Monday, July 14, 2008

The Value of Free

How do you put a value on the products created through open source? Do you consider all the time spent crafting quality software? Take into account your own effort in advocating its use? Charge for packaging and a profit margin? How, exactly, would Best Buy have come to the conclusion that Ubuntu Linux is worth $19.99? I think the answer is fairly simple: they guessed.*

You see, putting a price on open source is about as difficult as nailing jelly to a tree. You could charge in the ballpark of competing software (Windows Vista, which starts at $199.99 and runs up to $299.99), but I'll bet people would balk at that, with claims about it being available free, you can't sell open source for that kind of money, and so forth. Although, a Red Hat Enterprise edition will run you about $349 (with 1 year support), and that's built on open source.

Maybe it's because Red Hat sells it; a company that has put a lot of effort and code into the product. I can buy that (literally). Here's a company that's been involved in open source for about as long as Linux has been around. They deserve to sell free software, and make a profit from it. Okay, now how about Dell? They sell Red Hat and Ubuntu on some of their systems, and just a quick comparison of systems shows me that Ubuntu costs an extra $20 over a Windows-based system (check out their Desktop Inspiron). Not bad, for a free OS, but I think they seriously undervalue it. Would there be an outcry if they charged Vista prices?

According to the text printed right on every Ubuntu CD, "You are encouraged and legally entitled to copy, reinstall, modify, and redistribute this CD". Does this include selling the CD, instead of just sharing it with friends, colleagues and neighbours? Well, let's look at the licensing. In general, the software included with Ubuntu is licensed under the GPL or the LGPL. If we look carefully at the GPL (v2.0), the third paragraph of the Preamble states:

...if you distribute copies of such a program, whether gratis
or for a fee...
Gratis being distributing for free, and "for a fee" pretty much says you can sell software licensed under the GPL. How about the LGPL? Strangely, that same phrase appears in the Preamble (v2.0). Under the newer GPL 3.0 and LGPL 3.0, they've moved this language around, but it still exists.

Why all the fuss over whether you can sell something that is free? How fair is it if a company like Best Buy starts distributing open source software and is actually making a profit from it? According to the licensing, it is perfectly fair! Maybe not 100% ethical, but fair! Personally, I'd like to see them donate something of their proceeds back to the open source projects they affect, but they aren't obligated.

Another way to look at it is to consider how much Ubuntu (for example) would benefit from Best Buy or Dell even giving their product away (like the text on the CD says -- share it around). It's all market share, and increased awareness, so it is irrelevant if a vendor charges $19.99 or a more competitive $199.99. Consider the old adage, "You get what you pay for." When it comes to free software, does this hold true? In many people's minds, this is the perception. Through Best Buy, Dell or anyone else putting a value on Ubuntu Linux, it changes consumer perception. I think they're being very fair in pricing open source low, due to it's availability for free, but at the same time I value the fact that they are raising consumer awareness of open source, regardless of their own profit motives. The actual worth of the product becomes a moot point; once an individual is exposed to open source, they usually become fans pretty quickly. Look at the Firefox phenomenon.

Personally, I think this is an idea that really needs to be exploited by open source advocates of all sorts. Think the open source products you use are good enough to compete in the market? Sell it to the masses! If you feel the need to give your profits back into the community, all the better. The market -- and the community -- will decide if your move has been worthwhile, and your success will ride on how you handle the diplomatic introduction of open source to a whole new world of users.

*I still think the price is somewhat arbitrary, but I'm pleased to find I'm wrong about the lack of connection to Canonical, and that the boxed set actually comes with 60 days support. Here's a link I failed to read prior to this post.


Anonymous said...

You're wrong about the price of Ubuntu at Best Buy. The price wasn't a stab in the dark. You're not really paying for software in the case of the Ubuntu from Best Buy for $20 or RHEL for $350. Both come with a *service plan* (sixty days for Ubuntu, a year of commercial support for RHEL) -- something which, after reading your blog and many others -- seems quite alien because many hobbyist Linux users balk at the notion of paying for either software or service even though the GPL isn't even about price (see below). The hobbyists also like to get into histrionics about "ethics" of charging for something that's free (gratis). They're wrong.

