Sunday 21 July 2013

Second Life Region Count Falls But Not the Price!

As predicted by Metaverse pundits Second Life, the beleaguered virtual world operated by Linden Lab lost another 9 regions in the past week according to Tyche Shepherd's GridSurvey which took it below the magic 20,000 mark to 19.997. This mark has become a kind of psychological barrier no one really thought would be approached let alone crossed. This portion of the grid is where Linden Lab earns the bulk of it's income from hosting the region simulators but Second Life has actually been in slow decline for several years and is down 4,797 regions since its peak in June, 2010. Regions cost up to $295 a month but just getting a region up is expensive too with an initial charge of $1000 so it's clear the Lab is loosing a lot of their cash flow.

Surprisingly, Linden Lab doesn't appear particularly disturbed by this trend and are even rather upbeat about releasing totally unrelated products to their flagship money spinner and what advances they have made in the platform seem largely ignored, faltering or simply not understood by a lot of the resident population. Certainly, it is doubtful if it would make much difference to the average resident if Linden Lab had never bothered to implement a lot of the updates at all because it should be noted over 80,000 residents had either not bothered or had left it to the very last minute to get the viewer updates we are told are mandatory with the roll out of server side baking. In fact, there has only ever been two basic complaints that mean a whole lot to the majority. Fix the many existing bugs and lag, and reduce the excessive tier pricing for virtual land within the grid.

Linden Lab have a reputation for ignoring the SL resident complaints anyway and their customer service has never been that good but they do seem to think up ways to antagonize their customers on a regular basis
like closing the bug reporting Jira system while imposing what, apparently, the majority don't appear to want or care about. Moreover, it has meant disruptive server updates every week which has been going on for several years and has left all kinds of breakage from scripting faults to inventory losses and periods of unexplained and excessive lag. Most annoying for residents is that all this disruption has been going on while the Lab still expected high tier payments.

Unsurprisingly, since 2009 Second Life has seen a steady decline. In that time a full third of the work force has also been sacked, the former CEO, Mark Kingdom resigned, education and none-profit discounts have been scrapped and the Teen grid closed while allowing children onto the, essentially, adult grid. More recently, with a new CEO at the helm, the focus of the company has gone from virtual worlds to investment in the development of video games. Unfortunately, the resident population of Second Life are a rather conservative bunch. They accept change if it clearly benefits them but the kind of change Linden Lab tries to impose dose often actually challenge people who are very set in their ways. But, all of the general complaints aside, the one thing that nearly everyone agrees is an abuse is the excessive charges for land.

When Linden Lab were on a roll around 2006 and the media couldn't get enough stories about Second Life the executives of the company decided to hike prices, increasing the tier on a full (15k prim's) region by a third to $295 and the setup fee to $1000. Later they scraped the significantly cheaper Openspace product and introduced Homesteads with 3750 prim's at around 60% increase in tier making them much more expensive. A lot of people that could not afford the full region pricing had taken an Openspace so they could build their dream home or set up a small store, club or RPG only to see the rent raised by almost two thirds. What happened next was the beginning of the end for Linden Lab's reputation amongst it's long term customers but it would be a long road with many more blunders yet before the grid fell to the magic number of 20,000 paid for regions.

To all intents and purposes Second Life is a social-economic soap opera. There are no end goals like video games have. SL is not a game, pure and simple. It's an adult playground if anything where grown-up's play out all kinds of fantasies and express themselves in many ways. It's a virtual world of endless possibilities that grow out of the collective imagination of the residents. It appears doubtful if Linden Lab executives understands this or if they do at all it might only find expression in contemptuous statements like, "broken people living a rural life". The fact that virtual worlds like Second Life lend themselves to so much creative expression and education seems lost on the company. No, for the bosses it's all about money and how much they can make out of it. They own the product of course and can do what they please but the product is nothing without the residents who spend money. In fact, the residents who interactive with each other breathe life into the product and become an essential part of it. That is the part the company dose not own. That is where the partnership comes in and Linden Labs have never looked upon their residents as partners - just paying customers.

