Taking the Heist

by Oliver Breidenbach

Something is going on in Mac Developer Land. Factions position themselves, Flamethrowers at the ready. It's about the Heist. Things are said and replied to and then the tone gets rougher. Is this becoming one of those religious wars that the Mac community is so famous for? Only this time it is good guys against good guys since Apple has taken away the bad guys to boot camp?

People need to calm down.

Here is how I see it: A couple of people got together to find out how to make money on the Mac software market. For themselves, of course. They are trying out ideas. Some are good, some are bad. Some work, some won't.

Why do they do it? Nobody is exactly sure how to make money on the Mac market. Certainly, good products, good service, a positive attitude, adherence to the "standards" get you a solid business. But nothing spectacular. I mean nothing like a Google or Flikr or YouTube. When was the last time a Mac developer crossed the 50 employees threshold without being bought by Apple or someone else with already more than 49 employees?

I think this is because the group of customers a small developer can reach across the internet is a small proportion of the total Mac users and with the growing number of Mac users, it is also shrinking. Not many people are like you and me online all day surfing the Mac news sites and blogs on the lookout for cool new stuff to put on their Macs. Many more people occasionally go to a mall and enter one of the Apple Stores to spend a nice afternoon and being wooed into buying an iPod or an iMac with iLife. And that proportion of Mac users is growing. People who can help you to get to these people take a huge margin off of your profits. Reaching out to these unsung masses (Apple claims around 25 Million Mac users) is very tough for a small company.

So, new ideas are needed to draw attention. Many of those are not going to work, but we will only know when someone actually tries them.

Now, there is one point very prominent in this discussion: the money. Who makes what and why. You see, I don't care how much money the MacHeist guys make, I care about how much my company makes and how the Heist brings us forward towards our goals.

Let's see, if we sold 2,000 copies of FotoMagico in one day, we would have made $160,000. That would have been really cool. But usually we don't sell as many. In fact, I think most of the 2,000 people who bought the MacHeist bundle on this first day did not buy it for FotoMagico and would never have bought FotoMagico separately. Many of them probably will never use it. Let's base our assumptions on experience from direct marketing: According to that my gut feeling is that maybe 2% of the people are "real" customers and would buy FotoMagico from us instead of from MacHeist. So that is 40 today. And maybe up to a 100 until the Heist ends.

If you assume that we got $5k for our participation as was reported elsewhere, that is $50 for each license that we may have been able to sell in the same period on our own to the crowd of people buying MacHeist bundles. Not too bad. In fact it is a pretty good deal if you look at what we usually have to spend on advertising to sell a copy. And it gets better: our usual sales have not dropped off significantly and we got 2,000 additional customers who we can maybe convince later to buy other apps or updates from us.

It would be a different story if 5,000 people would buy the MacHeist bundle because of FotoMagico and become "lost" customers. And it would be quite a different story if we wouldn't get some cash for the licenses.

And for the MacHeist makers: I don't think they will get terribly rich. They may make some serious money on the Heist, but certainly not nearly as much as to make us jealous or feel ripped off. And you can't say that they did not work hard to get their share. I know people who worked much less for a lot more profit.

The MacHeist crew has to be applauded for developing and testing new ways to market Mac applications. If they succeed, it may well be that this becomes a good revenue stream for Mac developers. Because if they succeed, the next time, the amount of money that we will demand will increase dramatically. And if it turns out that it was all not worth our while, we simply will have to mark it down as another way not to get rich.

63 Comments

John
2006-12-12 15:31:44
Thank you for your comments. Amongst the moaning I have been hearing lately about the negative side of The Heist, this is the first intelligent response I have seen. I also am in the business of software (although not Mac Shareware) and I know first hand you try everything you can to get your application in front of people, which Mac Heist has done for a number of apps.


