The Leader in Software Value Management Page 1 Software Best Practices 3 Practical Strategies for Increasing Revenue Daniel Greenberg VP Worldwide Marketing

The Leader in Software Value Management Page 1

Software Best Practices3 Practical Strategies for Increasing Revenue

Daniel GreenbergVP Worldwide MarketingMacrovision


Best Practices

• Overview of 3 Revenue Strategies

• Strategy 1: Value Pricing

• Strategy 2: Feature Segmentation

• Strategy 3: Piracy Prevention

• Summary

FeatureSegmentation

Piracy Prevention

Value Pricing


“Pricing is the Biggest Lever Affecting Profitability.”

Average economics for ISVs between $100 million and $10 billion in sales

Raising price by 1%…

…increases profit by 7%

OperatingProfit

COGS

Sales Fixed Costs*

100

59

26

14

McKinsey & Co., Oct. 2003

“ 1% effective increase in pricing delivers an additional 7% increase in earnings on average.”

15101

FeatureSegmentation

Piracy Prevention

Value Pricing

26

59

100


Piracy Prevention

Value Pricing

Feature Segmentation

Current Revenues

If You Can’t Raise Your Price….Raise Your Deal Size …Or Market Potential

FeatureSegmentation

Piracy Prevention

Value Pricing

Sales

Raising price by 1%…

101

100


Increase Your Revenue Potential Throughout Your Product’s Lifecycle

Time or Product Maturity

$ R

eve

nue

Introduction GrowthEarly

MaturityLate

Maturity Decline

+ Your Current Revenue Line

+ Offer Value Pricing

+ Offer Feature Bundles

+ Protect Against Piracy

FeatureSegmentation

Piracy Prevention

Value Pricing






• Summary

FeatureSegmentation

Piracy Prevention

Value Pricing

Best Practices


Many Companies Set Pricing for One Market Segment .…

Medium Usage Light Usage

$ Revenue

& Leave Significant $ Behind

Potential revenue

Current revenue

Heavy Usage

FeatureSegmentation

Piracy Prevention

Value Pricing


Many Companies Set Pricing for One Market Segment .… & Leave Significant $ Behind

Medium Usage Light UsageHeavy Usage

FeatureSegmentation

Piracy Prevention

Value Pricing


Many Companies Set Pricing for One Market Segment .… & Leave Significant $ Behind

Light Usage

Medium Usage

Heavy Usage

FeatureSegmentation

Piracy Prevention

Value Pricing


Are You Leaving Money on the Table?

Light Usage

Medium Usage

Heavy Usage

extra

FeatureSegmentation

Piracy Prevention

Value Pricing


Does Your Pricing Enable You to Penetrate All Customer Segments?

Light Usage

Medium Usage

Heavy Usage

extra

FeatureSegmentation

Piracy Prevention

Value Pricing


Usage

100%

10%

Heavy Medium Light

Does Your Pricing Enable You to Penetrate All Customer Segments?

Light Usage

Medium Usage

Heavy Usage

extra

FeatureSegmentation

Piracy Prevention

Value Pricing


Different Users Have Different Usage

Usage

100%

10%

Heavy Medium Light

FeatureSegmentation

Piracy Prevention

Value Pricing


Locked Floating Usage

Licensing

$100/pc/year $300/floating user/year $5/user-day

Pricing

Offer Different Prices for Different Usage Patterns…and Your Customers Will Buy More

Usage

100%

10%

Heavy Medium Light

FeatureSegmentation

Piracy Prevention

Value Pricing


“FLEXnet is helping us to remain competitive in the market, and we can now relate and adapt to our customers’ needs more quickly and effectively.”

