Thursday, September 15, 2011

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Second Life Has Lost Over 650 Sims & $1 Million in Yearly Revenue in 2011; This is Why SL Can't Survive as a Niche

Second Life losing revenue

Linden Lab has lost over 650 private estate regions in Second Life just this year alone, according to Tyche Shepherd, who tracks SL economics on her site Grid Survey and her essential Twitter feed. This amounts to a loss of over $1 million in yearly revenue for the company, and is yet another data point to a theme I return to often: In order to survive, Second Life now needs mass growth, and dramatic changes and bold strategies, to get it. It cannot survive as a profitable niche, because that niche is slowly but surely eroding.

Since January 2011, Tyche told me last week, “Private Estates regions number 24196 , that's 647 down since the start of the year.” Since then, 7 more private sims have gone away. If these land owners were paying a full $300 monthly fee, the total loss would amount to around $2 million in yearly revenue gone. However, Tyche estimates the annual loss is closer to $1 million.

“Comes to about US$1,008,000 down on yearly run rate,” she tells me via Twitter. “58% of private estates are [higher priced] Full regions, so that's why estimate isn't as high as US$1.5-2M.”

I asked Linden Lab about the decline of private sims, and spokesman Peter Gray insisted to me that the loss wasn’t as significant as I thought (see quote below), but didn’t give many specifics. In any event, what’s clear is this: As I wrote back in April, private sim ownership in Second Life is unsustainable as a revenue source for Linden Lab. According to Gray, just under 80% of the company’s revenue is from land fees. So unless the company can replace this revenue with mass growth of monetized users in the next few years, continued erosion of this revenue base will finally eat away Linden’s profit margins.

SL improving Premium subscriptions

This is almost surely why Linden Lab is now heavily bolstering and promoting its Premium, monthly subscriber offering: To shift away from virtual land as its main revenue source. However, there are not enough active Second Life users now to supplant that waning sim revenue. Premium monthly subscriptions are just $9.95 a month. If 400,000 SL users became Premium subscribers (and there were less than 100K in 2009), that would only amount to roughly half of Linden Lab’s current yearly revenue of $75 million.

For SL’s dedicated users, that’s the bad news. The good news? Linden Lab does seem to be making the bold moves that will gain those mass users, such as adding gaming systems. (Something SL founder and Chairman Philip Rosedale himself now endorses.) But make no mistake: The only future for Second Life is several millions of users, or none at all.

After the break, a detailed breakdown of the private sim loss, with Linden Lab’s Peter Gray on this decline in sims:

Here's SL's private estate week-to-week gains and losses since January 2011 (my rough tally) via Tyche Shepherd's Twitter feed:

  1. - 43
  2. - 17
  3. - 55
  4. - 56
  5. - 22
  6. - 34
  7. +23
  8. - 31
  9. - 10
  10. - 67
  11. - 27
  12. - 65
  13. - 8
  14. - 13
  15. - 74
  16. +19
  17. +7
  18. -34
  19. -81
  20. -31
  21. -6
  22. -33
  23. -15
  24. +69
  25. -10
  26. -8
  27. -66
  28. -52
  29. +24
  30. -9
  31. -21
  32. -17
  33. -5
  34. -7

Linden Lab’s Peter Gray on these losses: “The total amount of private land owned over the last year has declined minimally and is consistent with changes in total world size as reported in ourquarterly economic blog post. However, the impact on land revenues does not track with volume owned due to price changes which can offset them. Also, land revenues represent only a part of Linden's total revenues, so any change there represents an even smaller impact overall and can also be offset by positive changes in other revenue items."

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Wizard Gynoid

The much touted (by @rodvik) increase in new signups is not translating to higher concurrency or more land. It might be encouraging if those noobs purchase premium memberships. To what extent is that happening, I wonder aloud?

Ordinal Malaprop

This does not follow as an argument. If SL is losing lots of private estates, perhaps what LL needs to do is look at is why fewer people are prepared to pay for private estates than previously.

It seems to me that focussing on "mass growth" - or at least, policies designed to elicit mass growth - in the last few years has been one of the main problems.

IntLibber Brautigan

As I predicted long ago. Tyranny and oppression results in economic stagnation, film at 11.

Arcadia Codesmith

VW real estate is cheap and plentiful outside of SL -- some virtual worlds literally give it away. Maintaining the same tier is going to price SL out of the market altogether.

I can't see land ownership stabilizing at anything more than 10% of current tier rates, and even that much is a stretch.

Transaction tax is where the money is.