I had no idea before Mac Heist that FotoMagico existed. Mostly because I was not looking for that sort of application. I play around with iPhoto's slideshow feature every now and then, but it has never been something that I thought a lot about. After having purchased the Mac Heist bundle I can imagine that I will spend quite a bit of time making slideshows (once my license is emailed to me..). I definitely fall into the category of a user who would never have bought FotoMagico separately. Now that I have it though, I will certainly be on the look out for future updates and other software from Boinx.

JulesLt
2006-12-12 15:42:41
I think what's been cruel is decribing the apps on offer as all flash and no quality - a lot of them are quality apps. What would be a great solution would be an Apple 'software store' for third party software that's based around an iTunes like app (a cross between iTunes and Port Authority, that would also help manage software manuals), rather than the Apple Store, along with a weekly application promo.


Go into an Apple Store and you get the impression the Mac has very little software. Go into PC World and it's worse. So much great Mac software is download only these days.

JulesLt
2006-12-12 15:51:41
I think what's been cruel is decribing the apps on offer as all flash and no quality - a lot of them are quality apps. What would be a great solution would be an Apple 'software store' for third party software that's based around an iTunes like app (a cross between iTunes and Port Authority, that would also help manage software manuals), rather than the Apple Store, along with a weekly application promo.


Go into an Apple Store and you get the impression the Mac has very little software. Go into PC World and it's worse. So much great Mac software is download only these days.

BobC
2006-12-12 18:46:24
Does anyone else see a problem here, though, long term? It's fine and great that all the devs in the current offer feel like they are getting what they want out of the deal. But the MH/MDA clan are trying to both promote and create apps. What happens when/if they produce an app similar to FotoMagico from MDA? Think they'll allow you to get into their little deal? Nope. You'll see this happen from the current batch of MDA winners when they are finally out, i'll bet, none of them are completely original, especially the recipe app. You can bet that that shuts out any deals with competitors. This is how this might become bad for the indie mac developer in the long term. Pretty much cuts out a lot of the fair competition considering how little coverage most indie devs can get from the major mac sites (by their own statements, read the yahoo group), and how MUCH these guys seem to be able to get for everything they do.
David Teare
2006-12-12 19:27:08
Thank-you for the very level-headed analysis.


It is very helpful for independent Mac developers, like myself.

autumnmist
2006-12-12 19:42:50
I don't see how it wouldn't be a "fair competition", BobC. Sounds like Phillryu and the other guys started with the same stuff everyone else started out with: their own brains. If they can get people so excited and generate so much publicity using their own ideas (e.g. MyDreamApp, Macheist), how is that "unfair"? It's not like they were born billionaires and paid off Apple to advertise Macheist on www.apple.com. Nothing would stop the indie devs who were "left out" of post-MyDreamApp-land from starting their own venture into marketing.
Zac
2006-12-12 20:03:19
I think MacHeist is a great idea both for the developers and the customers.


It is FotoMagico I don't get. Does the Mac platform really need another slideshow program?Let alone an $80 one. I guess you can count me as one of the customers that never would have bought FotoMagico otherwise.

BobC
2006-12-12 20:12:51
autumnmist: When the average indie mac developer isn't apparently given fair and equitable media coverage, that's an unfair advantage.
Oliver Breidenbach
2006-12-13 00:41:51
autumnmist: When the average indie mac developer isn't apparently given fair and equitable media coverage, that's an unfair advantage.


On the other hand, it is not the reality in media that everyone is given fair and quitable coverage. We don't get as much coverage as Apple or Microsoft, for example. Competition is about tilting the playing field in your favor. Some do it with good ideas, others by exploiting their market position and some by employing their lawyers. You may or may not like it, but it is the reality of a market.

Oliver Breidenbach
2006-12-13 00:45:25
It is FotoMagico I don't get. Does the Mac platform really need another slideshow program? Let alone an $80 one.


If you ask our (non-MacHeist) customers, the answer is definitively yes. FotoMagico gives them a level of artistic and creative control that they can't get with the same amount of effort with other products on the platform. It does storytelling for photographers.

