tue, 2008-12-02 at 18:15 -0800, Ben Tilly wrote:
> On Tue, Dec 2, 2008 at 5:52 PM, Michael R. Bernstein 



>         Am I being *too* coy? I was hoping for some feedback by now...
> 
> My reason for not responding is that I don't see how you'd monetize a
> free data format.

Generally speaking, I expect the free availability of the format, and
the availability of free/open data (or content) in that format, to
actually create a market for proprietary/licensed data in the free
format, as well as services related to aggregating demand and supply
(free fonts and clip art help create demand for higher quality
offerings).

I don't expect that market to be winner-take-all, but I do expect to get
a healthy slice of the new ecosystem by virtue of having helped created
it.

> The most applicable business models would seem to be providing support
> and training for your system, or else making money off of proprietary
> tools built on top of your data format.  Without details I can't guess
> whether either of those is viable.

There may be some service and consulting revenue from companies that
want to deploy the service internally, but I am actually not sure how
soon any of that would materialize (could be a few years). Data-creation
(or content-creation) services may materialize sooner (think custom
typeface design). Proprietary tools (think fontographer) could be
lucrative, but I may simply have to cede that portion of the market to
someone else as it is not my area of expertise.

I've had some more time to think about this, and I believe that
operating a free consumer service where users can use free content as
well as purchase access to premium content for use *with* the service,
may be the way to go.

Unlike the 'font' ecosystem, there are no incumbents in this area with
deep catalogs of analog content waiting to be digitized. The few
existing analog precursors are simply not suitable. For this new format,
new content will have to be created. I'll need to prime the pump with
some free content which I'll probably release under a Creative Commons
ShareAlike license (to make the free service immediately usable, and to
serve as inspiration/example for independent artists), as well as
possibly cut licensing deals with some existing media brands for
creating premium content based on those brands.

> Depending on what you're doing, other models may work.  For instance
> Sleepycat built a pretty good business around offering a free product
> which you had to pay to incorporate into proprietary products.  And
> for many years Aladdin made money from Ghostscript by having a
> proprietary product that they would open source old versions of.  Both
> of those models require that you maintain ownership of the copyright
> though.

The Sleepycat model could work for the webservice, but the GhostScript
model won't. Perhaps for libraries intended to be used by desktop apps
though... Hmm... No, probably not.

> You also haven't said how difficult it will be to launch this project
> and what size of company you're looking to build on it.  It is much
> easier to, for instance, come up with a business model around a niche
> product that will work for a personal consultancy than it is to come
> up with one that is keeping a several hundred person enterprise going.

Part of why I'm being coy is that it actually won't be particularly
difficult to devise a format for this new purpose (though it could be
done well or poorly), create the supporting web service, and launch the
company, but my resources are slim at the moment, so it could still take
me a while.

While the marketplace created by this format could be pretty darn big, I
don't have *any* illusions about being able to corner it. Initial
success will probably be marked by sustainable revenues that support
5-10 employees. How far the company could grow beyond that is anybody's
guess depending on whether I'm right about the format leading to an
explosion of creativity *and* demand for content, both consumer and
corporate.

For example, royalty-free clip-art is a pretty big business (though not
as big as digital fonts) with both high end and low end offerings, but
could you have actually *predicted* that with any certainty at the very
beginning of the desktop-publishing revolution? Or the current market
for cell phone ringtones as recently as a decade ago?

On the other hand, desktop themes and backgrounds are a niche that few
consumers have ever paid for, or pay very much, though some artists are
able to make a living at it, and some aggregators have built successful
businesses.

And yet on a third hand, screen-savers were quite popular and profitable
for a while, and then that market mostly dried up.

I am quite simply not sure how big this new market will be, just that
there is, in fact, one waiting to be created.

- Michael


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