Mark C

What kind of arithmetic is Tyche doing? 647 @ $300 is over $2.3 million a year, not "as high as $1.5-2 million."

Which means that the 42% of the sims that are full-priced ALONE are nearly $1 million per year ($978,264 to be exact). Even if the other 58% are free. Which they aren't.

Mark C

And actually, now that I look at it, you and/or she has the numbers backwards anyway. Full regions are the EXPENSIVE ones. Homesteads are the cheaper regions. And full regions are nearly 58%.

Henri Beauchamp

If LL was less greedy (sim pricing is INSANE !), more geared towards keeping its user base by not shoving down their throat things we don't like (AKA viewer 2/3), and reinstating (and following to the letter) their original motto (remember ?... "Your World, Your Imagination"), then perhaps SL would be as healthy as what it was when I joined, back in 2006...

Ananda Sandgrain

"The only future for Second Life is several millions of users, or none at all."

You've been making your case around this base assumption for a while now. It's not true of any comparable virtual world product, like sandbox MMO's that operate for years and years with populations of only 100,000 or so. So why, exactly, do you believe this?

Nica Pennell

If Second Life's lunch is being eaten by new virtual world startups, then logically it would seem that it's entirely possible to run a successful virtual world with a small population base. Otherwise those new startups wouldn't be able to compete with SL.

Missy Restless

It's a 2.6% attrition rate during an extremely harsh global economic environment. Alternate revenue sources (e.g. premium membership) do not have to assume anywhere near 50% of revenue. If alternate revenues can even approach a 5-10% of total revenue then they will more than offset land based revenue decline. I believe your dire portrayal is not only inaccurate but contributes to the problem.

Hamlet Au

"It's not true of any comparable virtual world product, like sandbox MMO's"

Architecturally and operationally, Second Life is not comparable. And as I said in my April post:

"It’s not public knowledge how much profit Linden Lab currently makes from Second Life, but a reasonable guess is $5-12 million a year. And when the attrition of private landowners begins cutting into that profit, and if that revenue is not replaced by other streams, it’s likely Linden Lab’s corporate owners will begin taking drastic measures."

Lukemary Slade

LL seems simply not to have (yet!) a good business model or a business model at all. That's it. SL is a niche and it will be untill anyone can understand how to use this software. Could it be profitable in the future? It depends on how good LL will be in customer relationship. If LL will be able to enanche its customare care and ignite a new mood in its potential customers, like Apple was able in late '80s, it will survive (and earn money). If not, there is a plenty of "good projects" doomed by new ideas and competitors. They call it market, babies....

Leonel Morgado

The main reason this is happening is that there are plenty of free or very cheap OpenSimulator alternatives, which although buggy, unstable and feature-limited, provide "good enough" experience for most cases. Linden Lab simply cannot sustain the current insane prices. If you cannot sustain a business like LL cannot sustain such a service with about 100.000 paying users and minimal land fees, there's something seriously broken with its cost structure.

GeneVincent Tigerpaw

One problem with premium accounts for UK and European users is the VAT added to the price. We pay more than users in other parts of the world. As a service based in the US, why are we paying this extra amount? It does reduce the number of premium account users signing up.

Loki

need land to implement 'gaming systems', need people to pay and play gaming systems.

Hitomi Tiponi

I am sure several businesses would love to be only suffering that sort of fall in revenue in these hard times - have a look at the other MMOs that have been out for many years. Considering that most people are playing SL with disposable income it is surprising how well it has done.

Ignatius Onomatopoeia

Bugs and all, OpenSim answered my teaching needs for about $25US a month for a full region.

The closed-grid worlds I know, based upon forks of the OpenSim code, are even more stable. They are not as laggy or buggy as one might have expected even a year ago. This year, I was very impressed by the performance, community, and UGC in both InWorldz and Avination. Even OpenLife, one of the first dissident worlds, after being plagued early on with tech problems, remains vital for its tiny population. It too is stable and fast now. These worlds do not advertise except through word of mouth inside SL. I think that along accounts for their relatively small user bases.

I don't want SL to fail; it has been a great place for educators to gather in large numbers to discuss our work. Its range of goods for sale is unprecedented (and mostly, cheap). For $200US, we outfitted an educational simulation used by 50 students in three classes. I could barely buy them all coffee and doughnuts for that.

But tier fees are awful, even if land prices are currently great.

Most of us who comment at NWN know the problem. LL could have made things work with an active user base of 100K. But their chosen revenue model now works against growth or retention.

