On January 22, 1998, Netscape Communications Corporation announced it would release the source code to its Navigator web browser. The company was losing market share rapidly to Microsoft's Internet Explorer, which was bundled with Windows. The decision to open the source was a strategic response: Netscape hoped that developer community involvement could accelerate the browser's development in ways the company could not sustain internally. The announcement was significant because Netscape was a major commercial company taking a step toward source availability that had previously been associated almost exclusively with the gnu-project and related free software projects.
The announcement prompted a strategy session on February 5, 1998 at VA Research (later VA Linux) in Santa Clara, California. The attendees included eric-raymond, bruce-perens, john-gilmore, christine-peterson, and other prominent free software figures. The meeting's purpose was to discuss how to take advantage of the moment — how to make the case to the corporate world that source-available software development was a viable and superior model.
At that meeting, christine-peterson proposed the term "open source software" as a replacement for "free software." Her reasoning was that "free" in English created confusion between "free as in freedom" and "free as in cost," and that business audiences were resistant to the word. "Open source" was clear, positive, and corporate-friendly. The group adopted the term.
eric-raymond and bruce-perens went on to found the open-source-initiative in February 1998, with the open-sources-book-1999 appearing the following year as a manifesto collection. The OSI promoted the open-source-definition-schism framing: that the criteria for open source were technical (source availability, distribution rights) rather than ethical. The result was the free-vs-open-source-schism-1998-2007 that stallman has never accepted.
stallman's response was immediate and sustained. His essay why-open-source-misses-the-point argues that "open source" deliberately sidesteps the software-freedom-vs-open-source question: whether software freedom is a matter of ethical obligation or merely practical advantage. For Stallman, the 1998 coinage was not a marketing improvement but a philosophical retreat. The four-freedoms framework that the free-software-definition articulated is not reducible to source availability; it concerns users' rights to run, study, modify, and redistribute — and the claim that these rights matter ethically, not just practically.
Netscape's source release eventually became the Mozilla project, and later Firefox. The browser itself was significant in keeping the web accessible to free software systems, but the organizational and terminological split of 1998 proved the more consequential long-term development for the free software movement.