Why Making Money from Free Software Matters (Glyn Moody)

I just want to jot down a few comments here about an open-ed piece by Glyn Moody at the H-online: Why Making Money from Free Software Matters. It is a very good summary of the motivations I had in writing my book Open Life: The Philosophy of Open Source and why I have since also strived to work towards making businesses benefit from Open Source models, and vice versa, making Open Source benefit from the businesses.

Says Glyn:

As companies like Red Hat have grown in size and profitability, so has the credibility of free software options among larger enterprises. Profits mean that other, smaller open source companies can be bought, providing a useful payback for entrepreneurs that encourages others to enter the fray by funding new open source start-ups. Money also means more influence at the political table through increased visibility and clout.

But there is another, perhaps less apparent, but ultimately more profound reason why the success of these businesses based around free goods is so crucial: their arrival and success is in many respects a forerunner of coming shifts in many other industries.

In the world of music, it's more complex. Prices are dropping, not least because most people regard traditional pricing levels as extortionate for digital products that cost far less to produce and distribute than analogue ones. The rise of online file-sharing services has also provided competition, although not of the same kind as free software does to closed source products. As people come to expect digital music to be priced much closer to zero than is currently the case, the recorded music industry is faced with precisely the problem that Stallman and his successors grappled with: how to make money from something that is freely available, or nearly.

When I wrote my book on this topic, examples of profitable businesses were still scarce: While there were already non-commercial examples of the tremendous potential seen in Wikipedia, or the fan translations of Harry Potter or Project Gutenberg, the examples of successfully commercializing on open content boils down essentially to John Buckman of Magnatune, with the experiments of Stephen King and Roger Williams ranking as undecided at best.

Glyn reports on a more successful experiment by musician Jill Sobule.

She adopted a donation model whereby fans paid her before the music existed, so that Sobule could spend time and money creating it. With great inventiveness, she came up with various kinds of goods that she gave those who financed her, priced according to their scarcity:

$10 - Unpolished Rock (but with potential) Level: A free digital download of the album, when it's released.

$25 - Polished Rock Level: An advance copy of the CD. Weeks before the masses.

$50 - Pewter Level: An advance copy and a "Thank You" on the CD.
...

$5,000 — Diamond Level: I will come and do a house concert for you. Invite your friends, serve some drinks, bring me out and I sing. Actually, this level is a smart choice economically. I've played many house concerts where the host has charged his guests and made his money back. I'd go for this if I were you.

$10,000 - Weapons-Grade Plutonium Level: You get to come and sing on my CD. Don't worry if you can't sing - we can fix that on our end. Also, you can always play the cowbell.

She later revealed that this approach garnered her $75,000 in just two months.

That's like a years, salary for some! Kudos to Jill, and good luck to all other artists out there, trying to move their lives into the 21st century.

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