ChrisV opened this issue on Oct 27, 2010 · 17 posts
bagginsbill posted Wed, 27 October 2010 at 6:37 PM
For interesting background material on the financial numbers involved in software development, have a look here:
http://www.smithmicro.com/about/news-press-detail.aspx?newsid=414
That's the press release from when SM bought Poser, Anime Studio, and Manga Studio from e-Frontier.
Now let me speculate some interesting numbers. (Please please be completely aware that I don't know any of this. While I am friends with the Poser folk, they don't tell me this stuff. I'm making this up based on my general experience of working in software development for my whole career.) So...
Total purchase price was $6 million. That's a public fact.
E-Frontier's total annual revenue (including other non-Poser stuff that they did not sell to SM) was $7 million. Also a public fact.
Speculation: Which means the Poser+AS+MS revenue was far less than that. I don't know how much, but probably in the neighborhood of $3 to $4 million. Most functioning software companies are purchased for around 2x annual revenue. If they're having trouble, it is somewhat less. Certain bad deals are made at 1X revenue but that's unusual. Great software companies are purchased at 10x to 20x revenue.
Speculation: I'm guessing that the group of people necessary to develop, market, sell, and support those apps is roughly around 40 people.
Speculation: The cost of a group this size is around $6 million per year.
So - a group that generated somewhere around $4 million in revenue costs the company $6 million a year to keep working. That's a $2 million annual loss unless growth is achieved.
You think they're allowed to hire more developers? NOT
They need to get the revenues up over $6 before that will happen.
If the community thinks Poser is unique and should grow faster/better, then the community should come up with some more revenue. There are three ways to do it:
Get more people to buy (sell more copies). (One way is go cheaper)
Get the existing people to buy more stuff (content, or upgrade more often)
Get everybody to pay more. (Usually buy more awesomeness in the software)
SM have pursued and successfully performed some of all three. Expect to see more new approaches to all three as well.
Hopefully that will accelerate the funding of new development.
Oh - I forgot - there is tactic #4:
Yep - okee.
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