10 ms·

I'd argue that the perceived value of software is correct. As with all IP, once created the value of a copy is pretty much zero. It's a simple case of supply an

by Aaargh20318 10y ago

I'd argue that the perceived value of software is correct. As with all IP, once created the value of a copy is pretty much zero. It's a simple case of supply and demand, the supply is infinite so logically the price is zero. The problem is not selling software (or songs, or movies or any other IP really) for too little, the problem is billing for something that is not scarce. People intuitively understand that scarce things have value and that the value depends on how scarce it is. This is why selling things for which there is an unlimited supply is an uphill battle. Look at it like this: if you hire a plumber to install a toilet in your home, would you accept it if the toilet was 'free' but you had to pay a fee for every usage ? Hell no. But you'll gladly pay the plumbers hourly wage and material costs. The IP industry is trying to sell toilets on a pay-per-flush basis and then acts all surprised when people don't accept this and see no ethical problems with piracy. The real solution would be to find a way to charge for things that people do consider scarce, such as the developers/artists time. Unless we find a way to do that we are stuck with this conflict between consumers and producers of IP.

erichocean 9y ago
> As with all IP, once created the value of a copy is pretty much zero. It's a simple case of supply and demand, the supply is infinite so logically the price is zero. That's why I believe everyone should print their own counterfeit money: • printing money for yourself does not deprive anyone else of their money, just like "stealing" a copy of a book, film, or piece of software does not deprive anyone else of their copy • money (which is just pretty looking paper) has essentially no intrinsic value, just like a copy of a book, film, or piece of software (which are just bits) The OP is exactly right: the only reason money has "value" today is because the supply is being artificially restricted: the value of a copy is pretty much zero. It's a simple case of supply and demand, because with counterfeiting, the supply is infinite so logically the price should be zero. > The IP industry is trying to sell toilets on a pay-per-flush basis and then acts all surprised when people don't accept this and see no ethical problems with piracy. Same with the banking industry.
goseeastarwar 10y ago
Pharmaceutical companies spend 100's of millions developing new drugs, but it costs essentially nothing to manufacture those pills once they have FDA approval. Who expects medicine to be free because they cost nothing to replicate?
- daughart 10y ago
  People will pay for medicine. They won't pay for apps.
- mathattack 10y ago
  Who expects medicine to be free because they cost nothing to replicate? There is a large group pushing for Health Care to be free. This includes medicine.
  - dagw 10y ago
    Well no. Some people are pushing for health care to be free to the end user. That is something very different.
  - goseeastarwar 10y ago
    Universal health care still costs money, it just comes out of your wallet differently.
    - wayn3 10y ago
      For a lot of people, the cost of universal healthcare comes out of other peoples wallets. Germany has arguably the best, but certainly the free-est (in the sense that you are free to choose which doctor to see and what kind of treatment to receive), universal healthcare system. The premiums of almost 40% of the adult population are very close to 0. They don't pay for that. Other folks do. Enjoy those people voting for more free shit.
      - Arizhel 10y ago
        Yes, and Germany has a significantly higher quality of life than the US. You think that's a bad thing somehow?
pvg 10y ago
As with all IP, once created the value of a copy is pretty much zero. The cost of copying is not related to value. But you'll gladly pay the plumbers hourly wage and material costs. Most people, quite sensibly, don't want to pay a programmer's or airplane engineer's hourly wage.
- ue_ 10y ago
  Yet nevertheless the engineer and programmers are for the most part paid wage for labour power, measured in hours.
  - pvg 10y ago
    As is the person who drives a combine harvester.
- Aaargh20318 10y ago
  > The cost of copying is not related to value. Then what is ?
iplaw 10y ago
This is a problem with all IP. People fail to consider a business' need to recoup expenses associated with developing a product, be it software, hardware, pharmaceuticals, or widgets. And the initial price you pay can't merely cover the cost of research, testing, development, production, supply chain profits, transportation, and meager profits for the business, but it has to extend to maintenance, updates, warranty coverage, returns, replacements, etc. Maintaining software is a continual battle, especially if the software is going to be implemented in an extremely segmented market (Android and the thousands of versions in the wild, personal computers with thousands of makes and models of graphics cards, drivers, chipsets, libraries, etc.). Developing and testing software updates, which are expected weekly and free of charge, isn't only an Apple thing. And they weren't the first to start it.
mathattack 10y ago
Your conclusion looks good, but I think you're misusing the term value. once created the value of a copy is pretty much zero It's not the value that approaches zero, it's the Marginal Cost of producing one more unit. It doesn't cost anything to reproduce it, but if people will pay higher, then there is value. When you have an economic moat (less competition) or a monopoly, you can capture some of this value. (Think Telsa selling software upgrades to improve car performance - zero Marginal Cost, but high value) In Perfect Competition, prices approach or hit the Marginal Cost. Other than that nitpicking, I agree with the rest of what you say. :-)
- jmorrison 10y ago
  Thinking out loud: (1) The nameless model of reality I think is implied by "marginal cost of production is zero" simplifies away some essential aspects of reality (as explained by the late, great, RIP Manny Lehman model of "software evolution"). As the article points out, bug fixes and updates of the existing copy are necessary (to wit, IoT botnets), and in this model one never speaks about the continuing cost to maintaining the zeroth copy. (2) The anticipated rejoinder to observation (1) is that, given the source, the end-users can do all maintenance, customization, and extension themselves. What we know about complexity (again, thanks, Manny) of any non-trivial application puts the lie to this. (3) The anticipated rejoinder to observation (2) is existence proofs such as the Linux kernel. My reply to this rejoinder is that Linux is largely corporate-supported as a complement to the supporters products/services.
  - TheOtherHobbes 10y ago
