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Jenious
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So, a friend and I watched Batman tonight (by the way, a great movie) and on the way home I decided to throw out my opinion based on loosely gathered data tidbits that theaters make most of their profit from the concession stands, not the movie ticket sales. This led to a discussion that said it wouldn't make sense for somebody to start a company with most profit coming from a secondary source instead of the main attraction. After all, what smart business man would start a company that could barely break even on its main product? Well, how about amusement parks, game consoles, gas stations and more?
So, here are some little known facts about gas stations (the primary source to show that businesses can start out knowing their attracting product won't make them money. Credit card companies charge 1.9%-2.2% + $0.10 per transaction. Gas stations are selling gas for approximately 15 cents/gallon above cost. After expenses and a 9-12 cent/gallon credit card fee, gas stations make very little on gas. Some quotes from various news articles:
"Jeff Lenard, spokesman for the National Association of Convenience Stores, estimates that gasoline accounts for 70 percent of a typical station's revenues, but only 30 percent of its profits." - http://www.msnbc.msn.com/...
"'For most gas stations, it's the convenience store that makes the money,' said Sue Nelson, who with her husband operates Fridley Amstar Auto Care" - http://www.startribune.com/...
So, the argument is that it is possible and even a good business decision to start a business offering a core product/service, but making money off of something completely different.
What I would like to see is some data on my original opening statement that theaters make more money from concession stands than movie tickets. Any takers? Oh, and how many people would be willing to start a risky business where your guaranteed revenue isn't enough to support the business and rely on an afterthought to be successfully profitable?
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Profilepilgrim337
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I think you hit a major nail on the head. Offering a core business product while only making profit on secondary products is the heart of Open Source Software (OSS) and has proven successful in many other industries (e.g., gas stations and theaters). The OSS business model, which I am not an expert on, says that one should release a core product for free with community support and only charge for customization. Using the correct license has the great benefit of allowing anyone to join in and add to/fix the product without fear of losing his or her work (kinda like a snowball). It really levels the playing field and produces good software. Businesses that require customization (like all do) can pay for that labor through consultants and support contracts.
Sadly, as software has gotten so complex there is no money in _good_ software development. One major company has shown by actions that time and time again the only way to turn a profit (survive) is to release rushed and buggy software (see Vista) with the hopes that users will buy it and thus provide enough capital to fix the known problems. In other words, get users to pay in advance for software that may/or many not become stable.
Alternatively, we have stuff like Linux where many coders get together with the desire, first, to create a good product. Creating a good product benefits all businesses _and_ since there will always be a need to customize products there will always be a steady stream of support contracts for consultants. Additionally, small operations (like Universities) that have good programmers but cannot pay for software can use the full power of the Linux operating system and can customize it directly. Open Source Software, imho, is really about the freedom to develop good software.
Also, open source development has lead to much less buggy software and has created some amazing products. For example, 4 years ago, one person estimated the cost of re-developing the Linux kernel (just the kernel!) at $175-600million: http://www.dwheeler.com/...
Another estimate says that it will be worth US$1 billion by 2009: http://www.informationweek.com/...
Just my $0.00000002 million 
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