MagicWB
Alex,
In fact it's very realistic. A 15% royalty on a software product that
sells for $100 is pretty good. A book author usually gets between 10 and 12%
of the "wholesale" price of a book. If it's a hardbound book that sells for
$40 retail, the wholesale price will be about $25 and the author will receive
between $2.50 and $3.00 a book sold. Considering that a "best seller" is a
book that sells more than 30,000 copies, an author of a best seller could make
a decent living if the book sold that many copies every year. However,
typically the life of a best seller is only a few years at best. Furthermore,
very few published books ever sell more than the first printing, which may be 3
to 5,000 copies.
Consider this when applied to software and you can see that Steve's
illustration is quite in line. If you are a member of a programming team at a
major software producer, you probably won't get even royalties, but instead
just a salary. Suppose, further, that you are a software seller and have a
product which retails for $100. Given the "average" profitability of a company
in the software industry, the net profit to the company for a $100 sale product
(wholesale) is probably not much more than 12% of sales price, perhaps even
less, after all expenses and taxes. So, if you expect to net after tax $12.00
on a $100 sales price item, and you could sell that item shareware for $20.00
cash (probably unreported income, but that's another matter), then you are
doing as well or better than the software house.
The big difference relates to costs of sale. A shareware author spends
little if any money on advertising and promotion, and thus will not likely
generate the level of sales a major producer might generate given the
advertising and promotion costs they will incur.