As an FPGA designer, I can't disagree more with your statement of their business model. They make money on chips. That is indisputable.

My last 3 designs used the vendor's free software, except for some IP we bought (IP=Intellectual property, a specific core). You might think of the IP as a library you would buy as a software engineer.

This is entirely my experience also. The chips themselves are very expensive and it's exactly why you move to an ASIC for volume as soon as you can. Assuming you can... If you are not shipping in volume then maybe the toolchain licensing becomes an issue. And if you are not shipping because you're a hobbiest, student, etc. then some of them grant you free licenses, they used to at least.

bcarlton0, what area of business are you in? I'm a young engineer working with FPGAs in the medical space and I'd love to hear about what else is out there.

Ductapemaster, I have done designs in networking (e.g. packet processing and 10 Gb Ethernet), wireless (e.g. baseband part of a modem), glue logic, and other more specialized areas. FPGAs have a wide variety of uses other than ASIC prototyping and small glue logic.

The difference with software is that I don't need to buy the library to use the computer. Not sure which FPGA's you're using since all the big players force you to use their shitty tools and charge massive license fees for the privilege

thowayedidoqo, I can still use them without the libraries. For example, I could write my own FFT or compression routine. It just may be cheaper to license them from the vendor or a third party. I have done plenty of designs without paid IP. I have used IP from Xilinx, Altera (pre-Intel), and third parties.