Magic?
2006-12-13 02:30:29
Oliver, I bought FotoMagico full price. Now you are bundling it among these bullshit schemes that zot this and heist that and give away a Mac app a day. Are you a serious developer? Do you value your work? Do you want me, an actual user, to pay a fair price for it that will keep you in business for 2007? How do YOU feel when your recent purchase ends up in the bargain bin at the dollar store the week after? Is there a money back guarantee from Boink if you find this product elsewhere for free?
Oliver Breidenbach
2006-12-13 02:58:08
Now you are bundling it among these bullshit schemes that zot this and heist that and give away a Mac app a day. Are you a serious developer? Do you value your work?


Yes, I am and yes, I do. MacHeist bought an undisclosed number of licenses at an undisclosed price for resale. This happens all the time. I am sure you have watched TV lately where you can get an iPod for free when you sign up with somebody's mobile phone plan. Does that devaluate the iPod?


You can also not get FotoMagico for free at MacHeist. You'll have to pay $49 to get it, which, granted, is a significant discount, and you'll get lots of other stuff "for free" with your purchase which might or might not be of value to you. Would you have spent money on RapidWeaver? Same for people who buy the Heist bundle because of Delicious Library. They get FotoMagico and it might have very little value to them so they would never have bought it otherwise.


Do you want me, an actual user, to pay a fair price for it that will keep you in business for 2007?


No. I want you, my actual user, to pay what you think FotoMagico is worth to you. The key here is that our actual users do not collect software that they can show off to their buddies but purchase something that is worth it for what it does for them. If you think FotoMagico is not worth the full price to you, you are free to return it in any case.


How do YOU feel when your recent purchase ends up in the bargain bin at the dollar store the week after?


It has happened to me and of course it leaves an uneasy feeling if you just bought a DVD at full price to find it a week later on sale. But I already made the decision that it would be worth the full price for me, so why should that change now that it might cost less? People buy Playstation 3s at 3 times the price on eBay just so that they can have it now instead of in January. Because it is worth it to them. Are they going to complain when Sony drops the price in January when the demand goes down? I refrain from buying a Nintendo Wii on eBay at twice the SRP because it is not worth it for me and I will wait until January when more will be available at SRP because I think it is a good price. If it goes on sale in February because demand has come down, I will not complain because I already made the decision to pay SRP.


2006-12-13 03:07:16
What happens when/if they produce an app similar to FotoMagico from MDA?


The same thing that always happens, when a competitor enters the market: The competition gets tougher. Which is theoretically a good thing for the customers. What would happen if Apple decided to make the slideshow feature in iPhoto much better?


The good thing is that we do not compete for a limited resource. People earn new money every month and they might even switch their favorite app for slideshows every once in a while depending on which product seems best for them. Although it can be hard to lure customers over from a competing program, it happens all the time.

Flaubert P. Rogers
2006-12-13 03:16:49
BobC, what is your criteria for "fair and equitable" media coverage?
Kenneth Ballenegger
2006-12-13 04:13:46
This is one of the only well-balanced articles I've read about MacHeist. Some say it's awesome, some say it's bullcrap. I think it's cool, but it's all about money. So what? Everything is about money. And I think the MacHeist guys have earned the money. They've been working hard and all.
William
2006-12-13 05:26:51
Oliver, I have to say that one of the deciding factors for me getting this bundle was Fotomagico. I have a collection of photos that relate to my kids that I want to make a slideshow dvd for the pictures that would mean the most to them, and give it to them for Christmas. I had demoed your when it first came out and had put the project aside, and when I saw it in the bundle i jumped all over it. Still with enough time for Christmas I will be able to throw a slideshow together that I would have had limited features had i used iphoto alone for.


Yes I would have bought the app seperatley if you are wondering. I think that it is a very nice program that gives you a lot of control.


Thank you for including this software in the bundle.

Oliver Breidenbach
2006-12-13 07:10:13
Oliver, I have to say that one of the deciding factors for me getting this bundle was Fotomagico.


