The internet has no shortage of pundits complaining loudly about the iPad’s extensive use of DRM (digital rights management). They say that the device is “crippled” by DRM and that it is a giant step backward for the software freedom movement. I’ll concede that it is a step back for the free software movement (a movement that seems to push for the abolition of any form of intellectual property), but I don’t think that DRM is necessarily a bad thing, especially in this case.

Over the past 20 years we have seen technology improve to the point where almost anything of intellectual value (e.g. software, literature, music, movies, schematics, business processes, etc..) can be copied and shared freely. In addition we are now at the point where it is easier than ever to produce creative works. If you’re a writer you can start a blog with the click of a button, or publish e-books on the ‘net for download. If you’re a movie maker, you can shoot, edit and publish movies all for virtually free using common software and video distribution services like YouTube. I.e. the barriers to entry into the world of creative productions became very low. These two trends complement each other to some extent since the increased demand created by the free distribution of content is met by an increased supply of content due to the lowered production costs.

So analyzing the trend with our broad economic brush we might conclude that everything is fine and that we have just reached a new equilibrium with an unprecedentedly high demand for creative content which is nicely met by the record levels of supply. Unfortunately our purely economic metric is incomplete. The axes on our familiar economic model are marked “Price” and “Quantity” only, and a shift both the demand and supply curves to the right (i.e. increased quantities at lower prices) should indicate greater wealth for all. But what of quality? How does the quality of the content fare in this new utopian equilibrium where content is both “free” to consume and “cheap” to produce? Now that we are a little over a decade into this experiment (that arguably began with the advent of broad-band internet) I believe we are in a good position to see a trend along the quality line – and it does not look good.

Over the past 10 years we have turned to the internet for more and more of our entertainment. At the beginning the quality of content paled in comparison to competitive content through conventional sources. You could stream or download audio to your computer but the quality still wasn’t as good as CD and it was time-consuming and inconvenient to go through the hassle of trying to find music that was decent quality – and then ultimately burn it onto CD in a 2X CD recorder (it would take 40 minutes to burn a CD). You could get some news off the ‘net from various news sites but it wasn’t in an easy to read format, nor was it comprehensive. Video seemed a life-time behind the conventional media formats (e.g. DVD, satellite TV or cable … or even VHS for that matter). You could download a smattering of books, but there wasn’t an easy means of copying it to a portable device for reading – so it was a far inferior experience to the real thing. What the internet provided wonderfully at this time of birth and exploration was access to a wealth of amateur content. People were able to, for the first time, try their hand at publishing and share their thoughts and art with the world. And the world could take it or leave it. This period of the internet was an exciting time and didn’t present a threat yet to quality. If you really wanted to watch a good movie, you still needed to look outside the internet for it. Similarly you had to seek the professionals for quality news and editorials.

This baby that we called the internet, grew like a weed, however, and in a mere 10 years has improved to the point where everyone can become a publisher, and aggregators like Google have solved the problem of comprehensiveness that limited the early internet. Everybody can contribute a tiny piece of the puzzle and old faithful Google will assemble the pieces into a shallow approximation of the complete picture. This approximation amounts to a cartoon-y picture of the real picture where only the primary colors are every present (no shades, skin-tones, or mixtures that we expect in the real world). The fact that technology is now able to paint these 4 color portraits of our world and culture is a remarkable achievement. We can look at these 2-dimensional, computer aggregated cartoons and quite easily imagine their real world equivalents (we see that the people have only 3 fingers, but that’s OK, we’ll settle for that – it’s close enough). The insidious problem with the ease with which these cartoon representations of reality are produced is that now there is little to no demand for the art of producing photo-realistic paintings (or any style other than 4 colour cartoons), because the “free” cartoon puzzles that are assembled by the internet aggregators are “good enough” to satisfy 99% of the demand. And without demand, the price to produce a real painting that accurately represents the world it is meaning to portray goes through the roof – and ultimately the craft disappears into history despite the fact that it is a far superior product to the free cartoons that it was replaced with.

This analogy of the cartoon puzzle describes the state of creative works with ever increasing accuracy as time goes on. We have been corralled into consuming mediocre content on a regular basis because it is so easily accessible.

So how does all this relate to DRM? A big reason why the cartoon puzzles have become much cheaper to produce than photo-realistic paintings is because the transaction cost of obtaining the painting is higher by “legal” means (i.e. purchasing the painting legitimately) than it is by “illegal” means (i.e. copying from a friend or downloading from torrent). So even if there remains a market for quality paintings after it is flooded with cartoon puzzles, there is a logistical barrier to the distribution of it. Purchasing the painting legitimately currently involves having to go into a store and purchase some physical media on which the painting resides (e.g. a DVD, news paper, magazine, book, etc…). This is far more difficult that simply turning on torrent and downloading it – for free!. If we make a digital version of the painting available for sale, then it will soon be copied to torrent for distribution. And having to fill in credit card information on a web site and all kinds of personal information just to buy a $5 painting is still far more of a hassle than simply downloading the product on torrent – for free!. Only when the transaction cost of obtaining the painting legitimately is *lower* than that of downloading it from torrent, will there be reason for a customer to buy the painting.

