[thelist] cheap software spam - how do they do it?

Ken Schaefer Ken at adOpenStatic.com
Tue Mar 14 21:27:14 CST 2006

: -----Original Message-----
: From: thelist-bounces at lists.evolt.org [mailto:thelist-
: bounces at lists.evolt.org] On Behalf Of Shawn K. Quinn
: Subject: Re: [thelist] cheap software spam - how do they do it?
: On Wed, 2006-03-15 at 12:34 +1100, Ken Schaefer wrote:
:     [I wrote:]
: > > You're comparing apples to oranges here. I think it's a bit unfair
: > > to compare physical goods with something which can be reproduced at
: > > little to no cost.
: >
: > Not entirely. Producing and marketing a physical product includes all
: > sorts of initial setup, design and testing costs which need to be
: > recouped across the sales of the product.
: You are approaching what I say with entirely the wrong mindset to
: understand what I'm actually saying.
: For the moment, forget the support hotline, shrinkwrap, fancy box, 60
: second commercial on 100 different cable TV and broadcast channels
: including one airing during a major national sporting event that Nielsen
: thinks almost everyone watches, half- or even full-page newspaper and
: magazine ads, billboards, and even the CD/DVD itself. Take all that out,
: and the cost to develop a given program into something usable drops
: significantly (and we begin to see just where that $1200 for this Adobe
: Suite thing actually goes).

Huh? Programmer salaries? Buildings to house said programmers? HR, finance
and legal departments (all that other infrastructure required to support any
type of business the size of Adobe or similar). That all costs significant
amounts of money.

: > You could say that the cost of the physical product needs to recoup
: > both the variable cost of the item, as well as the fixed cost
: > in developing the product. Software is no different.
: Software is *very* different. All of the software I use, I either do not
: have on CD-ROM (I don't have a DVD-ROM drive in this PC yet) or it was
: made on media I supplied myself. However, I'm pretty sure I could buy
: fancy shrinkwrapped boxes with CDs inside if I really wanted to.
: If you keep thinking of software as a physical product (in fact, it is
: not), this will never make sense to you.

I still don't see why software is different. You claim it is different but
don't seem to provide any evidence to support this contention. 

a) Developing software costs money
b) Software has a relatively low marginal cost of production (the cost to
produce an extra unit). This could be a few dollars to press a CD, or it
could be bandwidth to support a download. More people using it tends to
generate more support costs.
c) Software still has a high fixed cost
d) The fixed costs need to be recouped through sales of product if that's
your business model

(a) through (d) apply regardless of whether the product is physical or not.
Tourism runs the same way, education services run the same way, and so do
hopitals, and all sorts of other service-based industries that have no
physical output.

: > The marginal cost per unit is low (maybe a few dollars to press a CD),
: > but that doesn't mean that the fixed costs are insignificant. Look at
: > electricity - it costs next to nothing to supply a few extra watts to
: > your house. Does that mean electricity should be free (or nearly so)?
: This is a complete non sequitur. 

Why? Electricty has a low marginal cost, yet a high fixed cost. But no one
seems to argue "well, it costs the electricity company only $0.000000001 to
supply me with an extra watt, so that's all I should pay"

: Besides, it doesn't hold water, as
: people do make money selling copies of free software: the people that
: really do need the disc, shrinkwrap, and fancy box get it, and those
: that don't, don't.

That's a completely different business model. A business can choose which
model they wish to use. For those that choose to charge upfront for
development, then I don't see why paying a fair price for it is such an
outrageous suggestion. People on this list charge hundreds to thousands of
dollars for their time/effort. Doesn't seem any different to me.


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