William, that is nice to hear. I hope you enjoy it. We will be sending out license keys this evening.

jeff
2006-12-13 07:28:20
our usual sales have not dropped off significantly and we got 2,000 additional customers who we can maybe convince later to buy other apps or updates from us.


That's the key, here. So long as the product you're providing has a clear path to produce more revenue, then you're essentially giving away trial licenses. The smart developer gives away copies of 1.0 just a few months before 2.0 comes out. And those will cost.


I like what pzizz did for MDA: free licenses, but no upgrade without spending some $. And he upgraded the software within weeks of the promotion. Those who bought the product full-price get free upgrades for life. Essentially, the free licenses were "lite" versions, lacking a key feature of the full-price version: upgradability.


The problem with MH (as Gruber points out) is the inherent inequality. You may be happy with the deal, but it still sucks that Philip Ryu and crew might get 70% of the profit while you get 3%. Is marketing really worth that much more than your code? I don't think so.


Is it possible to be happy with the new customers (as you clearly are) and still think that you're getting ripped off? Yes. Because the way it stands now, you're the little brother who pays $5 for the privilege of cleaning your big brother's room. Just because you don't complain doesn't mean it doesn't suck. And sometimes, Mommy needs to come in and set things right.


Imagine the same promotion, with the same end-user benefit (hot damn! Cheap software!) but run by a cooperative of developers. You get together with the same developers and you guys manage it, and you share the profits. Wouldn't that be better? And, based on what Phil Ryu has posted on the MH website, isn't that what he's pretending to sell? What is Ryu providing? Seriously, what value?

Sapere
2006-12-13 08:46:30
Oliver, I can't agree enough with what you've said. Thank you! I've been discussing this issue with several established independent Mac developers and there are a few issues at work here:


1) Resentment. The "delicious generation" of applications has been extremely successful at marketing and media placement. Disco, MyDreamApp, and MacHeist are examples of simple, creative marketing strategies that brought much more attention and money than anyone expected. This marketing-heavy approach has led some to bemoan "style over substance!" or a "sign of the fall of the Mac". Of course, neither are necessarily true. Several really great companies know the importance of incredible marketing. Consider Apple, for instance.


2) Resentment. Established independent Mac developers feel as if the rug has been pulled out from underneath them. They've been making their living successfully developing and delivering great independent Mac software, and then this rookie comes along trying to change it all? A perceived level of comradery has been challenged. Of course, this is a little sophomorish -- software is a business, after all. Which brings me to the next point...


3) Un-Economics 101. Unless you have evidence of a financial conspiracy between all the blogs and news sites discussing MacHeist and MyDreamApp and those folks then there is no such thing as "unfair competition". Whether or not you feel it's fair that a marketing strategy or application is showing signs of success is irrelevant. You can choose to ignore it or adapt it or whatever. But trying to stop it is kind of stupid. Besides, consumers are reacting positively. MacHeist participant developers are reacting positively. The only one unhappy with this is you.


So all I've seen is resent and a misunderstanding of how business works. This whole debate hopefully will soon end, as the players are running out of reasonable complaints.

Richard Neal
2006-12-13 08:48:34
Jeff: Phill Ryu is providing the ideas and the marketing. I don't think any of the developers (no offense to them) could have come up with an idea that has drawn in as many users (25,000) as MacHeist has, and if they had, they wouldn't have been able to do such a great deal, because Phill is a marketing genius.
Chuck
2006-12-13 08:52:26
This is unquestionably not a way for a Mac developer to get rich, period. It's currently looking like a way for a couple of Web designers to make 25 times more than the developers -- in an event that they're calling "the week of the independent Mac developer." That's what has rubbed people the wrong way. If they had called it "the week of Phil Ryu and a couple of Web designers," nobody would be complaining.


People don't like the fact that they're taking 90% of the profits from these indie devs' apps and then trying to make it sound like the devs are the big winners here. I think people view it like those charities that ask you to donate money so a poor kid in Africa has food and then it turns out that they give the kid like $0.05 and go live in Costa Rica with the rest of the donations.

