This has been posted here before but for any new investors that are lurking here, this is a good synopsis of WAVX, written in Wired Magazine back in May 98.
Tom
wired.com
PC Meter Meets Its Maker
by Chris Oakes
5:03am 29.May.98.PDT
Wave Systems Corp. (WAVX) thinks you won't
always want to buy software. More and more,
rather, you'll want to rent it.
Proof is in the Internet, the company says,
where content is supported by advertising and
(some) pay-per-view. Similarly, the future's
dominant software and content business model
will be supported on a per-use basis, not
outright ownership.
On this reasoning, Wave is equipping PCs with
a usage meter -- the built-in ability to track and
bill a consumer's use of content and software.
WaveMeter is the company's proprietary
hardware-based system for measuring,
controlling, and billing the use of electronic
content for this purpose.
"It's a piece of hardware in your computer," said
Wave Systems president Steven Sprague.
"Using a dial-up connection and your credit
card, you put money on the meter."
To get this technology under the hood of
consumers' PCs, the company announced
today that integrated circuit-maker Standard
Microsystems Corp. (SMSC) has licensed the
technology to build WaveMeter technology into
its chips.
Users of PCs with meter-equipped Standard
Microsystems chips will thus be able to
purchase pay-per-use or rent-to-own
entertainment, education, and software titles.
Wave Systems says it has partnerships with
some 30 consumer software companies offering
game and family software titles, such as Red
Storm Entertainment, McGraw-Hill Home
Interactive, and GT Interactive.
With metered usage, these publishers see lower
marketing and distribution costs, along with the
ability to reach new users not interested in
buying software outright.
Consumers meanwhile can pay for software and
information based upon actual use in
incremental amounts. If it's a software title, the
payment system might be something like $1 or
$2 per day, capped at a total expense of 80
percent of the retail purchase price. (At that
point, the user would own the software.)
But Wave Systems has been trying to advance
its ideas in hardware for over four years now,
with no successes to this point. For the fiscal
year 1997, revenues were a mere US$11,000 for
the company, with a $16.4 million loss.
Some observers think there's a reason the
company has yet to make money on its
technology.
"I don't perceive a considerable consumer pull
for the applications this technology will be used
with," said Jupiter Communications analyst
Seamus McAteer, an opinion echoed by another
analyst, Zona Research's Vernon Keenan.
"Overall I'm pessimistic on metered content.
Like micropayment, it relies on capabilities built
into the client -- i.e. the user's PC. That needs
to be widespread with a critical mass," Keenan
said.
Part of the lack of interest on the part of
consumers, McAteer believes, is an aversion to
monitoring technology built into their PC, be it a
smart-card reader or a usage meter. "I don't
know if people are comfortable with that notion."
Nor does McAteer see the pay-as-you-go
market. Consumers, he said, like to own. "There
is a real value in ownership." Part of that value is
the consumer's ability to take their time in
getting to know a piece of software, he said.
As far as the Internet being proof of the
pay-per-use model, McAteer says such content
has been a small part of Web use, and primarily
confined to pornography publishing. Even there,
he said, "I don't know if people are gong to want
to have a chip on their motherboard for
pay-per-view porn."
These negatives are why these analysts see a
niche application at best, though Keenan
believes that if Wave Systems can achieve the
all-important critical mass, with PC
manufacturers building the technology into PCs,
it may have a chance.
Wave is relying on the field-of-dreams, "if you
build it they will come" philosophy, he said. But
in this case, he points out that there are several
parties that have to build it -- from chip suppliers
like Standard to PC manufacturers to software
companies, including Microsoft Corp. building
metering APIs into its operating system.
When there are that many builders involved,
Keenan says new technologies such as the
WaveMeter usually don't achieve the critical
mass they demand.
Still, Wave Systems recognizes that ubiquity is
the name of the game for such technology to
work, and hope that today's announcement is
the beginning of such a trend. And that will
depend on PC manufacturers opting for the
added cost of WaveMeter in the motherboard
circuitry they purchase from Standard
Microsystems. Sprague estimates that the cost
for manufacturers will come in at an acceptable,
sub-$5 per PC.
Standard Microsystems is a sizable partner too,
supplying integrated circuits to PC-makers
worldwide. It shares the market for such chips
primarily with National Semiconductor. Wave
Systems' Sprague believes Standard
Microsystems' hardware is found in 30 percent
to 40 percent of the PCs sold.
The initial plan calls for Standard Microsystems
to build the metering capability into an
input/output motherboard device it supplies to
PC manufacturers. Independent of the CPU and
the operating system, the triple-DES-encrypted
technology is very secure, Sprague said.
To sweeten the pot for manufacturers opting to
order meter-enabled hardware, the Wave
licensing arrangement lets them draw a
percentage of all pay-per-use revenue.
"You have to be pervasive on the desktop before
you can introduce a client security solution,"
Sprague said. "This helps us get the technology
broadly deployed." |