    The initial cost of production is far from zero, as anyone who has spent more than few months (years) building a non-trivial application will tell you. As you say, updates/fixes also cost. So do marketing, web infrastructure and so on. It's usual in business to charge for utility and perceived value ("As much as the market can bear"), not for the cost of mechanical assembly/reproduction. OP is correct that Apple has created a new(ish) distribution model. It was a gold-rush for a year or three, but has become extremely unfavourable to new product development. But this has become a curation and discovery problem, not a distribution problem. Apple's 30% would be a lot more palatable if discovery and search worked better, if buyers could opt-in to a mailing list to support newsletters, cross-sales, and future sales, if sellers could set up trials - and so on. None of this is likely because the App Store is an example of the first law of aggregation - be the feudal landowner, not the peasant smallholder. The App Store is immensely profitable for Apple. The law of aggregation means that Apple has no serious incentive to make it better. The App Store won't change now. Eventually the entire platform will collapse and be replaced by a new technology in a new market space. But I wouldn't bet on that happening within five years, and possibly not within ten. (My best guess would be somewhere between those two.) Meanwhile it's still possible to do well selling app development as a service instead of apps as a product.
Androider 10y ago
The value of software, copied or bespoke designed, is not in the bits but what it allows me to do. The value of a new mobile game is fairly low to me, even if a small team spent 5 years creating it, but the value of a service like Google Docs is high because I rely on it daily for my work. The value is further increased because I'm relieved of having to update, patch and secure the software, the vendor providing this as a service which I'm very happy to pay for. Millions of other people having access to Google Docs does not diminish the value I derive from it, in fact it increases it. There's a saying about "a man knowing the price of everything and the value of nothing", that you might want to consider. By the way, if your toilet-as-a-service is always magically clean, nice smelling and stocked with a never-ending supply of toilet paper, I might very well be interested :)
- Aaargh20318 10y ago
  > The value of software, copied or bespoke designed, is not in the bits but what it allows me to do. Water allows you to live. Should the water company raise the price to €1000/liter ?
  - fellellor 10y ago
    If the water company created the water, then yes. Also, if you are in a position to "pirate" all that water then it is your duty to do so, whether it hurts the company or not. I think a lot of these relationships are very adversarial and people, companies included, don't have much of a choice in the absence of a wide reaching and binding understanding.
    - Aaargh20318 10y ago
      > If the water company created the water, then yes. Thank you for proving my point: if it's scarce (only one company can make it) it has value. So the argument that the value comes from 'what it allows you to do' (not die) is bogus. Water allows you to survive so if utility determined the prices water would be extremely valuable, but it isn't. $1000 water is ridiculous, but I'll bet that if I drop you in the middle of the desert, after 24 hours you'd be willing to pay $1000 for a liter of water. Yet it's the same water, you need it to survive wether you're in middle of the desert or at home. Clearly utility has nothing to do with value.
gbuk2013 10y ago
The cost of software maintenance is not even close to zero. Unless you are someone like DJB (or even then) your software will need to be updated and bugs will need to be fixed. TFA specifically calls out the assumption that a one off (essentially micro) payment entitles you to lifetime updates and I think that is a very fair criticism.
Arizhel 10y ago
>Look at it like this: if you hire a plumber to install a toilet in your home, would you accept it if the toilet was 'free' but you had to pay a fee for every usage ? Hell no. But you'll gladly pay the plumbers hourly wage and material costs. Never say never. Years ago, the answer would have seemed to be an obvious" hell no", but these days with X-as-a-service it really seems like a lot of people would be perfectly happy to pay a per-use fee for their toilet as long as that means they never have to pay an upfront fee to have it installed or repaired. Just look at all the people happy to pay a recurring fee for Photoshop.
AnthonyMouse 10y ago
> The real solution would be to find a way to charge for things that people do consider scarce, such as the developers/artists time. In theory that is what copyright does. If you make some software, you have a copyright on that software, but (unlike patents) not a copyright on any software that does the same thing. So if your total revenue is more than twice what it would cost to re-develop the same software then some other developer should do the math and go into competition with you. You, knowing that, would charge lower prices to begin with to avoid having to split the market with them. The classical problem with this in Hollywood is that the big studios bought up all the distribution to lock out new competitors, which breaks that mechanism. You still see them trying to do this with cable TV set top boxes and so on. This is also similar to Microsoft's traditional game, but doesn't apply to most other software, which actually has quite vigorous competition. The problem with what Apple is doing is that it breaks it the other way. Instead of companies leveraging a separate monopoly to thwart their own competitors, Apple is leveraging their App Store monopoly to siphon revenue that rightly belongs to the app developers. With the result that app developers make less than they ought to, which means that useful apps that ought to exist now don't because making them is not profitable against Apple's restrictions.
heartbreak 10y ago
I pay the water utility company for every flush. What is unethical about that model?
madiathomas 10y ago
Software needs to be maintained. You don't create it and stop updating it. Last time I checked, people who develop sofware cost a lot of money in salaries and other demands. Servers which hosts the system also need to be up 24/7. That's another cost. Maintenance of software costs more than the building phase.
nikdaheratik 10y ago
I don't think that the problem is the way Apple does business. The problem is that people view their mobile phones as a service and don't want to pay for anything on top of that. It's like paying your ISP and then being expected to pay again everytime you visit a new website. Pretty much exactly the same as in both cases the people writing the software have trouble getting people to pay the bills. If you could somehow bundle your apps for free as part of the service and get a cut from that, I don't think people would have a problem at all with software. But I don't think most of the telcos are interested in that approach.