They need to cut tier to retain users, and yet they cannot afford to cut tier.

Eddi Haskell

Noral economic rules do not apply here. I think this loss is insignificant to Linden in the broad scheme of things.

SL is privately held. A loss of 1 million US dollars by the ownership of SL, which includes some very wealthy individuals, is insignificant if there is an anticipation in the growth of the entire virtual world sector.

There are concerns that would by up Linden Labs tomorrow if the price is right. Linden Labs is counting on staying around for the mid-term at least (3-5 years) since virtual world usership continues to increase in total, and the world economics allowing for discretionary income on the part of "power users" is bound to improve over the next 5 years - how much of this cutback is due to the fact that over 60% of all Americans feel financially pinched right now, for example?

Also, SL offers something in exchange for high land rents that no open world or Blue Mars can -- other users which can be found and social networking. In addition, there is a market to sell items too, one that is missing from other places.

I see things slowly improving for Linden, in the mid term, which will allow them to continue until virtual worlds and related applications become "hot" again at some point in the future.

Eddi Haskell

Noral economic rules do not apply here. I think this loss is insignificant to Linden in the broad scheme of things.

SL is privately held. A loss of 1 million US dollars by the ownership of SL, which includes some very wealthy individuals, is insignificant if there is an anticipation in the growth of the entire virtual world sector.

There are concerns that would by up Linden Labs tomorrow if the price is right. Linden Labs is counting on staying around for the mid-term at least (3-5 years) since virtual world usership continues to increase in total, and the world economics allowing for discretionary income on the part of "power users" is bound to improve over the next 5 years - how much of this cutback is due to the fact that over 60% of all Americans feel financially pinched right now, for example?

Also, SL offers something in exchange for high land rents that no open world or Blue Mars can -- other users which can be found and social networking. In addition, there is a market to sell items too, one that is missing from other places.

I see things slowly improving for Linden, in the mid term, which will allow them to continue until virtual worlds and related applications become "hot" again at some point in the future.

Androgyne Michinaga

It is not good that SL has been losing some private sims, but the fact is that there is a recession on now. This decline does not mean that private sims will continue to decline at this rate until there are none. Therefore, LL does not have to make up all of the shortfall that you are indicating with premium memberships.

I very much hope that SL toughs it out through the recession and comes out on the other side. To me, your article seems to be overly and unhelpfully pessimistic.

bongo

"givin some yoko" a badge that says "mayor of crapland" dosent make him able to afford playin "crapland" any better. Unless of course you follow Ham Economics 101, which is work/hype for people who suck others dry.

Any failed Vampire Social Games lately?

Recka Wuyts

I agree with Androgyne Michinaga and Eddie Haskell...in part. We are in a world wide recession at the moment and the fact that tier fee pricing has always been a major complaint among land owners suggests that something needs to done in order to encourage growth. New premium account residents are more likely to buy land, even in this economy, if the price is right.

That being said, Mr. Haskell is correct. LL, a privately owned company, needs only to hang on; cut costs, lay off some employees, shut down a few hundred servers, pack the other servers to the max and hold on.

If what is happening in the merger markets with companies like AOL and Yahoo....and Google gobbling up whatever they want, it is just a matter of time before Second Life is bought and then everything you thought was going to happen to this virtual world will change. And it will never be that same again.

So enjoy this while you can. Marvel at how beautiful everything is here and how diverse our culture is, be joyful, be happy. Be here now. Mesh has finally arrived, explore, build, be.

;-)

spyvpsy

I call this, cause ~> effect, world wide recession (mainly the biggest cause atm, I guess), business strategy, between other reasons. We don't need to talk much about LL than positive feedback, at least for this last year it gave another orientation to old residents/new residents. As far as I know, viewer became easier (or more intuitive, although I still have difficulty, I guess other granny avatar haves to!). Older residents don't have too much motivation to rent or buy private SIM, I guess it have to do with, since the massive marketing by LL about the Linden mainland, people don't have money for privt. SIM but rather a mainland parcel, if really needed, tho.

The market and business have some particular behavior in market/economics crisis, when applied the right strategy. one could be make a cut of on the tiers and lower premium accounts. Invests really on what gave to the company, return, in this case increase the number of people feeding the LL internal bank. More money circles, more money they do! Make much faster the LL transaction. Although people charge their accounts, some sells huge amounts of LL to real money. Basically "charge all the transactions, don't pay the Route!", could help but not the big deal.
and we have to remember also that the big wave of SL and virtual world it's getting lower, as predicted last year.

