Chapter 33

The BASIC interpreter actually did not make much money. In its first year, it brought in only a little over $10,000, right? At the time, only one-tenth of consumers were willing to pay for Microsoft's BASIC interpreter. Thanks to the sharing culture prevalent in early Silicon Valley—after all, the more niche something was, the more people loved sharing it—the remaining 90 percent of consumers got the program for free. So piracy definitely did not start in China. And if you wanted to stay in business for the long haul, passion alone was certainly not enough. You had to find a viable business model and monetize it. That was why Gates wrote the famous "An Open Letter to Hobbyists," attacking the notion that it was natural to pay for hardware but that software ought to be shared for free. Software was labor too; it possessed inherent value and ought to be paid for. Bill Gates made an enormous contribution to software business models. If he had not invented this so-called licensing model, then programmers today might not be making any money at all. For a software company that wanted to turn a profit and maximize revenue, the goal was to distribute its products as widely as possible while charging licensing fees. The more users it had, the stronger the marginal benefits became. After all, the cost of developing software was fixed. Once you made one copy, you could sell it to ten thousand people, driving the cost lower and lower. For example, when Microsoft signed its agreement with MITS, the attorney added a special clause requiring MITS to unconditionally make its best efforts to distribute, license, promote, and commercialize the BASIC interpreter.

Otherwise, the license holder would have sufficient grounds to terminate the contract. This showed just how fierce competition in