Gary DransfieldCommercial Manager

Aveva Engineering

Pricing Case Study

Challenge Solution• Customers don’t want to pay large

upfront fees for software.• Customer don’t know exactly how

many seats are required in a given quarter (demand is hard to forecast)

• Introduced FLEXnet Utility Pricing• Customers pay for the time they use

the product.• Customers have flexibility to deploy

on as many seats as required without publisher intervention

FeatureSegmentation

Piracy Prevention

Value Pricing






• Summary

Piracy Prevention

FeatureSegmentation

Value Pricing

Best Practices


$ Revenue

Many Companies Build Products for One Market Segment.… And Leave Significant $ Behind

Potential revenue

Current revenue Lite

Standard

Premium

Piracy Prevention

FeatureSegmentation

Value Pricing


Example: Studio Artware

Market• Many Potential Users

– Novice Professional– Lite User Heavy User– Consumer Corporate User– Price Sensitive Price Indifferent

• Only 1 User Buys Today

Product• Many Features

– Oils– Watercolors– Acrylics– Canvas size– # of Colors supported– # of Paintings that can be worked on at a time

• All Features Available in 1 Package Today

Piracy Prevention

FeatureSegmentation

Value Pricing


Studio Artware

“Software for all your graphics

needs”

Piracy Prevention

FeatureSegmentation

Value Pricing


License by Product Components


Studio Artware

“Jr” Edition

“Pro” Edition

Fin

ger

pai

nts

Wat

erco

lors

Oil

s

“Standard” Edition

Piracy Prevention

FeatureSegmentation

Value Pricing




Studio Artware

“Jr” Edition

“Pro” Edition

Fin

ger

pai

nts

Wat

erco

lors

Oil

s

Related Products

Sketch Sculpt


Piracy Prevention

FeatureSegmentation

Value Pricing




Studio Artware

“Jr” Edition

“Pro” Edition

Fin

ger

pai

nts

Wat

erco

lors

Oil

s

Related Products

Sketch Sculpt

Can

vas

Siz

e

# o

f C

olo

rs

# o

f C

on

curr

ent

Pai

nti

ng

s


Piracy Prevention

FeatureSegmentation

Value Pricing



License by Usage Metrics


Studio Artware

“Jr” Edition


“Pro” Edition

Fin

ger

pai

nts

Wat

erco

lors

Oil

s


License by User

Site License

Disconnected Network User

Networked User

Single User

Related Products

Sketch Sculpt

License by Usage Metrics

Can

vas

Siz

e

# o

f C

olo

rs

# o

f C

on

curr

ent

Pai

nti

ng

s

Piracy Prevention

FeatureSegmentation

Value Pricing



“We’re now maximizing revenue through flexible, feature-driven pricing and packaging. Thanks to the FLEXnet platform we’ve been able to create a license model that closely matches how our customers perceive the value of our products.”

Chandra ShekarProgram Manager

Software LicensingNokia

Feature Segmentation Case Study

Challenge Solution• Different customers needed

different feature sets• Too expensive to stock multiple

versions of products

• Using flexible licensing Nokia “turns on & off” features for different customer segments

Piracy Prevention

FeatureSegmentation

Value Pricing






• Summary

FeatureSegmentation

Piracy Prevention

Value Pricing

FeatureSegmentation

Piracy Prevention

Value Pricing

Best Practices


$ Revenue

Prevent Unlicensed Use….…And Convert Into Paying Customers

Manager

AdminExecutive

Potential revenue

Current revenue

FeatureSegmentation

Piracy Prevention

Value Pricing


56%

63%

53%

71%

36%

23%

0% 10% 20% 30% 40% 50% 60% 70% 80%

North America

Western Europe

Eastern Europe

Asia Pacific

Latin America

Middle East/Africa

$30 Billion of Software Is “Pirated”(IDC & BSA)

Worldwide Piracy Rate = 33%

FeatureSegmentation

Piracy Prevention

Value Pricing


Most Enterprises Are Not Tracking License Compliance

4%

96%

0% 20% 40% 60% 80% 100%

“Do you track software compliance?”

