Path: utzoo!utgpu!water!watmath!clyde!rutgers!cmcl2!nrl-cmf!ames!pasteur!ucbvax!hplabs!hplabsz!news From: SHEIZAF@HBUNOS.BITNET (Sheizaf Rafaeli) Newsgroups: comp.society Subject: "Soap software" - One scenario for the Software market Message-ID: <1493@hplabsz.HPL.HP.COM> Date: 27 Jan 88 10:23:10 GMT Organization: Hebrew University of Jerusalem, Israel Lines: 184 Approved: taylor@hplabs Jean-Claude Morand raised the issue of who buys and how are prices to be assessed for software (vol 3, #1). In the following I'd like to make the following arguments (here's an executive summary): 1) The issue of funding for software is related to the issue of software theft. 2) The issue of funding for software does not have to be solved by increasingly sophisticated costing models. Rather... 3) One way to fund mass produced, mass consumed software of general interest is to treat software like journalism, drama, film, literature and music: A cultural commodity paid for through advertising. 4) I am not aware of any current use of software as an advertising medium (other than for other software products). 5) Given the logicality of (3), (4) is surprising. 6) The prospects of using software as an advertising medium raise some questions: practical, ethical and otherwise. (Please skip the rest of this lengthy message if you've had enough. The remainder is an elaboration on these six points. As I am researching these issues, I would be grateful for any information, comments, criticisms). The question of funding for software (in ten years or even today) has deeper importance than some realize. It really is part of the general question about who pays for cultural content and form. Discussion of the economics of software should be informed by the treatment of software as a cultural (literary?) form. The Medicis (benefactors of art, literature, learning in post Renaissance Florence) are not around anymore to patronize this or any other art. The phenomenon of rich patrons who determine what is and what isn't art has disappeared. Nor does it seem particularly efficient to have the content of software determined (guided) by the few but rich. However, it also seems that the average users are also less willing to pay for their share in the costs of developing, marketing, and maintaining the software. Witness the development of software theft, but also freeware, shareware, software lending libraries, etc. Interestingly, the question of who pays for software is closely related to the issue raging on the pages (screens?) of this digest: the uneasy relation between Universities, Basic Research, and Industry. We're not sure who calls the tune, but the piper needs to get paid. An attendant problem is that of software theft: It seems that no sooner a useful software package gets on the market than illegal copies of it outnumber legally purchased copies in use. The assumption that excellence gets rewarded financially has a glitch in it. Any discussion of pricing strategy for software has to take this into account. In a comparative study of software theft we have just completed we ran into two outcomes of the proliferation of software theft: 1) One result of theft is that some software designers shy away from writing general purpose software. It simply doesn't pay anymore. The designer of software faces a very weird demand curve for her product. Response is not (cannot be?) just in pricing policy. Often, the designers' solution is to tailor software by hardwiring, firmwaring, or simply directing their energy toward the solution of problems that are decreasingly general, increasingly particularistic, decreasingly interesting or creative. One result of software theft is the decomposition of a mass market for software to many small, fragmented (but paying) audiences. 2) Honest microcomputer software users are rare. Illegal use of software is widespread, this is not news. What is amazing is that (for study, comparative purposes) we were almost unable to locate ANY users whose consciences and hard-disks were completely clean. The term "deviance" (statistically defined) is no longer appropriate for this particular crime. Add to these findings the apparent fact that for almost every copyright protection device or strategy a (cheaper) solution arises. The problem of who pays what, then, goes far beyond pricing policy. Furthermore, it is no longer just the problem of designers/producers of software. Users/consumers and the culture at large should be just as involved. The economic process is shaping a cultural outcome. One solution may be financial support of software via advertising revenues. Software could be reconceived as a vehicle (medium) which carries and is paid-for by advertising. Imagine a spreadsheet "brought to you by Campbell Soup", half an hour of wordprocessor use "sponsored by your local grocery store", expert systems' advice courtesy of a political candidate, an information utility paid-for by a catalog store. We may also speculate about advertising-funded computerized communication- Bitnet, CSnet, ARPANET paid for by Madison