Had you bothered reading more from the FSF site than a cursory skimming of GPL/LGPL, you'd see they openly *encourage* the sale of "free" software. That's because free isn't about price, it's about freedom. The fact that so many "advocates" still don't get it should be of grave concern to FSF and other groups promoting free(dom) software.

So with FSF openly encouraging the sale of "free" (LIBRE, read that again, LIBRE) software and Canonical including sixty days of support for $20, I ask you what's the value of free if you don't even understand what free means in this context?

Webmaster said...

I have seen Ubuntu for sale at Best Buy, but for the life of me, I can't find where it says they offer 60 days support, or that it's actually Canonical providing the software to Best Buy (I found a company called ValuSoft's name attached). I may be mistaken, but that's irrelevant to my position. I, for one, wholeheartedly support selling open source software. Morally, I feel one should give back to the community for profiting from open source works, however. The GPL and LGPL do clearly state that you can sell open source, and many people do not realize this. Thank you for expanding on my point.

Anonymous said...

In addition to the *many* articles you can find by searching "ubuntu best buy"...

Bob Robertson said...

While I was working at Staples, I suggested putting KNOPPIX disks where people could just grab one.

I was told no, they would not do that, because anything that came out of the store would be something that the customer would expect the store to support.

My personal preference for "selling" Linux is to have a book/manual inside, which covers the "price", while the software itself remains both libre and gratis.

So the "Debian 4.2 Bible" with Debian install disk included.

Or would that be, "Debian 4.2, with the Debian 4.2 Bible included"?

Anonymous said...

Re your addendum, how the bleep is it "arbitrary" (let alone unethical) if you get full install media, getting started documentation, and two full months of phone support? One call to tech support is going to eat up most of that $20. Not to mention the cost of the media, packaging, printing, etc.

What more do you think Canonical owes the open source community in the way of "giving back" to it that they're not doing now (bzr, launchpad, and other projects developed by Canonical/Ubuntu)? And if they owe anything else to the community, may I ask how you contribute to it?

I think "free and open source community" has become little more than a nicer term for freeloaders -- people who feel a sense of entitlement to cheap/free software with little if any interest in the free(dom) philosophy part of the equation except lip service. That's borne out when people complain that someone is making money off it, whether it's Canonical or Redhat pr IBM or even Best Buy. That such companies are obligated somehow to "give it back" even when they're already the ones funding open source development. Charging is only "fair," but "maybe not 100% ethical"?

Do you get a paycheck? Do you give any of it back to your employer? Or to your employer's customers?

It's not unethical or unfair to charge money for a product or service. Ever.

Webmaster said...

Anonymous, you raise good points. "Arbitrary" would relate to the valuation I suggested in the article -- that competitive products run about $199 to $299 -- and therefore Canonical/Valusoft/Best Buy could reasonably charge that much, instead of $19.99, which doesn't cover the cost of the support they're offering. Clearly this price undervalues the product Canonical has had a hand in producing.

The ethics of the situation largely come into play in terms of "can just anyone do this", because it is the misunderstanding of a vast majority that you can't sell open source software (F/LOSS, Software LIBRE, etc.). I don't think any add-ons, support or gimmicks are necessary to justify selling the products of open source -- it is in the license (and stated clearly in the link provided previously -- By using the GPL or LGPL you give others the ability to exploit these works, and you give up the right to moral superiority over anyone making a buck on someone else's work -- so long as they abide by the terms of the licence.

I agree that the majority of the "free and open source community" tend to be freeloaders who do nothing to advance the use of the software, expect everything free "on a platter" and will not move to promote or assist the rest of the community in supporting or creating open source software. Just look at efforts like Lindependence 08, trying to promote Linux in one small California town. Is the community 100% behind this kind of effort?