N = 99Source: IDC’s Future of Software Licensing Study, 2004

No

Yes

FeatureSegmentation

Piracy Prevention

Value Pricing


FeatureSegmentation

Piracy Prevention

Value Pricing

Anti-piracy: Easy Way to Grow Revenues






• Summary

FeatureSegmentation

Piracy Prevention

Value Pricing

Best Practices


Increase Your Revenue Potential Throughout Your Product’s Lifecycle


$ R

eve

nue

Introduction

GrowthEarly

MaturityLate

Maturity Decline



+ Offer Feature Bundles


FeatureSegmentation

Piracy Prevention

Value Pricing


New Sales

Next Steps: Executing on the 3 Strategies

1. Prioritize your strategies

2. Identify key team members

3. Add FLEXnet to your application

4. Collect revenue!

Your Application FLEXnet Functionality

• Piracy Protection• Creative Pricing• Flexible Packaging• Streamlined Operations• Automated Updating• End User Mgt. Tools & Reporting

+

FeatureSegmentation

Piracy Prevention

Value Pricing

Current Costs

Current Sales

OperationsSales

New Costs



$ R

eve

nu

e

Introduction GrowthEarly

MaturityLate

Maturity Decline



+ Create Feature Bundles


Pricing &Licensing Applications + ModulesPricing &

Licensing Applications + Modules

Key to Implementation: Separate Your Business Model From Your Application

FeatureSegmentation

Piracy Prevention

Value Pricing


QUESTIONS?

• On 500,000,000 desktops … 90%+ of market

• 100 of top 100 ISV’s use our technology

• 70,000+ customers

• 700+ patents worldwide in licensing & DRM

[email protected]

Make your software smarter

FeatureSegmentation

Piracy Prevention

Value Pricing

BACKGROUND ON MACROVISION


Macrovision FLEXnet Publisher™ enables software and hardware vendors to increase revenue and reduce operational costs by flexibly

pricing, packaging, protecting, and updating their product offerings. It is a core element of FLEXnet, the industry’s only Software Value

Management (SVM) platform. SVM solutions bridge the gap between pricing and packaging software on the developer side and

purchasing and managing that software on the enterprise side. Over 50,000 software publishers and hundreds of Fortune 1000

companies use Macrovision technologies for Software Value Management, which include FLEXnet license management and software

updating solutions and the InstallShield® suite of software installation and application packaging tools.


Partial List of Macrovision’s 70,000 Customers

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OUR CORE COMPETENCY: Get a Great Return on Our Investment

Our Core Competency

Industry Standard

Platform Benefits

Extreme Flexibility

R&D• $110 million invested in R&D• 580 person-years invested• 15 years of development

Proprietary Technology• 700+ Patents Worldwide in Licensing & DRM• Patent for Concurrent Licensing & Borrowing

Proven in Real World• Battle-tested on millions of desktops• 4 FLEXenabled apps launched every second


INDUSTRY STANDARD: Our Market Leadership Secures Your Future

+Our Core Competency

Industry Standard

Platform Benefits

Extreme Flexibility

• Major corporations require their software to be “FLEXenabled”

• Launching new chip (Prescott) in Spring ’04• Pre-production version not compliant with

Macrovision licensing• Intel, at great expense, changed chip

• Sun ships new OS, Solaris 9.0, in 2002• Not compliant with previous versions of

Macrovision licensing• Sun changes operating system


PLATFORM BENEFITS: Freedom to Choose the Best Options

Our Core Competency

Industry Standard

Platform Benefits

Extreme Flexibility

Broadest possible range of capabilities• “One-stop shopping" for all needed capabilities• Large community of FLEXnet providers• More than could be provided by any one vendor• Much more than you could build yourself!

The safest choice: Lowest risk to implement• Certification program ensures that "everything

just works"• Modular platform architecture means new

capabilities can easily be added whenever needed

• Platform standards ensure that systems will interoperate seamlessly now and in the future


EXTREME FLEXIBILITY: Unparalleled Market Agility

Our Core Competency

Industry Standard

Platform Benefits

Extreme Flexibility

• Change pricing, licensing & packaging at any time, without changing your software

• 1000’s of license models supported

• 25+ platforms (Windows, UNIX, Mac, Java, etc.)

• Supports the entire software license lifecycle:– Demo and Evaluation– Initial purchase– Incremental purchases (through multiple

channels)– Version upgrades

• Licenses can be sent via multiple means– Web, email, phone, FAX or paper certificate– Also using automated license installation

technology

Documents

The Leader in Software Value Management Page 1 Software Best Practices 3 Practical Strategies for Increasing Revenue Daniel Greenberg VP Worldwide Marketing