CompuServe Thread

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.