erichocean 9y ago

> As with all IP, once created the value of a copy is pretty much zero. It's a simple case of supply and demand, the supply is infinite so logically the price is zero. That's why I believe everyone should print their own counterfeit money: • printing money for yourself does not deprive anyone else of their money, just like "stealing" a copy of a book, film, or piece of software does not deprive anyone else of their copy • money (which is just pretty looking paper) has essentially no intrinsic value, just like a copy of a book, film, or piece of software (which are just bits) The OP is exactly right: the only reason money has "value" today is because the supply is being artificially restricted: the value of a copy is pretty much zero. It's a simple case of supply and demand, because with counterfeiting, the supply is infinite so logically the price should be zero. > The IP industry is trying to sell toilets on a pay-per-flush basis and then acts all surprised when people don't accept this and see no ethical problems with piracy. Same with the banking industry.

goseeastarwar 10y ago

Pharmaceutical companies spend 100's of millions developing new drugs, but it costs essentially nothing to manufacture those pills once they have FDA approval. Who expects medicine to be free because they cost nothing to replicate?

daughart 10y ago
People will pay for medicine. They won't pay for apps.
mathattack 10y ago
Who expects medicine to be free because they cost nothing to replicate? There is a large group pushing for Health Care to be free. This includes medicine.
- dagw 10y ago
  Well no. Some people are pushing for health care to be free to the end user. That is something very different.
- goseeastarwar 10y ago
  Universal health care still costs money, it just comes out of your wallet differently.
  - wayn3 10y ago
    For a lot of people, the cost of universal healthcare comes out of other peoples wallets. Germany has arguably the best, but certainly the free-est (in the sense that you are free to choose which doctor to see and what kind of treatment to receive), universal healthcare system. The premiums of almost 40% of the adult population are very close to 0. They don't pay for that. Other folks do. Enjoy those people voting for more free shit.
    - Arizhel 10y ago
      Yes, and Germany has a significantly higher quality of life than the US. You think that's a bad thing somehow?

