“Although we currently do not accept L$ in lieu of land sale and maintenance fee payments, we could. Acceptance by Linden Lab of just one month of land sale and maintenance fees in L$ denominated payments could cut the in-world money supply by more than 50%.” – Zee Linden, 14th August 2007 – Second Life Economy Blog Post.
I’ve quoted Zee there, who was the chief financial officer of Linden Lab a while back, because The Marketplace arguments are tied tightly to the tier being too damn high arguments. I’ve argued in the past and continue to argue, that Linden Lab can’t cut tier until they find alternative revenue sources.
Inara Pey has an excellent blog post explaining why slashing tier would be problematic: Tier Cuts : Looking From The Lab’s Perspective. There are some eye watering figures on how much income Linden Lab would potentially lose from slashing tier by a third: “However, were the Lab to cut tier by one-third, they immediately slash monthly private region revenue by $1,400,520. That’s equivalent to 4,747 full private regions vanishing from the grid – 1.6 times more that the total number of private regions (full, Homestead and OpenSpace) lost in 2012.”
This is the stark issue facing Linden Lab and one which explains why tier is unlikely to be slashed anytime soon. However this doesn’t mean nothing can be done, Linden Lab need to get their thinking caps on but a couple of areas which could be investigated are with regards to timed usage and greater use of Linden Dollar sinks.
In my previous post I suggested including inworld items in Marketplace search, with Linden Lab getting a commission from sales of those inworld items. How about further expanding upon this and saying that if you opted for a higher commission, that commission could be used to offset some of your tier costs. Now the problem with sinks (and Marketplace commission is a sink) is that it’s hard to evaluate how much revenue it raises for Linden Lab because it’s not direct income, but as Zee’s quote at the start of this post points out, in theory Linden Lab could accept Linden Dollar payments in lieu of land sale and maintenance fee payments, that was the case in 2007 and I’ve seen nothing to suggest it still wouldn’t be the case.
There was once a merchant survey from Linden Lab that asked if people would be interested in free mall space inworld if Linden Lab took commission from sales, I think it may have been as high as 30%, but the idea about using Linden Dollars for fees is certainly not new and has been kicked around Linden Lab for a while.
Another area Linden Lab could examine is charging sim owners a pro rata fee, so you’re not dinged with the full USD$295.00 fee a month for a private region. This could work along the lines of you always needing a balance of USD$295.00 in your account, as private tier is paid ahead (unlike mainland which is paid behind) this could work by the owner paying USD$295.00 first month, but if during that month they only had their sim online for a period which billed them USD$195.00 their next due payment would be USD$195.00, which would be USD$295 – USD$100 unused fees. This way people could decide they only want their sims online for certain hours a month.
The problem there being that Linden Lab would take a revenue hit, the challenge would be whether it perked interest for people who have never thought of owning a sim due to the high tier costs, to decide that with managed billing, they could actually afford a sim.
Whatever happens here, the tier issue will eventually come to a head. Tyche reports that we lost another eighty six private regions this week, however we still have a very healthy 20,835 private regions on the grid. There’s plenty of time for Linden Lab to do something, income is still very healthy, but they do need to consider how they’re going to take this platform forward and addressing tier is a very big challenge, however it’s one Linden Lab need to meet head on. The tier is too damn high!
Pro-rata is interesting, but could need more of a sweetner in order to find widespread favour in terms of “new” land: such as a reduction in set-up fees. As stated in my own post, and as you and I have discussed, these are ridiculously high all things considered, and do present a significant barrier to land entry (vis-a-vis 2011’s “land sale”).
BUT… the rub for LL is that pro-rata could, as you say, hit them very hard. Another problem is that pro-rata works for a limited subset of regions: those primarily focused on RP and live entertainments, etc. It simply would not work for estates offering residental or mixed residential / commercial regions, where the region owner would have no control over people’s coming or goings – not without taking a significant hit in terms of tenants going elsewhere (“you can rent a house here, but only occupy it, mond, Wed, Fri between 8:00pm – midnight SLT…”)
Absolutely, pro-rata is just another choice, it’s certainly not for all use cases and obviously with Second Life being a global world, one man’s 8pm is another man’s middle of the night.
Setup fees should be looked at for sure.
Sorry for the abrupt end to my comment. Unexpected rl visitor caused me to hit the Submit Comment button and log off…
The other point I wanted to make is that given the situation I outlined (and Atlas Programme notwithstanding), pro-rata then becomes fraught with issues for LL as people start making demands for additional concessions, as they don’t qualify for pro-rata benefits but X, Y, and Z do… Hence, from the Lab’s perspective, it’s likely to be a non-starter.
As such, I think your other ideas – advertising, etc., – are far better options for better leveraging revenue “through SL”, as they can be implemented relatively easily and yield almost immediate results. It’s not going to be a huge bankroll as I’ve said in my own piece, but given the daily volume of traffic through the marketplace, even CPM-based ads should yield a comfortable month flow of pocket money.
The problem here is that LL appear to be unwilling to rock the boat at all. Just about anything they do directly with tier is liable to mean their revenue takes a hit. At this point in time they simply don’t have anything to compensate for taking that hit.
The problem is finding the balance where the hit can be minimised to an “acceptable level” as other revenue streams start to come on stream. This is in turn exacerbated by the fact that they are just not in a position to do this – and what is worse, I actually don’t think they will be any time in the near future. Creatorverse isn’t really that big a revenue earner, Patterns won’t be up to full strangth every features-wise or price-wise until the end of 2013, and it is hard to see how either Dio or Versu will be monetised.
So the risk is, they’ll continue to sit tight rather than being in any way pro-active, and that could result in things strinking to the point where any action is going to be too little, too late.
The other aspect to this, of course, is whatever they are planning vis-a-vis “new virtual worlds”. Huble made it very clear via my blog that whatever it is will “Make Second Life users … very happy”.
Could it be that LL are developing something of a “Second Life 1.2”, which is not based on the land model for revenue and which presents a migration path for existing users? It’s hard to see how this would be achieved (and for that reason I dropped speculation from my own piece on tier) – but it might also explain why the Lab do not appear to be taking any action at present.