Jeff
2006-12-13 09:38:57
Richard: I respect your opinion. You approach things thoughtfully and call things as you see them. But I think you're wrong on this one. Phillip Ryu is no "marketing genius." Exploitation is not marketing and is not genius.


Did he force the devs to participate? Nope. But apparently, the independent mac software business is so lousy that devs are willing to submit to really lousy terms for some guaranteed revenue. If these guys made $5k in a regular week, they would have no need for Ryu. But if they made what they *deserve* this week, they'd be happier even still.


Were they forced? No. But were they given unreasonable terms? Yes. Ryu is to marketing what the mob is to small business loans. He deserves no praise. He is not helping the situation.


Your other point, that the devs could not have come up with this on their own: you may be right. Most independent mac devs are so bad at self-promotion and marketing it makes my head hurt. Great software: lousy, lousy, lousy promotion. That Ryu is better than they are is like commenting that I'm more potty-trained than my toddler. It's hard to be worse.


Then again, to call Ryu's exploitation "better" strikes me as disingenuous as well.

Chris
2006-12-13 09:39:36
John Gruber crunches the numbers:


http://daringfireball.net/2006/12/iniquities_of_the_selfish


Personally, I suspect NewsFire and TextMate negotiated significantly higher payments and/or percentages, and that's why they're locked. David Watanabe and Allan Odgaard aren't stupid.

Oliver Breidenbach
2006-12-13 11:08:08
Did he force the devs to participate? Nope. But apparently, the independent mac software business is so lousy that devs are willing to submit to really lousy terms for some guaranteed revenue.


No, it is not. We think the MacHeist revenue is on top of what we usually make and is reaching customers we would not reach otherwise. That is precicely why we assume it is a good deal. If we are wrong in this assumption, it will be one lousy week out of 52 in the year, so the risk is pretty low.


If these guys made $5k in a regular week, they would have no need for Ryu.


If we made just $5k a regular week on FotoMagico, we'd have to close down business.

Oliver Breidenbach
2006-12-13 11:15:10
Personally, I suspect NewsFire and TextMate negotiated significantly higher payments and/or percentages, and that's why they're locked. David Watanabe and Allan Odgaard aren't stupid.


I don't think they did. I think it is a smart move to turn customers into sales people because if you convince lots of your friends to buy the bundle, you get to get more out of it. Of course, it might also be a way to limit the risk to the investor. Because, what most people don't see is that we would have gotten our flat fee even if MacHeist sold only 1,000 copies.

jeff
2006-12-13 11:20:35
If we are wrong in this assumption, it will be one lousy week out of 52 in the year, so the risk is pretty low.


Actually, if you are wrong, it could be 52 lousy weeks with an overload of customer support that saps all your development energy.


But if you don't mind having Ryu take loan-shark like profits off your hard work, I can't see what else to say. The deal is a definition of inequality, and that inequality is based on the backs of the developers. How do you stand up for this?


Oh, wait. You're already in. Even if you did think it was a crap deal, what would you do? Sorry.

jeff
2006-12-13 11:23:39
I just realized that I've become a real f-wad on this comment thread. Sorry. I'm not a developer, and I'm not going to participate in MacHeist. But no one is breaking any laws, and really, if the devs are happy, who am I -- especially with my limited, outsider information -- to act like this.


Sorry to all. Just got caught up in the anonymous wonder of the interwebs. Be happy.

Oliver Breidenbach
2006-12-13 11:36:09
Actually, if you are wrong, it could be 52 lousy weeks with an overload of customer support that saps all your development energy.


If FotoMagico were such a bad quality that we couldn't handle a couple of thousand more customers, we would have to close shop as well.

Chris
2006-12-13 11:58:18
I don't think they did. I think it is a smart move to turn customers into sales people because if you convince lots of your friends to buy the bundle, you get to get more out of it.


I know that TextMate doesn't need more salespeople, and that this sort of bundle cheapens the value of the software in the user's eyes. There's no value for TextMate or NewsFire in it. I think I'm right.


what most people don't see is that we would have gotten our flat fee even if MacHeist sold only 1,000 copies.


