A report by the Standish Group indicates that adoption of ‘open source’ has caused a drop in revenue to the proprietary software industry by about $60 billion per year. That’s not a huge amount of money compared to what has been lost though the misselling of mortgages, but it is still a lot. The report identifies the value of these ‘open source’ products to be about 6% of the world market for software.

A new conventional wisdom began to spring up around free software, led in part by theorists like Eric Raymond, who were interested in the economics of free software production. Much of this thought centered around service-based and other ancillary sales for supporting free software. Based on this kind of thinking, it’s fairly easy to imagine extending free licensing ideas to utilitarian works. But what about aesthetic works? The Creative Commons was established in 2002, largely to solve the kinds of licensing problems that aesthetic works might encounter, and it has been remarkably successful, pushing the envelope of even this newer wave of thought. Today, Creative Commons licensed works number in at least the tens of millions. And more than a quarter of those are using the free “Attribution” or “Attribution-ShareAlike” licenses.

With any paradigm shift, it is difficult to see the new world from the old one, even though it is glaringly obvious once you’ve crossed over. Empirical evidence is one way to bridge the gap. To that end, I want to show some solid evidence for the “impossible” things that commons-based peer production (CBPP) has already accomplished—things that the old conventional wisdom would tell us “can’t be done”. This week, I’ll look at what is probably the most obvious case: free software.

Some people who advocate against free software claim that it’s bad for the economy and not sustainable in the long term, because the lack of direct revenue on developing free software makes it harder to make money out of developing such software. If generating direct revenue out of software development is not possible, they claim, then less people will be inclined to write software professionally. In turn, this will mean that end-users will have less high-quality software available. Is that really true? Let’s find out.

Revenue, and money as a motivator

One of the principles of free software is the ability to develop on a platform for your own personal advantage without having to pays IP fees to the framework originators. As we see from the free software movement this principle evolves itself into different models both in software and in other domains.

One business model that I’m surprised hasn’t been further explored for funding free software is advertising. Ads have been a standard way to make “free” media pay in countries like the USA, where advertising-based commercial television broadcasting has been the dominant medium for decades.

There are really two bazaars that fire the boilers for free software: one dominated by talented amateurs who create for love; the other, by professionals who create for money. This creates a curious bi-modal nature to the free software/open source community: there’s always a certain amount of tension between the schedule-driven bottom-line interest of commercial entities like Novell, Red Hat, or even Canonical and individual hobbyist developers.