On revenue streams
How and why do we pay for software?
Our consultants remember when you would buy software. You went to a physical store to get it, and it came on a medium you could hold in your hand and take to the checkout. After that, it was yours; you could use it on any compatible machine you had. There were license agreements, chiefly to make sure you didn’t try to make money from someone else’s work, but most people didn’t bother to read them. We speculate that the model came from that used for recorded music, intentionally or not: you’d buy your vinyl record, or later your cassette tape or CD, and play it anywhere it would play until it wore out.
Now, however, the most-used word processing and business suite has gone to a sort of rental model: you pay something every month to keep using it. The most popular photograph processing program went to the rental mode some time ago. To a limited extent, it makes sense for the user: the software can be kept updated and even improved (though we think updates are overrated, and improvements can be very troublesome). Mostly, though, it’s a way for the seller to keep money coming in for something done and past. As such, there is grumbling among the customers, who do not understand why they have to keep paying for something they already own.
While the rental model is mostly associated with the interconnected way in which we use computers nowadays, downloading software over the internet that can in turn communicate with the seller, the idea is actually more general and much older. Our photographer tells us of how his digital compatriots may buy a professional-quality ink-jet printer at a quite reasonable price, but are then stuck with restocking the inks, which are among the most expensive liquids in existence. And the Kodak company started selling inexpensive cameras in the nineteenth century, making its profits from the film they used.
There are, however, flaws in the rental model (in addition to grumpy customers). Other companies began to make film that fit Kodak cameras. This led to a proliferation of Kodak film formats, so that a roll of 120 film would not fit in a 620 camera, and 116 and 124 were different again. Any exclusiveness was temporary, however. Eventually Kodak competed on the quality and qualities of its film, where it was quite successful. Indeed, the film division of Kodak continued to be profitable even after the digital age (though much smaller than it had been). But the model couldn’t really be transferred to digital imaging, which was disastrous for Kodak as a whole.
Similarly, there are third-party printer inks. The printer companies warn of dire consequences when using someone else’s product; we’re not in a position to comment. And there is third-party software. We suspect we’re now seeing a version of Kodak’s film-format race, in which the leaders try to add features and services and in general stay ahead of any alternative. We won’t make any predictions on how it will come out.
Our photographer uses an open-source image processing system on the rare occasions he needs one, and feels smug while loading Kodak Tri-X into his 1934 Leica.