Avenue. In several ways, this makes sense: Software is a means of expression. It is the imposition of form and the selection of content in ways which are creative and artistic toward ends that are hopefully useful, or at least aesthetically pleasing. Comparing the historical development of the software market with that of other forms of expression is interesting. Software, like journalism, drama, literature, music, begins without a market structure to prop it up. (Urge to write? Drive to program?) Earliest funds come from philanthropic rich and powerful benefactors. (Medicis, Apple Foundation, IBM education grants). Software, like journalism, music, literature, film, then gets its financial push from the producers of hardware who stand to benefit from the diffusion of their products for the purposes of consuming these modes of expression. Phonograph makers subsidize early Jazz; RCA makes radio and then television programs so that people would buy the sets. (This is the stage that is equivalent to the hardwiring/firmwaring of software of today). Very soon radio and television, newspapers and magazines, and other forms of communication found the way to charge industry at large (not its own consumers) for cultural production consumed by the mass. This just may be the crossroads software is at. Consumers have already shown that they are eager to use free software. Can we show that software (penny software?) may be an attractive medium for advertisers? - It reaches fairly upscale audiences, with larger than average disposable incomes. - It already reaches groups that are highly segmented (differentiated by taste, interest and other advertiser-relevant qualities). - Attention paid to software by its users is high. (Mostly higher than other forms of communication currently carrying advertising). - Length of exposure (time) is longer. The ephemerality of the message is smaller than that in other forms of mass communication. - Space and the attendant demand for brevity (the 15 second tv commercial) are less of a problem. Software carried advertising can (therefore) fulfill more tasks: not just persuasion, but also more informing. - Software offers an option for broader bandwidth in its appeals (more senses, sound, movement) - Software is better designed to include involvement schemes -- get them to buy through "foot in the door" techniques. - The status of software as a medium is (still?) higher than most other mass media outlets. - Suggestibility of the audience may be, therefore, high. Defenses are low. Advertisers rejoice. - Distribution costs for the commercials/ads (the equivalent of layout, printing, delivering the newspaper, transmitter and amplification costs) are (in the case of software) shared by the audience. The consumer/target is likely to carry most of the costs of copying and distributing copies of software (if it is good enough). The above should not be understood as an approval - just a statement that such a development could happen. Several questions could be raised: - What will this do to software: As in literature, music, drama, two tiers of software can evolve: low-brow (advertising supported) vs. high-brow (connoisseur-oriented) non supported software. - Will machine-readable information (as distinct from software) also undergo this process? Online information (in factual, bibliographic, journalistic, tabular and other forms) is currently priced on the bases of pay-per-use, time, fixed-sum, and other schemes. Minitel, Compuserve, the Source and others have preceeded others in introducing advertising to pay for portions of their service. - Does the advertising industry generate enough revenue to make this proposition interesting? Seems that it does - but I don't have the data to prove this. - One question that can be raised has to do with the distinction between entertaining cultural fare, and all other cultural genres. One could argue that advertising gravitates to the entertainment niche, shying away from anything useful. Furthermore, some say that once advertising is introduced to any mass communicated context, it trivializes and denigrates it (witness North American commercial TV news): a) Is this a rule? (how about highway billboards, PBS and CPB sponsorship, etc. as exceptions?) b) If it is (partially) true, it raises the specter of some interesting ethical questions vis a vis the quality/sobriety of software. - Ethical and legal concerns: Subliminal persuasion. Self governing by the media outlets themselves (as in smoking advertisements). Quality control of software algorithms - avoiding the bastardization/crass commercialism of software. This message is much too long already. I am researching some of these issues currently, including some field tests of actual software containing simulated commercials. I would like to plead for feedback. Any response, related anecdotes, criticisms are welcome. I promise to share the results of our studies. Sheizaf Rafaeli Hebrew University of Jerusalem Online: SHEIZAF@HBUNOS.BITNET Mount Scopus, Jerusalem, 91905 or ISRAEL KBUSR@HUJIVM1.BITNET