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The End of Shrink-Wrap?

Online sales methods may fundamentally change the software industry.

7/29/96 -- As a by-product of its tremendous growth, the Internet has become a popular medium for distributing free software, add-ons, and upgrades. Looking to extend this phenomenon to the realm of standard for-sale software, several companies have sparked a rash of new innovations that make it possible to purchase and download fully functional software instantly, over the Internet.

Software That Sells Itself
Launched today, Release Software's SalesAgent 2.0 (formerly A/Pay) is one such product that's poised to change the digital marketplace. The new sales tool is a module that's designed to be embedded within a program, making it possible for the program to "sell itself." SalesAgent extends the now-familiar model of giving away software, letting users become addicted, and then forcing them to buy it. The module is activated after a predetermined number of days or levels, or after a user decides he needs a feature that's unavailable in the trial version. It offers a number of ways to complete a purchase: by phone, fax, credit card, direct modem, and now, the Internet, using RSA encryption over a standard TCP/IP connection. After credit information is verified, the user receives an "unlocking code," which provides full access to the product. The upshot is that any company can now make software freely available from its own Web site, then sit back and relax as the sales roll in.

But don't expect CompUSA to go out of business overnight. For all of its advantages, there are several hurdles in the way of success for products like SalesAgent. A major one is the Internet's limited bandwidth. For those with slower connections, even small programs can take hours to download. Most people undoubtedly prefer the convenience of walking into a store and coming out with the program on disk. And of course, manuals and any other physical materials in the box are not included with a download. This may not be a major issue, though, particularly as built-in and online help continue to improve.

A Shift to Subscription Software?
According to industry analyst Tim Bajarin, people are simply locked in to the traditional model. Bajarin explains, "People like to pick up the box, read the back, pick up another box. . ." While he doesn't see electronic distribution replacing traditional channels anytime soon, he does believe that, years down the road, electronic distribution will become dominant. Even Release's Chip Hall, vice president of Marketing, concedes: "The switch will definitely not be anytime soon."

Still, electronic distribution does have the potential ultimately to revolutionize the industry. Such a shift could help level the field for smaller developers by giving them an alternative to competing for shelf space. It could also facilitate the move to a subscription-based pricing model for software. "Users could buy a game by the level, or lease Photoshop for a month," Hall explains.

Release calls its new model SuperDistribution, referring to the fact that a single piece of software can be "sent out through any channel, and then spawn offspring," as Hall explains. And piracy becomes simply another sales opportunity: SalesAgent knows when it has been transferred from one machine to another, and it can require payment for each copy. In fact, SalesAgent could ship in standard, store-bought software and activate when copied. And to make it more attractive to developers, Release is distributing its software for free and charging developers a fee (typically from 10 to 20 percent) for each purchase.

A number of other companies offer similar products, such as IBM's Cryptolopes and Intertrust Technologies's Digibox. These tools are more limited and have yet to get off the ground. Likewise, a number of vendors, such as AtOnce Software, support online payment and downloadable software, but these approaches force you to buy before you download.

In a field still in its infancy, SalesAgent marks an important development. While people will continue to buy software in boxes for the foreseeable future, downloading software promises to become an increasingly attractive option as high-speed Internet connections become commonplace.--Jon Kaufthal

Related Trends Online Articles:
"Webware: Customers Are Turning to the Web for Mix-and-Match Components"
"Electronic Software Stores Are Bustling on the Internet"
"Buy Software Online--But Safeguard Your Credit Card"

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Copyright (c) 1996 Ziff-Davis Publishing Company.

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