Courtesy of Tyche Shepherd's Grid Survey

To be fair to Linden Lab bosses one can sympathize with the difficulties they face over Land charges. It is not as easy as it sounds to just drop prices given that the whole economic model could be irreversibly damaged by a wrong move. Last Year the Lab held a Weekend give away Special on buying land when they offered a free setup. It worked to some extent and the Lab made sales but the buyers almost certainly had been renting from Land Barons and this, in turn, had a negative effect on the Baron's thinking. The Barons own a huge amount of the land and find themselves swallowing increasing losses on empty sims they can't find tenants for. Offering discounts that appear to damage the Barons is not something to do lightly because its like this; Linden Lab is rather like the Overlord or King who owns all the land and makes grants to his most loyal subjects, the Barons. Privileges in the form of discounts on tier is what they get granted to them. The rest of the population are basically citizens and shop keepers that always pay the top rates albeit in relatively small sums compared to what the Barons are committed to. So the shop keepers make stuff to help off-set tier costs and because those costs are quite high they have to make and try to sell a lot of stuff. The citizens, or consumers, want free places to hangout and perhaps role play but they will buy what the shop keepers sell - some will actually spend quite a lot! The shop keepers and those running venues as clubs, RPGs, sailing and other arts & entertainments generally will more often than not be renting from Barons and so they have to keep working to off-set those costs and try to turn a profit too. They rent from Barons to avoid setup fees and know they are no more committed than the next rent day. So the money moves round the economy.

Now, if the Lab drops tier and maybe makes it possible to buy just one sim then this might upset the balance of the economy for dropping prices too much and too quickly will greatly reduce financial pressure on the shop keepers and venue organizers. Thus, if they don't have to off-set tier costs to the same extent that they were doing this could lead to a drop in the economy and possibly lead to less people bothering to make and sell stuff. In deed, more stuff might be given away free which would create downward pressure on the economy too. Some would take the opportunity to profit of course but if prices are falling eventually the incentive is lost anyway.

Now consider what might happen if more people can buy and own land in Second Life. In Opensim grids land is cheap and people often own vast estates which ends up pretty much empty land since there is not enough traffic to fill it. Second Life is not exactly bursting with traffic these days but if land became very much cheaper it would result in a lot more empty regions and, like Opensim grids, the Lab would find that this becomes a criticism of the platform - lack of users!. Not just that but game organizers and venues all want a slice of the traffic and lowering the entry costs and making it easier for people to set up games and venues just adds to the glut of entertainment for a limited population. Some of the best would probably give up. By contrast, we don't see the same problem in Opensim grids. There is not enough traffic anyway to make many businesses viable yet. What we do see, however, is new grids starting up where selling and renting land is the primary business product. They want content makers and businesses to join them too but, generally, these start-up's focus on an activity like role playing in a particular theme while Second Life plays host to hundreds of themes which all want a slice of the traffic. Opensim traffic is almost invisible, not because there is none, but because it is spread across the Metaverse on so many grids. Apart from the apparent invisibility, there is not a lot of difference between people teleporting  about on the Linden grid or people teleporting between the many Opensim grids that enable Hypergrid travel. The difference is that in Second Life it is easier to setup business but more expensive while a small Opensim grid is cheaper to set up but technically more challenging and not for everyone. But we do see great effort and advances grids like Inworldz, Avination, Kitely and Aurora Sim, developers working away to improve their worlds. Often the developers are in partnership with each other and residents too in ways you wont see between Linden Lab and their residents. And, of course, many grid owners are developers and contribute to the Opensim core. Yes, there are rivalries and competition between Opensim grids. There are shifting loyalties too but still there is a strong spirit of shared destiny and partnership often comes out of that. In fact there is a lot of partnership in Opensim worlds but you wont find a great deal of partnership in Second Life between the Lab and it's residents. The residents are first and foremost merely consumers in Linden thinking. Where the Lab might consider partnership it usually is a one way street where LL gains from the ideas and talents of it's residents but hardly ever puts much money into projects that can truly be called a partnership.

I might be wrong, probably am, but Linden Labs must be struggling with the land pricing decision. They may already be feeling like they are in a Catch 22 situation too for, if they don't drop prices no one is going to buy more land and if they do drop prices then the balance of the economy might be irreversibly damaged so perhaps the answer is to lower tier gradually in steps by maybe 10% percent every six months until it is approximately a third lower than it is today. This should start now and continue into 2014 and perhaps a final drop by the summer. It should drop across the board too and not just for one section of the community so there is no disparity or it will just drive more people away and throw the economy into more confusion and uncertainty.

Another thing the Lab could do is get rid of Linden Homes. In fact, I never did understand why they ever set out to take business away from the land Barons in the first place. It didn't strike me as a smart move making free homes available - most of which are hardly used I might add. I think most residents would have been more interested in an increase in stipend if anything and if it fell to me to decide I would increase the stipend by at least 100 L$ as both an incentive to attract more premium accounts and a way to help stimulate the economy. Yes, the increase would be hard to maintain but it would feed a lot of new money into the economy at a time when budgets are tight in the real world. Hell, the bank rates are the lowest they have ever been so why isn't Linden Lab lowering the costs this way if not on Land pricing?