The recent fuss about the division of revenue from Banshee’s Amazon MP3 store made me think about the moral right of making money with help of the open source code written (partially) by others. In this post I would like to explore this issue, by the example of the Banshee Amazon MP3 plugin, and Canonical’s rights to change the affiliate code.
Banshee’s Amazon MP3 store plugin was developed by Banshee star-developer Aaron Bockover, who announced on his blog last August that all revenue of the plugin would go to the GNOME Foundation. The plugin consists of two separate extensions, one for integrating music importing from Amazon’s MP3 store into Banshee, the other for embedding the store’s website. Both are open source, and available from Banshee’s GIT branch.
After discussions between Canonical and the Banshee developers, Jono Bacon announced on his blog that the final settlement was that Canonical would receive 75% of the revenue of both music stores, and direct 25% to the GNOME Foundation. Some people were outraged by Canonical taking such a large share of the revenue, arguing that the company was simply profiting from the work of others.
When are you allowed to sell?
I want to investigate this issue by going from the bottom up. Let us first establish why we pay money. We can’t do everything ourselves, because we don’t have infinite time and skills. Therefore we use the services of others, and pay them in exchange for what they produce. That money allows them to buy the products of others, so they can focus fully on their job. Money is thus awarded for a service.
In open source, most of the time you will not have to pay for the software. However, the GPL license does not prohibit selling your software. The Free Software Foundation defines free software not as ‘gratis’ software, but says software is free when
a user is free to run the program, change the program, and redistribute the program with or without changes. (Read its piece on selling (free) software if you want to know more.)
When are you entitled to sell?
You pay money in exchange for a service. In the case of the Banshee Amazon MP3 plugin, Amazon gives a share of the revenue to Banshee, as a reward for bringing users to its store. Banshee subsequently chooses to give the revenue to the GNOME Foundation. Note that it is not the end-user who is the customer here, but Amazon!
Under the current plans, the Banshee Amazon MP3 plugin on Ubuntu will give Canonical 75% of the money paid by Amazon and the revenue of the Ubuntu One Music Store. The GNOME Foundation, via Banshee, will get 25% of both. I shall focus on the Amazon MP3 plugin. There are two ways to look at this. The first way is to consider Banshee an involuntary customer of Canonical, buying the service ‘broader access to customers’. The win for them is more income. The second way is to consider Amazon a customer of both Banshee and Canonical, who jointly provide the service Amazon pays for.
How does this happen? The Banshee Amazon MP3 plugin, developed by the Banshee project, is the direct means used to make the Amazon MP3 Store available. Other important factors are the attractiveness of Banshee—courtesy of its developers—and distribution via Ubuntu, the most popular Linux distribution on the desktop.
We have seen that both Canonical and the Banshee project deliver a part of the service that Amazon pays for. Canonical is the final distributor, bringing the product to the customers’ doorsteps, Banshee can be compared to a more specialised producer, providing a specific product to the distributor. If we look at the real world, we can see that it is often the distributor at the end of the chain that determines the prices. Farmers, for example, earn often very little for their crops. Most of the revenue on produce goes to the supermarkets that distribute the goods to the customers. Supermarkets may not be the sole method of reaching customers, but they are by far the most important channel; the farmer depends on the supermarkets. This simple fact allows the stores to dictate the prices. It is an economic law that says that when a good—in this case access to the customer—is scarce, the costs will go up. Here it means the costs for the farmer will go up in the way of lower revenues.
Canonical can be compared to the ‘Superunie’, the joint procurement organisation of the major Dutch supermarkets. Like supermarkets, it doesn’t actually make everything it offers itself. Instead, it is responsible for the selection, integration and fine-tuning of the components, and maybe for baking the fresh baguettes. Its large market share in the Linux desktop world gives it a lot of power. Some people are principally opposed to it and say it abuses its power.
Access to many potential customers makes Canonical’s contribution to the ‘service’ provided to Amazon much, much more important. It is very likely that 25% of the Banshee Amazon MP3 plugin’s revenue when enabled by default will be higher, than 100% of the same plugin disabled by default. The service of enabling the plugin by default is therefore a valuable ‘product’, which is sold to the Banshee project at a not unsubstantial price.
This high price can be justified by the fact that Canonical is selling a scarce good to the Banshee project. However, Banshee has little choice than to accept whatever benevolent offer Canonical deigns to make. Because they’ve chosen for a free license, there is no real transaction to be made. If Canonical doesn’t like what Banshee demands, then it can just replace the affiliate code and keep everything for itself. Banshee is powerless. That is the difference with the farmer-supermarket analogy, in which the farmer can decide to reject and offer and not give his or her produce.
So, what amount can you ask for this substantial additional value? It is impossible to determine the true economic price of it when only one side can make demands. The 75:25 ratio is therefore not a representation of the true values of what both sides have to offer, but instead the representation of what the only party with any power over the matter considers the values to be. It is a subjective determination.
Whether or not you agree with the chosen ratio depends what value you attribute to the services provided by Canonical and by the Banshee project to Amazon. It is not possible to do this fully objective, and in any case you need extra data to say something definitive.
To me the demands from Canonical don’t seem very unreasonable at all. The value of the huge user share Ubuntu has to offer seems to be worth the 75% slice at first glance. However, we’ll first have to see the statistics from the Amazon MP3 plugin in action on Ubuntu to verify this assumption. If it turns out that Ubuntu brings in a lot of revenue, then the 75% fee is justified. If it turns out that the revenue is relatively low, or average, then Canonical’s share should be lowered to compensate for the proven lower value of the ‘service’ offered by the company. I would propose to do this check not too long after the launch of Ubuntu 11.04, make the results public and swiftly announce change when change is justified.
What do you think? Do you agree with my conclusion? Did you spot any mistake? Please leave a comment!