pvg 10y ago

As with all IP, once created the value of a copy is pretty much zero. The cost of copying is not related to value. But you'll gladly pay the plumbers hourly wage and material costs. Most people, quite sensibly, don't want to pay a programmer's or airplane engineer's hourly wage.

ue_ 10y ago
Yet nevertheless the engineer and programmers are for the most part paid wage for labour power, measured in hours.
- pvg 10y ago
  As is the person who drives a combine harvester.
Aaargh20318 10y ago
> The cost of copying is not related to value. Then what is ?

iplaw 10y ago

This is a problem with all IP. People fail to consider a business' need to recoup expenses associated with developing a product, be it software, hardware, pharmaceuticals, or widgets. And the initial price you pay can't merely cover the cost of research, testing, development, production, supply chain profits, transportation, and meager profits for the business, but it has to extend to maintenance, updates, warranty coverage, returns, replacements, etc. Maintaining software is a continual battle, especially if the software is going to be implemented in an extremely segmented market (Android and the thousands of versions in the wild, personal computers with thousands of makes and models of graphics cards, drivers, chipsets, libraries, etc.). Developing and testing software updates, which are expected weekly and free of charge, isn't only an Apple thing. And they weren't the first to start it.

mathattack 10y ago

Your conclusion looks good, but I think you're misusing the term value. once created the value of a copy is pretty much zero It's not the value that approaches zero, it's the Marginal Cost of producing one more unit. It doesn't cost anything to reproduce it, but if people will pay higher, then there is value. When you have an economic moat (less competition) or a monopoly, you can capture some of this value. (Think Telsa selling software upgrades to improve car performance - zero Marginal Cost, but high value) In Perfect Competition, prices approach or hit the Marginal Cost. Other than that nitpicking, I agree with the rest of what you say. :-)

jmorrison 10y ago
Thinking out loud: (1) The nameless model of reality I think is implied by "marginal cost of production is zero" simplifies away some essential aspects of reality (as explained by the late, great, RIP Manny Lehman model of "software evolution"). As the article points out, bug fixes and updates of the existing copy are necessary (to wit, IoT botnets), and in this model one never speaks about the continuing cost to maintaining the zeroth copy. (2) The anticipated rejoinder to observation (1) is that, given the source, the end-users can do all maintenance, customization, and extension themselves. What we know about complexity (again, thanks, Manny) of any non-trivial application puts the lie to this. (3) The anticipated rejoinder to observation (2) is existence proofs such as the Linux kernel. My reply to this rejoinder is that Linux is largely corporate-supported as a complement to the supporters products/services.
- TheOtherHobbes 10y ago
  The initial cost of production is far from zero, as anyone who has spent more than few months (years) building a non-trivial application will tell you. As you say, updates/fixes also cost. So do marketing, web infrastructure and so on. It's usual in business to charge for utility and perceived value ("As much as the market can bear"), not for the cost of mechanical assembly/reproduction. OP is correct that Apple has created a new(ish) distribution model. It was a gold-rush for a year or three, but has become extremely unfavourable to new product development. But this has become a curation and discovery problem, not a distribution problem. Apple's 30% would be a lot more palatable if discovery and search worked better, if buyers could opt-in to a mailing list to support newsletters, cross-sales, and future sales, if sellers could set up trials - and so on. None of this is likely because the App Store is an example of the first law of aggregation - be the feudal landowner, not the peasant smallholder. The App Store is immensely profitable for Apple. The law of aggregation means that Apple has no serious incentive to make it better. The App Store won't change now. Eventually the entire platform will collapse and be replaced by a new technology in a new market space. But I wouldn't bet on that happening within five years, and possibly not within ten. (My best guess would be somewhere between those two.) Meanwhile it's still possible to do well selling app development as a service instead of apps as a product.