Fair enough, but do you think they'd give it to you in that case? Did you sign a contract?

Jeff
2006-12-13 12:10:14
If FotoMagico were such a bad quality that we couldn't handle a couple of thousand more customers, we would have to close shop as well.


I didn't mean to imply that the software was buggy or poorly designed. But many of your newly licensed will receive the software before they actually consider how they'll use it. And they'll discover that they have ideas that it "should" work differently than you have designed the product to work. And then there's the feature requests that sound like demands, "As a registered user of this product, I can't understand why the developer doesn't add the simple feature of [fill-in-the-blank]." That's no reflection of product quality, but of user dumbery. And, I hate to say it, but users who jump at deals like MacHeist are at the low end of the dumbery scale. Good software + dumb users = support headache.


OK, I didn't hate to say it. But I did enjoy making up the word "dumbery."

jeff
2006-12-13 12:12:22
whoops again.


"are at the low end" should read "tend to be at the low end." Because readers at Mac DevCenter are surely not dumberied. It's those other people I'm talking about. Not you.

Oliver Breidenbach
2006-12-13 12:12:26
I know that TextMate doesn't need more salespeople


In my experience, Mac "shareware" usually sells well below the market potential. I would be surprised if TextMate would be the exception. You never have enough (unpaid) sales people. Of course you can be happy with the business as it is in a philosphical sense.


Fair enough, but do you think they'd give it to you in that case?


Now you are suggesting fraudulent intent. I can not say that I see any indication of that. I believe they would have, yes.

Oliver Breidenbach
2006-12-13 12:21:06
And they'll discover that they have ideas that it "should" work differently than you have designed the product to work.


Yes, and that would be a good thing because then we would know more about the market perception, user expectations and all the other things we like to base our product plans on. We might even discover new markets that we haven't thought of yet.

jeff
2006-12-13 12:46:05
Oliver, with your attitude, you can't lose. I really respect your optimism, your willingness to engage with civility, and your appetite for turning work into success. I disagree with your perception about MacHeist and pretty much everything Phil Ryu has done so far with his misspent youth, but without any sarcasm, I really admire your attitude. Good luck on the rest of the week.

2006-12-14 00:04:18
I have to agree with everyone who said this was a great article. Only time will tell if this worked out well or not, but right now this is the first level headed and intelligent piece I've read about the Heist.
Sanjay Mehta
2006-12-14 05:22:25
I'm one of the first 2000 people who bought the current MacHeist bundle. You're right, FotoMagico wasn't a consideration. Even if I had known that such a beast existed, I probably wouldn't have bought it as I have no use for this. Yet.


I went for the bundle as I wanted Delicious Library and the remaining apps at $10 would make for a reasonably priced evaluation.

Ian
2006-12-14 05:28:33
Good article. I actually purchased the bundle for FotoMagico. I had heard several reviews of it via podcast over the past few weeks and was chomping at the bit to buy it, but was waiting until after the holidays. Now you have another customer. I am impressed by the software and completely pleased. Keep up the good work.
Anonymous
2006-12-14 06:48:02
Oliver: You seem to believe most people buy the MacHeist bundle for Delicious Library or some application other than FotoMagico. That's probably true, given the younger demographic that MacHeist seems to appeal to. However, listeners of the iLifeZone and MacBreak Weekly podcasts are familiar with Scott Bourne's endorsements of FotoMagico. Those listeners would likely view FotoMagico (along with its $70 regular price) as the leading reason to purchase the bundle. It's likely that those same listeners, like me, would find FotoMagico and TextMate as the only reason to purchase the bundle. (Well, maybe the Pangea game would get some use by the kids.)


With that in mind. Those potential users are faced with paying $120 for FotoMagico/TextMate separately versus $49 for the bundle. If you offered FotoMagico for 1 week at half-price, you'd only need to sell 150 copies to match the $5k payment for participating in the MacHeist bundle. With the MacHeist sales now topping 4500, would that tactic been seen as a viable option. Again, considering both the benefits of increased user base (for potential future upgrade revenue) and the negative aspects of overloading support and (potentially) causing harm to the perceived price/value of existing customers?