I volunteer on IRC and through email to provide support for my favoured distributions and software, and even give the odd bit of free support to Windows users I stumble across who need a hand. I pay for the open source software I can obtain through purchase, to show support for the creators of these wonderful wares. I advocate ferociously and vociferously for the use of open source, particularly in government and education, where it would be an ideal fit. I give out CDs to anyone who requests them of me, at my own cost, and I educate anyone I meet about the benefits of open source. I often risk my own employment in this advocacy, and I do so with the conviction that open source is the logical evolution of computing technology.

Oh, and I spend time writing articles, when I can, to try raise awareness about F/LOSS, Linux and computing issues in general.

Anonymous said...

Let's do the math because I think it's on par with similar trial offers.

Canonical charges US$250 for 12 months of service during standard business hours (9-5); this is near the range you suggested was fair market value. That's roughly $20/month. This "arbitrarily" priced bundle from Best Buy gets feet in Canonical's door at about half that price per month coverage for a briefer time period and less commitment by both parties. This is fairly consistent with Canonical's current pricing model especially in light of offers in similar industries that are designed to increase traffic during a short trial period.

I'll go further. This is a probably loss leader for Canonical -- like when a grocery store sells something (like cereal) cheaper than they buy it just so they can increase the sale of something else that's more profitable (you sell more cereal, you'll sell more milk); generate some traffic, sell something else with a higher margin. I think it's not going to be very profitable immediately unless they get very few calls related to two months of included service (which, for home users to whom this is targeted, is about all the service they should expect since Ubuntu is ready to run on just about any i386 hardware configuration). That said, I'm sure their own research has led them to decide the $20 price point is where more consumers will give it a shot and where Canonical breaks even or loses the least money up front. From that traffic, they'll press for longer term contracts and make other special offers with higher margins. That's where they'll come out ahead, by signing up people to longer-term contracts to balance out the cost:call ratio.

Sun is now doing similar things with both OpenSolaris (in which Sun leverages community support to reduce their maintenance costs and also to use as a lure to "upgrade" to serviced Solaris accounts) and enterprise Solaris. IBM has done this for years as well, giving away both hardware and software to get coveted long-term service contracts. Etc.

This really isn't novel or unique, not in open source or any other business where enticements are offered with the hope of longer term contracts. Nor is it so arbitrary. Nor is it unethical at all -- whether Canonical is involved or if someone decides to sell Slackware, Debian, CentOS, or any other distro, with or without offers to service it; service, though, is often worth the cost because most consumers (users) aren't immediately savvy enough to convert to Linux without some help.

Just because it's easily available for the cost of burning CDs or DVDs doesn't mean it lacks marketing value. If someone can sell and service software, more power to them. Not everyone wants to learn to set up sendmail on Slackware -- that's a market for enterprising people who do know how to set it up to provide a service for a decent wage. I wish people would stop treating open source as if it's too precious to sell, or as if making money from selling and/or servicing it were a bad thing. I'm glad you at least tried to make that point, but I wish it came through clearer between the lines about "fairness" and ethics. This is fair, this is ethical.

Anonymous said...

This boxed Ubuntu is a joint venture of Canonical and ValueSoft. Search and you can find a press release from Canonical about it. Support is provided by ValuSoft. The ValuSoft support people were trained by Canonical.

There is not even the faintest hint of even the most remote scent of anything unethical about this.

Webmaster said...

If Microsoft wanted to sell a packaged version of Microsoft Ubuntu Linux, that would be perfectly legitimate, too.

Anonymous said...

No, there would be a few legal problems with a "Microsoft Ubuntu Linux" from the standpoint of trademarks. Ubuntu is a registered trademark and Canonical is very diligent about its use. Canonical has stipulated how derivatives can use variations of the Ubuntu name in their remixes; Canonical also may license the Ubuntu name for a variety of purposes (other distros engage in the same legal behavior, so this isn't limited to Canonical). Ubuntu could certainly reach a deal with MS so MS could license the Ubuntu name or to whatever they'd mutually agree.

Your point's not without a real world precedent. MS is already in the Linux distribution business. Amid all the FUD and hysteria over the past year, MS is supporting Novell's SLED to the tune of nearly a half-billion dollars through 2012 which allows MS to use, resell, and distribute SLED (both a better deal and better product for MS and their customers than Ubuntu would be, IMO).