Androider 10y ago

The value of software, copied or bespoke designed, is not in the bits but what it allows me to do. The value of a new mobile game is fairly low to me, even if a small team spent 5 years creating it, but the value of a service like Google Docs is high because I rely on it daily for my work. The value is further increased because I'm relieved of having to update, patch and secure the software, the vendor providing this as a service which I'm very happy to pay for. Millions of other people having access to Google Docs does not diminish the value I derive from it, in fact it increases it. There's a saying about "a man knowing the price of everything and the value of nothing", that you might want to consider. By the way, if your toilet-as-a-service is always magically clean, nice smelling and stocked with a never-ending supply of toilet paper, I might very well be interested :)

Aaargh20318 10y ago
> The value of software, copied or bespoke designed, is not in the bits but what it allows me to do. Water allows you to live. Should the water company raise the price to €1000/liter ?
- fellellor 10y ago
  If the water company created the water, then yes. Also, if you are in a position to "pirate" all that water then it is your duty to do so, whether it hurts the company or not. I think a lot of these relationships are very adversarial and people, companies included, don't have much of a choice in the absence of a wide reaching and binding understanding.
  - Aaargh20318 10y ago
    > If the water company created the water, then yes. Thank you for proving my point: if it's scarce (only one company can make it) it has value. So the argument that the value comes from 'what it allows you to do' (not die) is bogus. Water allows you to survive so if utility determined the prices water would be extremely valuable, but it isn't. $1000 water is ridiculous, but I'll bet that if I drop you in the middle of the desert, after 24 hours you'd be willing to pay $1000 for a liter of water. Yet it's the same water, you need it to survive wether you're in middle of the desert or at home. Clearly utility has nothing to do with value.

gbuk2013 10y ago

The cost of software maintenance is not even close to zero. Unless you are someone like DJB (or even then) your software will need to be updated and bugs will need to be fixed. TFA specifically calls out the assumption that a one off (essentially micro) payment entitles you to lifetime updates and I think that is a very fair criticism.

Arizhel 10y ago

>Look at it like this: if you hire a plumber to install a toilet in your home, would you accept it if the toilet was 'free' but you had to pay a fee for every usage ? Hell no. But you'll gladly pay the plumbers hourly wage and material costs. Never say never. Years ago, the answer would have seemed to be an obvious" hell no", but these days with X-as-a-service it really seems like a lot of people would be perfectly happy to pay a per-use fee for their toilet as long as that means they never have to pay an upfront fee to have it installed or repaired. Just look at all the people happy to pay a recurring fee for Photoshop.

AnthonyMouse 10y ago

> The real solution would be to find a way to charge for things that people do consider scarce, such as the developers/artists time. In theory that is what copyright does. If you make some software, you have a copyright on that software, but (unlike patents) not a copyright on any software that does the same thing. So if your total revenue is more than twice what it would cost to re-develop the same software then some other developer should do the math and go into competition with you. You, knowing that, would charge lower prices to begin with to avoid having to split the market with them. The classical problem with this in Hollywood is that the big studios bought up all the distribution to lock out new competitors, which breaks that mechanism. You still see them trying to do this with cable TV set top boxes and so on. This is also similar to Microsoft's traditional game, but doesn't apply to most other software, which actually has quite vigorous competition. The problem with what Apple is doing is that it breaks it the other way. Instead of companies leveraging a separate monopoly to thwart their own competitors, Apple is leveraging their App Store monopoly to siphon revenue that rightly belongs to the app developers. With the result that app developers make less than they ought to, which means that useful apps that ought to exist now don't because making them is not profitable against Apple's restrictions.

heartbreak 10y ago

I pay the water utility company for every flush. What is unethical about that model?

madiathomas 10y ago

Software needs to be maintained. You don't create it and stop updating it. Last time I checked, people who develop sofware cost a lot of money in salaries and other demands. Servers which hosts the system also need to be up 24/7. That's another cost. Maintenance of software costs more than the building phase.

nikdaheratik 10y ago

I don't think that the problem is the way Apple does business. The problem is that people view their mobile phones as a service and don't want to pay for anything on top of that. It's like paying your ISP and then being expected to pay again everytime you visit a new website. Pretty much exactly the same as in both cases the people writing the software have trouble getting people to pay the bills. If you could somehow bundle your apps for free as part of the service and get a cut from that, I don't think people would have a problem at all with software. But I don't think most of the telcos are interested in that approach.