Your estimate of losing 100 potential FotoMagico sales during the MacHeist bundle looks to be low. With 4500 current sales it doesn't seem unreasonable for the push to include TextMate to succeed. 2% of 9000 units is 180. 180 customers at $35 each is $6300. Again, this might be more or less than the amount you're receiving as a MacHeist participant.


I understand the economic efficiency of selling a single copy of FotoMagic at whatever price the customer is willing to pay. I just believe you may have underestimated the appeal of you application to new customers if it were temporarily offered at a discounted price.

Anonymous
2006-12-14 06:55:57
Whoops! I meant to price the FotoMagico/TextMate bundle at $128, not $120.
mark
2006-12-14 07:51:40
This is a nice post and all, but it doesn't answer why the Heist doesn't pay developers on a percentage/royalty basis instead of a flat fee. That is the real crux of the argumen that they're scewing developers to keep the lion's share of the profits -- and it is a good one.
Oliver Breidenbach
2006-12-14 08:26:42
I actually purchased the bundle for FotoMagico.


It is a game of give and take. We take something from the bundle so we have to give something, too. I am happy to hear that FotoMagico is important to you.

Oliver Breidenbach
2006-12-14 08:30:05
I just believe you may have underestimated the appeal of you application to new customers if it were temporarily offered at a discounted price.


We made a call based on the knowledge available to us. We tried our own discounts before with less effect. If we had discounted FotoMagico for a week by 50%, we would not have reached 4,500 people. We would only have been able to reach people we already reached before. So it is not just about the revenue.


2006-12-14 08:37:00
This stuff reminds me of those recording label deals.


I think these deals can be useful in some cases (if you're about to release a new version, you can use last year's model as a promotional tool). Developers do need to be careful that they are reaching a new market. The $5K represents around 60 customers at full price, or around 100 at a 40% discounted price.


The additional customer base (20x) could be beneficial if you're getting those customers to upgrade. But also realize the majority will likely not as they didn't buy your software on its merits, they bought it because it was "a steal".


Regardless, you'll still have to support all 2000 customers and need to be prepared for the additional burden associated with that. Normally that wouldn't be an issue because it would have generated $100K in sales (which would help with the support), but you only got 5% of that in actual revenue.


It seems pretty clear why DL is doing this. I figure v2.0 is coming out soon and this sort of deal makes for a promotional tool. If you have a 1.0 product that's been out for a while, that might be fine.


If you're a smaller developer, it is a much trickier option. Many small developers are selling their products at $20 or $40 price points, which means at 5%, you're only getting $1 or $2 per customer, which you still have to support.


Just how much is product promotion worth? 20%, 50%, 95% ?

Oliver Breidenbach
2006-12-14 08:38:43
but it doesn't answer why the Heist doesn't pay developers on a percentage/royalty basis instead of a flat fee.


In business, paying a flat fee is not entirely unusual. For example, employees usually get paid a flat fee for the work they do. I have to pay a flat fee for the office space. Advertising fees are mostly independent of the revenue created. Creating a product usually costs a certain amount that is independent from the revenues. It is usually the entrepreneurs risk to invest a certain amount into something and then hope that the revenue is enough to break even and after that to make a profit. So the profit is usually on the side of the person who takes the biggest risks in a venture.


In this case, the fee was big enough to pay off our risks, so it is an acceptable business proposition.


Another thing to consider is that the possible profits for MacHeist are not unlimited as the sale ends on sunday. So, in a sense, we get a certain amount per day of sale and you could argue that that is not a flat fee after all.


I don't think this model is unreasonable.

Oliver Breidenbach
2006-12-14 08:47:20
Just how much is product promotion worth? 20%, 50%, 95% ?


We sell iStopMotion at the Apple Store retail in a box. It sells for $40. How much of that do you think ends up in our account?


