At 5:42 PM -0500 12/21/98, Robert Hettinga wrote:
Sure, Red Hat grosses $20 million, but that's more a function of the cost-domination of sneaker-netted CDROM over the still-scrawny lower capillaries of the internet. More to the point, I claim, it's the result of the cost of *credit-cards*, even *checks*, as a way to pay for code. Book-entry settlement, in other words, which is done "out of band", over private, hierarchical, and proprietary financial transaction networks.
Redhat makes it's money for 4 reasons, and only the first 2 will go way in the cryptoanarchic geodesic encrypted internetworked micromoney market place of the future: (1) Redhat [debian, slackware, S.u.s.e (the best dist. IMO)] contribute back to the Linux/Open Software community, and "We" pay them back by buying their software. (2) As noted above, the last mile pipes to the cloud are still small. (3) How much of Redhats profit is in support contracts? Lots of small to medium sized companies are starting to use Linux, and they like to buy support, even if it is useless and rarely used. This one will go away in the above cryptoanarchic geodesic encrypted internetworked micromoney market place of the future because one will be able to purchase specific consulting time from a wide variety of sources. --and--
If it were possible to pay to download code, as you needed it, for instantaneously net-settled *cash*, and for sufficiently small enough bits of money, then the need, the price-economy, if you will, for large glops of code would go away.
This is why I purchased a copy of RedHat (and later SUSE, Redhat sucks): (4) Being able to grab code as you need it is all well and good, but what do you do when the machine that ties you into the network fails? When you need to get that machine back up +now+. Yes, you can burn your own CD (or DVDrom, or whatever), but Media burners are more expensive than readers, and not every one can afford them. The network can't help when you can't reach it.
Finally, it even behoves huge companies who control large blocks of intellectual property, record companies, and Microsoft, for instance, :-), to compete in this new kind of market, precisely *because* the the transaction costs are so low and the initial profit margins are correspondingly higher.
The problem with your line of thought is that in the cryptoanarchic geodesic encrypted internetworked micromoney market place of the future, the difference between "old" information (code) and "new" information (code) in MARKET terms can be minutes or less, while it takes weeks to turn out good new code. Why should _anyone_ buy at a higher price when one can watch the value fall faster than gravity should allow? Yes, someone will make the _first_ buy, but that will be the last buy at anywhere near that price, and that is going to force the developer to reduce his costs etc. -- "To sum up: The entire structure of antitrust statutes in this country is a jumble of economic irrationality and ignorance. It is a product: (a) of a gross misinterpretation of history, and (b) of rather naïve, and certainly unrealistic, economic theories." Alan Greenspan, "Anti-trust" http://www.ecosystems.net/mgering/antitrust.html Petro::E-Commerce Adminstrator::Playboy Ent. Inc.::petro@playboy.com