Venture capitalism is the same. The money does not matter, the risk undertaken is the true cost when investing in a very new product just launched in the market.
The early adopters and payers actually fund the most crucial development period of the software.
Also, downloadable software does not cause any real loss (except opportunity cost) to the developer unlike cloud based / SaaS where operational costs matter.
Once offered, any lifetime deal has to be honoured because credibility matters a lot.
Lifetime deals bring in the initial financing that companies need. Without lifetime deals, some products might not take off.
An ideal situation is where a developer offers lifetime deals for a developing software, pulls in revenue and traction and thereon, goes on to achieve comfortable monthly membership revenue that can sustain the lifetime deals. THere are many examples of successful software that got launched and found success by raking in LTD money.
Most importantly, the lifetime deals can be a viable option against venture funding at the cost of giving up stake in the company.
On the side, Remember the time airlines offered lifetime tickets?
Open ended liabilities are a terrible idea for exactly the airline lifetime ticket reason.
They are still honouring their commitment, almost half a century later and I believe it is fair.
I have no idea what was their situation at the time or whether they used the money well. But you could think about it as if you have invested a little bit of extra cash in the company and you got lifetime service from them.
The extra money I gave them probably helped them build the company and may have had at that moment the same present value as all those discounted future maintenance costs.
Found John Titor!
A good LTD offers basically the same as the average customer lifetime value (CLV) discounting by maybe some small percent due to the fact that money now is worth more than money later, and that money in full upfront is also worth greater than the same amount (or even more, for some definition of "more") in recurring payments.
If you offer a good LTD, you should not be losing any money on average than you would have otherwise gotten from recurring payments.
But what’s done is done. A business unwise enough to offer lifetime free updates is still obligated to live up to that promise. Or to refund it otherwise buy back the obligation.