Enter the iPad, a device that is now infamous in “free software” movements as a “crippled, trojan horse of DRM”. It provides two powerful remedies for our assailed painters:

1. The extensive use of DRM makes it difficult to illegally distribute the content on torrent once downloaded (this will help to increase the transaction costs of obtaining the paintings illegally).
2. The seamless integration with iTunes’ payment system makes it completely painless to purchase the paintings legitimately. One click and it’s yours in a format that is ever so elegant and pleasurable to consume. This significantly decreases the transaction cost of obtaining paintings legally.

After only the first couple of months of the iPad being on the market, the signs that this strategy is working are quite evident. Already “painters” like Time magazine, marvel comics, the new york times and more have cast their lots and started delivering high quality paintings, the likes of which have not been seen yet in the digital world. The promise of a digital market for paintings is once again compelling artists to pick up their brushes, dip them in the ink of their personal creativity, and cover the canvas with innovative and truly unique paintings. As patrons return to the market place, and the rank of artists continue to swell in this new platform we may be in for a new renaissance and a return to a world where quality and originality is king. If not, then we may doom ourselves to a prolonged dark age of cartoon puzzle art. I’m optimistic that we’ll choose the former, despite ourselves.

This article confirms my fears after noting that Apple hadn’t updated its downloads in over a month. The Apple Downloads section was my bread and butter for advertising new releases of my Mac software. Since apple discontinued its download section, my sales have taken a significant hit.

This section offered a compelling reason to develop Mac software. It provided an instant market place for my software and despite the mac market being smaller than the windows market, this connection point more than made up for this shortcoming. With its demise goes much of this advantage to the point where developing for Windows becomes much more attractive.

Looking at open source business models, it can be difficult to find something that looks viable. Here are a few models along with my assessment of their pros and cons.

1. Pay for support and Consulting

In this model you provide the software for free and open source, but charge for consulting and support.

Pros:

• Easy model to understand – you just charge an hourly rate for consulting and support.

Cons:

• Since you don’t get paid for the 90% of your time that you spend developing the software itself, you are forced to charge 1000% of your required hourly rate just to make ends meet.
• You would be better off finding another open source project that someone else is sweating over and just charge for support on that one. Don’t waste your time developing anything new.
• If you insist on this business model, you’ll be in direct competition with anyone else that wants to set up shop to do consulting on your software – and they can charge 10% of your price since they don’t have to spend time developing the software.
• This only works when your software is something that people generally require support for. If your software is too well made, then people won’t need support or consulting.
• Gives incentive to make software that is complicated and hard to work with .

Conclusion: This one’s a big loser.

2. Charge for add-ons

With this model your primary product is free and open source, but you charge for add-on modules.

Pros:

• If you have a large user base this is a good way to give you a relative monopoly on the market for your add-on.

Cons:

• The open source culture may resist attempts at monetization of this sort. Users of free software often resist or resent attempts to add pay software into the mix.
• You must have a very large user base for the market to be big enough to support add-ons.

Conclusion:
This model has potential if done the right way.

3. Charge for Documentation/User Manuals

With this model you provide the software free and open source but you charge for access to the documentation. This model could work well for software that requires documentation to take advantage of (e.g. software frameworks, libraries, or complex systems that are managed by an administrator). In fact, in certain cases this has the same effect as charging for the software while keeping the software itself open and freely distributable per the spirit of FOSS.

This is because those people who are explicitly using your software and its features will need to purchase the documentation (so it’s kind of like purchasing a license for the software itself), but they can still freely distribute the software itself as part of their own projects (so it retains the basic freedoms that sit at the core of the FOSS movement).

Pros:

• Could work well for technical projects or software components that rely heavily on documentation.
• Acts like commercial software for revenue (1 documentation license per user).
• Software remains freely distributable.

Cons:

• Only works if the software is heavily dependent on documentation to use.
• Gives incentive to create software that is difficult to figure out (non-intuitive).

Conclusion:
This is a good model for technical software.

4. Donation-ware

This is the model where you offer your software up for free and ask (beg) for donations. This is a ridiculous model. It is not even a model so it isn’t worth a pro-con matrix. There are no Pro’s. I am philosophically opposed to the concept of donation-ware. I am a software developer, not a charity. If someone feels compelled to donate money to a cause, there are thousands of good causes: Cancer, Haiti, etc.. But don’t donate it to a software developer (unless he’s creating software to cure cancer).

You will NOT make any money by asking for donations. At most you will make a few people feel good about themselves for donating a dollar or two.

5. Advertising

With this model you treat your software as a means to generate traffic to your website and you try to turn that traffic into money either through selling another product, or through sponsorships.

Unless you get a ton of traffic, this model likely won’t make you enough money to pay for your webhosting plan.