How do software companies make money?

I’m asking this in a general sense but I’m talking specifically about music software. In the course of my research I’ve interviewed alot of musicians about home recording, what set ups they have and software they use. I noticed that not a single one of them had purchased the software they used to make music. Many had spent thousands of $€$€ on hardware but they all used cracked software. Granted this wasn’t a big enough sample to be representative of the whole industry but it made me wonder how the writers of the software ever make money if their core market is mainly downloading their products illegally.

I own a software company and must say… piracy makes it VERY tough to earn a living. I work 60 hours a week trying to keep this going. Folks, please don’t steal software.

Some of them don’t make money. The rest make money off of those that do pay. You would notice a similar result if you looked at say, the software that college students use. Lots of it will be cracked. However, legitimate businesses usually do pay for their software. My mega-corp, like almost all of them, comes down very hard on employees that use illegal software. The money saved versus the risk isn’t nearly worth it. They pay for everything and there are lots of companies around that need music software even if it is just peripheral to their business.

I’m a college student and I often find it VERY difficult to legally use required software for my classes when software companies charge upward of $500-4000+ for the programs. I could work 60 hours a week just to pay for the software.

Software companies, please don’t rip off customers (or at least provide decent student discounts) and then plague everything with DRM.

Just playing Devil’s Advocate… :wink:

Specifically with music software, the educational market is where the money is, and for standard stuff such as Cubase that covers everything from secondary school to universities. It’s been a big part of marketing strategies for e.g. Sibelius for some time, with profitable results. (I work with heads of music whose headache is not about their lack of sofware or lack of funds to buy more, but the lack of sufficient computers & accomodation for it to be used to its capabilities.) Note that Sibelius also produce a cut-price, cut-down student version, and it’s a similar story with Finale Allegro.

Yeah I had noticed that alot of the software seemed to be exorbitantly priced, I was amazed at how many musicians illegally acquire software only because I suppose they are often reliant on consumers of their music paying for their “software”, ie musical products.

That’s an interesting perspective. Perhaps we should take this over to Great Debates?

The thing you have to realize that there is a tremendous amount of value for a company if their software is the standard. Every photo editing company buys Photoshop, every office uses MS Office, publishers use PageMaker etc. To these companies having small time users pirate software is better than them using their competitors software. The money is in enterprise level sales, not sales to individuals.

You guys don’t know how much expensive software licenses are. $4K piffle. You should see how much CAD software costs. $500,000 to $1,000,000 per year per seat is pretty common for some of the chip layout programs.

I think the primary difference is that there are not many independent silicon chip manufacturers plying their wares at the corner pub for a few bucks.

It is possible to make money in software but a lot of companies disappear. My company’s flagship product is doing well after basically outcompeting everyone. All the competitor products have been recalled or put out of business (not through nasty business practices, either, but just the demands of having to constantly release patches and updates to stay competitive). One of our old competitors now sells our product to its existing customers asking for upgrades.

Piracy is a concern. We finally upped our security on our software and sales skyrocketed, particularly people (often businesses) buying multiple licenses instead of just one for all their computers.

It sucks to have to do it but the sentiment people seem to have is “if they wanted the software not to be pirated, they’d stop me”.

Hell, I even get technical support requests from people pirating the software, who even demand help once caught pirating!

I’ve seen very few businesses pirate software. Honestly, it’s just not worth it. Like fluiddruid says, I think the majority of the problem are places that buy one license and then let multiple employees use it, and most software companies are on to that by now and adjust their software so it’s not possible.

And, for what it’s worth, I don’t think most people pirate software either. Sure, some computer savvy people do, but I don’t think the average person has any clue how to download a pirated version of something off the Interwebs and install it. Sure, on a college campus it might happen because there’s always a geek with spare time who is happy to make pirated copies, but once people get in the real world stuff like this gets more difficult. The vast majority of non-college-student real world people actually do buy their software, if only because getting it free is technically beyond their abilities.

Plus, as your income goes up, the advantage of pirating stuff goes down. Sure, I can download the latest game/movie/whatever off the internet, but by the time I screw around with finding a copy that works, converting it to whatever format I want, and paying for the DVD to put it on, I’d rather just pay the $20-$50 and get a legal copy.

For that matter, a lot of the software that college students use is legitimately free. Many companies allow students to use their products for free, and many others don’t charge anyone. In the case of the free (or heavily discounted, or university site-licensed) student versions, the hope is that once the students graduate, they’ll be sufficiently used to that product that they’ll want to continue using it, and will pay for a business version. And for the software that’s free for everyone, it’s usually either put together by volunteers, or supported by some parent company which profits indirectly from the software being widespread.

I guess it depends what kind of software company. I work for a company that makes very specialized software that we sell to other businesses, not individuals. We don’t have a problem with piracy – the companies we sell to are willing to make sure that they pay for a license so they have our complete support. Anyway, they don’t have time to pirate our software – they’re paying us so that they don’t have to write the software.

Ed

I see the same thing suranyi does. People pony up for licenses to get support. Small companies with no IT people, they want the software companies to be their IT people. Large companies with IT people are very wary of pirating and getting caught.

My company’s software could easily be pirated. But it also gets updated fairly frequently and there’s no way to get the updates without contacting us. Plus we’re a very small company with a small user base so it’s hard to find info about it online. So if you want the very best version of our software, and want it working smoothly from now on, it’s easier to have a relationship with us than to steal it.

The Software arm of my company makes a ton of money, but then again, we’re usually selling to other companies. But, surprise, surprise, other companies steal, too. However, we usually don’t sue (well, most of the time). We sell either through an enterprise license, or we sell as an ASP or other hosted solution. We also charge around 20% maintenance fees. I’m surprised that the music software doesn’t have maintenance fees. We also make money selling consulting services to actually install the software, train the trainer classes or learning classes, and customizations for the Software.

You are talking about a very different price range.

For example, Photoshop costs $650, or $1000 for the extended version. Cubase is around $800 to $1000.

The reason why the software companies make money is that hobbyists are not the core market for these programs. At these prices, they don’t expect hobbyists to pay up.

On the other hand, it could be argued that rampant pirating is what deters companies from trying to sell to the pirates. It is a circular debate. “You aren’t trying to sell to me” vs “It is too risky to put resources into that when you will probably pirate it anyway”.

Well, we don’t have any products in that price range… all of ours are < $100 but are still pirated.

Those companies that DO charge $500, well it surely has a higher development cost and smaller overall market. I mean if I sell a product that everyone wants and I charge $20, and I have a second product that cost the same to develop but only has a market of sailplane manuacturers, the price for the latter will be much higher.

Is this just a hypothetical, or do you really have classes that expect you to use such expensive software, but don’t give you any legal means to do so without you having to pay for it yourself? I know the costs of textbooks and such are pretty high, but $4000?

True, but even at those prices I see most professionals who use, say, PhotoShop, pony up to buy it. Like others say, new versions come out, you want support, and most software does have some sort of copy protection.

Obviously, my evidence is anecdotal. But most people I know have a hard enough time installing legal software, with installation programs and tech support phone numbers. I just don’t see a lot of them being able to figure out how to get a pirated copy off the Internet, even if it’s going to save them several hundred dollars.

Heck, I have the technical knowledge, I can probably get anything I want off the Internet with a minimum of hassle. Even so, I bought my copy of PhotoShop. It was easier that way.