Distribution, marketing and sales costs money. Look at the SEC filings for Adobe: Only about 20% of their revenue is spend on development. And that is after the external distribution channel took away 30%-50% of the product SRP.


2006-12-14 09:11:49
@ Oliver Breidenbach


Retail sales is a completely different game. The more hands that your software has to pass thru, the less money you get. In this case, however, it is only passing through a single hand and in the flat fee approach, each additional sales results in your having a smaller and smaller percentage.


Also, if you're playing the retail game, you're factoring in volume as well (most distributors/retailers won't even touch you if you don't have enough product volume).


With the flat fee approach, each additional sales means your percentage of the take gets smaller and smaller. If you're starting off at only 5% from the beginning, then that's going to suck! For a $40 product, that's $2 per product (and then each additional sale lowers that).


Even if you only made 5%, volume could help offset the costs associated. If you could make $2 a copy, but you sell 100,000 copies. You'd get $200K profit. If you only got $5K profit for those same 100,000 copies, you would now have the burden to support 100,000 users, plus not have made any money from them.


I do recognize the costs associated with the retail world, but I believe that's a different game and at a completely different scale. This is more of a specialty club program. Where a 60%-80% cost might be worth it if your audience is millions of people everyday, 95%-99% cost for an audience of thousands seems kind of pricey.



Oliver Breidenbach
2006-12-14 09:27:04
This is going to be the last reply I post here, because I think I've taken a stand on all issues I consider relevant and I also think that not very many people read this any more.


Maybe I will post a summary mid next week, but I am not sure if I'll have the time.


In this case, however, it is only passing through a single hand and in the flat fee approach, each additional sales results in your having a smaller and smaller percentage.


We can go back and forth on this as long as we like. I can only repeat what I said earlier: You are entitled to feel uncomfortable with the model, but I consider getting a flat fee per day of sales nothing but a different approach that needs to be tried out. Only time will tell if we made a really good call, but I am certain we didn't make a bad call. I think the MacHeist guys put a lot of work into this and took a considerable financial risk so they are entitled to a tidy profit.

Ted
2006-12-15 09:30:33
Count me as one in favor of the MacHeist promo. I think it does provide exposure that can translate in to new, life long customers. For example, I've been a user of StillLife for about 2.5 years. I use it every holiday season to create DVDs for family members. Well, StillLife hasn't been updated in forever. I wasn't even aware that FotoMagico did the same thing (and I'm plugged in to the Mac Dev community), and did it much better than StillLife. It was litterally the diamond in the rough for me in the whole purchase.


Boinx just got another customer out of MacHeist who will probably shell out for the next big upgrade to FotoMagico. Now how can that be a bad thing?

andy
2006-12-15 17:49:35
Hi Oliver, I have read a lot of pros and cons of macheist that some of us have just been involved in. I will keep this short(ish). I was just along for the ride, I had no intention of purchasing the bundle at the end, but on reading your column here I have indulged, if you are happy then at the end o the day, hopefully the other developers feel the same way. I am ashamed to admit that I have never been a great supporter of shareware, and had never heard of fotomagico before either. Having seen macheist and maczot and your comments I am now a fan and a supporter of it and it has also motivated me to check out other shareware that is available. Thanks for the software and also the reasoned argument for your getting involved with macheist, its good to hear your opinion on what has become such a contentious topic.
David
2006-12-15 21:38:51
Thanks for the story. I heard about this story in #macdev on freenode, and did some more research on it. This type of deal caused a lot of debate, which I can kinda see why. In my opinion, while I feel the developers should have made more money on this deal, the deal turned out fairly well. Why? Because I looked at the list of programs there, and only recognized 2 applications that I currently use (DevonThink and TextMate). I looked at the others, and especially newsfire and DeliciousLibrary, and I never heard of them before, but now I see the value is trying them out. For the full price of some of these apps, I would never have even tried them. Now, I get the chance to try these, and can potentially become a future customer for a lot of these apps.