The Shareware Model Nobody Remembers

Before SaaS subscriptions, before app stores took their 30% cut, before venture-funded startups burned cash for "growth," there was shareware. Try before you buy. Pay if you like it. An honor system that worked for decades. Modern developers have forgotten what that model taught us.

I ran BBSs in the 1980s where shareware was the primary way software spread. When I was running boards, I watched the model evolve from 1982 through its golden age in the 1990s. After 45 years in tech, the lessons shareware taught about distribution and monetization are more relevant now than ever.

The Three Fathers of Shareware

Shareware was born in two places in 1982. As The Digital Antiquarian documented, Andrew Fluegelman, a publisher in Tiburon, California, created PC-Talk. Jim Knopf (nicknamed Jim "Button" because Knopf means button in German), an IBM employee in Bellevue, created PC-File. They didn't know each other but had invented the same idea.

The model was simple: distribute software freely, ask users to send money if they found it useful. Fluegelman called it "freeware," describing it as "an experiment in economics more than altruism." He asked $25 from satisfied users.

When Fluegelman and Knopf discovered each other, they collaborated instead of competed. They agreed to mention each other's products and adopted similar pricing. Bob Wallace, Microsoft employee number nine, quit to create PC-Write distributed the same way. Wallace coined "shareware" in 1983.

All three became millionaires from software distributed on an honor system. The model worked.

Why the Honor System Worked

Cynics assume honor-based systems fail. People will just take the software and never pay, right?

I've watched this play out on the BBSs I ran. Registration rates were low. Estimates suggest 90% or more never paid. But "low" isn't "zero," and the math worked differently than traditional retail. Here's what actually happened:

Zero marginal cost of distribution. Once written, giving away copies cost nothing. Users downloaded files; developers paid nothing per download. In traditional retail, every unsold box was sunk cost. In shareware, every "pirated" copy was a potential future customer.

Massive reach. Shareware spread through channels impossible for commercial software: BBSs, computer clubs, disk swapping, magazine cover disks. Users who loved a program became its salesforce. This is the same dynamic that makes underground distribution channels drive innovation.

Community relationship. Jim Knopf deliberately avoided "crippled programs, time-limited programs, and other negative incentives." He trusted users. Many responded to that trust. People who felt respected were more likely to pay.

Lower prices. Without retail markup, packaging, and publisher cuts, shareware could be priced lower than alternatives. A $25 registration for a working program was easier to justify than a $200 retail box.

id Software and the Shareware Explosion

The shareware model scaled spectacularly with id Software and Apogee in the early 1990s.

Scott Miller at Apogee pioneered "episodic shareware": release the first episode free, sell the rest by mail order. As id Software's founders later recounted, when four young developers at Softdisk built Commander Keen in 1990, they sent it to Miller. He recognized brilliance and used the episodic model.

The first royalty check for Commander Keen was over $10,000. More than the team made in months at their day jobs. They founded id Software on February 1, 1991.

Wolfenstein 3D in 1992 proved the model could scale. The first episode was free: 10 complete levels. The full game cost $50, sold direct through Apogee. With no retail middlemen, id kept most of that revenue.

Then came DOOM in 1993. id was confident enough to self-publish, cutting out Apogee's share. The entire first episode, "Knee-Deep in the Dead," was released free: nine sprawling levels. Anyone could download, copy, or share it. Want more? You paid.

DOOM became one of the most successful games in history. The shareware model wasn't just viable; it was dominant.

Distribution Was the Moat

What shareware understood, and what modern developers often forget, is that distribution is the real challenge. Building great software is necessary but not sufficient. Getting it in front of users is hard.

Shareware solved distribution by making users the distribution network. Every copy spread the software further. Every user who showed the game to a friend was marketing. Every BBS that hosted files was a distribution point. The BBS culture that seems ancient now was the infrastructure.

Traditional publishers spent enormous sums on retail shelf space, packaging, and advertising. Shareware developers spent that energy making the free version compelling enough that users wanted more.

The lesson: remove friction from distribution. Make it easy to try, share, and spread. Money comes from users who self-select into being customers.

The Trust Relationship

Shareware worked because it established trust in both directions.

The developer trusted users by giving them complete, functional software. Not crippled demos or 30-day trials with nag screens. Real, usable software. Users could evaluate properly before deciding to pay.

Users trusted developers by paying voluntarily. The transaction wasn't enforced by DRM or legal threats. It was a social contract: I make good software, you support its development.

This created a different relationship than traditional retail. Users who paid felt like patrons, not customers. They'd chosen to support something they valued. The dynamic was cooperative, not adversarial.

Compare this to modern software: subscription fees whether you use it or not, licensing audits, DRM treating every user as a potential criminal, dark patterns to prevent cancellation. The trust is gone.

What Killed Shareware

Shareware didn't die because it stopped working. It was displaced by models that worked better for certain parties. Not necessarily users.

The internet changed distribution. When everyone could download anything from anywhere, grassroots distribution lost its advantage. Professional marketing replaced BBS networks and disk sharing.

App stores centralized control. Apple's App Store and similar platforms took 30% of every transaction. Developers traded chaos for a curated marketplace. Users traded freedom for convenience.

SaaS eliminated ownership. Subscription models meant users never owned software at all. No need for honor systems when you can cut off access. "Pay if you like it" became "pay continuously or lose access."

Venture capital changed incentives. When companies are funded by investors expecting 10x returns, sustainable profitability from honor-system payments isn't interesting. Growth at all costs requires different models.

The irony is that shareware's distribution innovations (try before you buy, freemium, user-driven growth) were absorbed into modern marketing. But the trust relationship was lost.

Shareware's Modern Descendants

The shareware ethos survives in unexpected places.

Open source is shareware's idealistic cousin. Free to use with voluntary support through donations, sponsorships, or paid enterprise versions. The trust relationship remains: developers give first.

Indie game developers on itch.io sometimes offer "pay what you want" with $0 as a valid option. Pure shareware thinking: trust users to pay if they can.

Patreon enables creator-audience relationships built on voluntary support. The math is the same: most don't pay, but enough do to sustain creators.

Even freemium apps are distant shareware descendants. Though they've often corrupted the model with manipulative monetization shareware pioneers would find distasteful.

What Modern Developers Forgot

The shareware era proved several things that current conventional wisdom denies:

Honor systems can work at scale. Not perfectly, not for everyone, but enough to build businesses. The assumption users will often take without paying is cynical and often wrong.

Trust creates value. Treating users as partners rather than adversaries creates loyalty that DRM never will. I learned the hard way that shareware pioneers who trusted users built stronger relationships than companies treating customers as thieves.

Distribution trumps protection. Shareware developers who worried about "piracy" missed the point. Wide distribution was the goal, not the problem. Every copy extended reach. The dot-com crash survivors built things people wanted.

Sustainable beats explosive. Shareware businesses grew steadily on actual revenue from actual users. No venture funding required. No dependence on infinite growth. They didn't collapse when markets changed.

"The shareware pioneers proved an honor system can work at scale when you give users something genuinely valuable."