Money in Open Source, and How Needle & Thread Will Be Profitable

Money is one of the most difficult subjects to talk about when it comes to open source projects. It’s a basic fundamental truth that all open source projects need money to operate, and while open source software provides a plethora of benefits, I don’t think any reasonable person would tell you that a steady stream of income is one of them. Lots of people and organizations have presented different ideas and undertaken different experiments to try and maximize the amount of money coming in, while at the same time remaining open, fair, and accessible.

But the fact remains that making money in open source software is tricky. Despite doing work in one of the most profitable industries in all of history, developers focusing solely on open source software struggle to put food on their table at the end of the day. Over the past few years I have thought long and hard about why that is. I have talked with other open source developers to hear their ideas. I have read many of the writings put forth by people working on various open source and free software projects. While I do not have any definite answers, I think I have an idea of why that is, and I have a plan in place to try and combat this trend.

Let’s get this out of the way early: Needle & Thread is not a non-profit organization. On the contrary, as a (soon to be) for-profit company it’s about as far from one as you can possibly get.

As you will soon discover when we officially launch our website, a prominent tagline on our homepage is “devs with heart.” We care deeply about our products and our users. We care about both our local and online communities. We strive to be mindful, conscious members of the community and to provide the world with the best software possible, as freely available as possible.

We know that a middle ground is attainable. With effort from both parties, and a genuine attempt to reach a mutually beneficial understanding, we think it is possible for individual developers and companies to provide great open source software to the world while still bringing home enough money for the developers to make a living wage.

This blog post is going to briefly outline some of the perceived issues with funding open source software that I have identified, and will finish by explaining Needle & Thread’s unique approach.

Trouble in Paradise

One significant issue, not just in open source software but in the entire worldwide software industry in general, is a decreased perceived value of software. Subjectively, I think it could be reasonably argued that the turning point for software developers, for good or for ill, was 2008, when the iOS app store changed everything about how people found, purchased, and used software, and how developers delivered their software to users. Instead of relying on retailers or other distributors to get their apps out to people, Apple directly connected developers with users. Users immediately had access to thousands of apps, most of which were free or incredibly inexpensive. If they didn’t like one app, they could move onto another for little or no cost. Software developers started putting advertisements into software or offering cheap, gimmicky in-app purchases to offset losses in direct revenue.

On the surface, these changes were great for users. But taking the long view, I think it will be judged as a great loss for software developers and users alike. Users started to see apps as a dime a dozen. Why pay for one app when you can find another similar one for free? What was the incentive for developers to put in a significant time and financial investment to make a great app when they would not be able to recoup those costs in the end?

Don’t get me wrong, I think that users still care about and appreciate well-designed apps that are carefully considered and lovingly hand-crafted. At Needle & Thread, we’re staking everything on that proposition. That said, over the past decade the perceived value of software has unquestionably declined — when was the last time you paid for your OS X upgrade, or a new copy of Microsoft Office?

The proposition is even more bleak for open source developers. If your product is entirely visible to the public, if anyone can gain access to your product at any point just by running a few commands, one thing you give up is the access incentive. Before, paying was the only way for people to get your stuff. Now they have it regardless of whether or not they pay, so what is there to compel them to pay for it? Take this fact, coupled with a general sense of corporate distrust and anti-establishment sentiment rampant in open source and free software communities, and on the surface things look bleak for the open source developer.

Hope

We recognize and acknowledge those difficulties, but we remain optimistic. As I said above, we think people deeply care for well-crafted apps. When you consider that, in conjunction with making apps accessible to the economically disadvantaged and visible for public scrutiny for purposes of security and education, there is a real proposition value.

We also think that people want projects and companies they like to succeed. We recognize the humanity in our users, and I hope they will recognize the humanity in us. We’re all just out there trying to make a living and, if we’re lucky, put a dent in the world. Everybody wants to put food on their table and be able to support their families. We want to enable our users to do that better, and we think our users that have the financial means to help us out will want to do the same.

Needle & Thread’s Plan

That’s where our Fair Value Price (FVP) comes in. Every single item that we offer will have an associated FVP. That’s the price that we think our product is worth. That price factors in the hundreds, if not thousands, of man-hours we spent pouring our hearts and souls into these products, plus the money we’ve invested in all sorts of different aspects to keep the projects going, along with our general perception of the final product.

Everybody is welcome to try our products and evaluate them in practice. For those that like the products, and continue to use them, we ask that those with the means pay the FVP.

We understand that not all users can afford to pay the FVP, and we value them as well. We hope they will continue enjoying the product. Since we’re operating on a pay-what-you-want model, users who are well-off may choose to pay more than the FVP, and in the end we think the kindness of the more wealthy users will cancel out any loss of revenue from the users who just can’t afford it.

The D Word

Those of you using the Vocal daily unstable PPA (or who manually build it from our GitHub repository) might have noticed something recently: there’s no longer a button to take you to the donate page on the project website. Actually, there’s not even a donate page on the website anymore. Why?

As I already said, we are not a charitable organization. Once everything goes through we’ll actually be an LLC (limited liability company). For LLCs, there’s not really such a thing as a donation. People are free to give us money, but it’s not tax-deductible for them, and we still have to pay taxes on it. There is no practical distinction between a donation and a sale. Therefore, we (and other companies, as you might have noticed) are doing everything we can to distinguish between donations and sales.

It’s simple: we are a company that builds unique, exceptional products, and we then sell those products to users. It might be a pay-what-you-want model, but it is a sale nonetheless.

How the Next Two Months Will Play Out with the Release of Vocal 2.0

We’re in a bit of a pickle. We’re releasing a new version of our most popular software, yet we’ve cut off our payment pages. This is our game plan going forward:

1. Vocal 2.0 will be available to download from the Needle & Thread website, and will also be made available in elementary OS’s AppCenter when it is available to third-party developers. We will not be accepting any payments until January 1st, 2017. We won’t be making any taxable sales until the start of the new year, as we don’t want to put ourselves in any hot water with the IRS. Those guys scare us. (JK, we ❤ you IRS.)
2. After January 1st, 2017, Vocal will be available for purchase on the Needle & Thread website and, assuming it is ready, in elementary OS’s AppCenter. The FVP will be $7.99, but it will be a pay-what-you-want system in both places.
3. We will not have the same “Enter $0” system on our website that elementary OS uses. We respect their decision and understand their point of view, but we are choosing to avoid that type of interaction. A direct download link will be offered on the website.
4. We will have an unobtrusive popup in our apps that will appear after January 1st, once you have opened the app more than 5 times, which will prompt you to pay for the software if you are able. You can dismiss it permanently and will never be bothered again. We will never place advertisements or in-app purchases in our apps.

Conclusion

I hope this explanation makes sense and meets with your approval. If you’d like to leave a response or continue the discussion, please respond here on Medium, or get in touch with us on Twitter, Facebook, Google+, or email.