Whether big is the grow, the biggest is the fall.

Emperor Norton

So to mass market Second Life world require duming down the interface while at the same to spoon feeding content for the notorious lazy and willfully ignorant general public. In other words destroying everything about Second Life, that make it Second Life.

It would make more sense for Linden Lab to accept Second Life is just a nich product, make another game orientated towards the mass market and use the new game to feed people into Second Life.

Metacam Oh

Get rid of Second Life Marketplace and I bet you see the land recession start to turn around a bit. :) Until then, in a recession why would I rent a full island to display my products when I can just put them on the marketplace

Will Szymborska

"Get rid of Second Life Marketplace and I bet you see the land recession start to turn around a bit."

@Metacam Oh

Get rid of marketplace and I bet you will see people just stop buying things altogether. Who's going to waste their time trying to find all the stores that sell these things they want? I have run a in-world business for 5 years and my inworld location probably accounts for less then a quarter of my earnings.

Marketplace may make take away from some land sales if people don't own inworld stores but considering the majority of people are here aren't active PROFITABLE business owners, what difference does it make? They all come here to enjoy their time, burn some cash and then stay or leave.

Who is going to bother with an inworld location anyway then? Secondlife Exchange/ Marketplace/ SLX has been around since 2007. Its almost 2012 over here; who's going to waste their time teleporting all over the place to find a specific product? Facebook, Twitter, Ebay, PayPal Etc. People don't want to waste time, they want things right away. Its a good thing Marketplace exists otherwise a lot of businesses would get no business.

tyche shepherd

I would like to add that the reason why one can't just take the net difference in grid size and use that estimate change in Tier is because as the Labs Peter Gray says in Hamlet's article, this doesn't take into account changes in distribution of different types of regions over the same period .

To get round this issue I calculate Tier using known distributions of Full/Homestead/Openspace regions at specific points in time, I do this as part of my monthly Private Estate Surveys which I report on sluniverse. I factor in known grandfathered rates for Homesteads and Full regions, but don't account for any academic discounts .

The change in tier reported here is based on the difference between that calculated in my December 2010 Survey and the one I ran in August 201.

During these 7 months, the vast majority of net loss has been amongst Homestead & Openspace regions rather than Full regions (partially buoyed up by a top 20 estate who has a policy of buying up homesteads and converting them to full regions) This, coupled with a small but growing share of remaining Homesteads who are at the new non-grandfathered rate accounts for the smaller estimate of lost tier than a cursory calculation based on just the net change would indicate.

You can find details of my August survey here which goes into a lot more detail http://www.sluniverse.com/php/vb/virtual-business/8523-new-sl-sims-past-week-49.html#post1361794

Whilst I've documented and reported on a very slow but definite shrinking of the Grid over the past year or so,I personally don't feel this is a major issue for the Lab. Based on the 7 month run rate an annualised 2.8% drop in revenue of LL's core product is something for them and us to be concerned with but in the current financial climate it could be a lot worse.

tyche shepherd

*8 months not 7
*2.6% drop not 2.8%

Mea culpa

Hamlet Au

Thanks for the extra background, Tyche. I do think a 2.8% drop in revenue over a year (it'll probably be over 3% by the time 2011 is out) is significant, as that drop is almost certain to continue over the next 3-4 years.

"Full regions are the EXPENSIVE ones."

Mark C, that's right; I misread Tyche's Tweet and originally said lower-priced, but have corrected that.

jo yardley

A possible solution for SL would be to create a new tier system.
They need people with full sims to pay the full tier to keep going but they could offer discounts for people who buy a second, third, fourth (etc) sim.
I own a full sim and would be very tempted to buy another one if I could get it at a discount price.
Another option would be is to offer people who own a full region and pay tiers to get their premium account for free.
This would cost LL a little but get them a lot of goodwill and may make it more tempting to get a full sim.

I think there are many possible ways if LL to make it tempting to buy a full region that doesn't have to cost them (much) money.

Ananda Sandgrain

"it’s likely Linden Lab’s corporate owners will begin taking drastic measures."

I was speaking in terms of comparable experiences and fan bases, but anyway... I really would like to know if this is some sort of knowledge you have about the personalities and attitudes of Linden Lab's owners. I ask this because who in their right mind, having a company with over a billion dollars worth of revenue, would start talking like "we need to shut everything down and destroy all our customers' hard work and creativity!" over the loss of a couple million dollars of that revenue? It sure doesn't make sense looking in from the outside.

The question I really want addressed is the "all or nothing" attitude, when we already have much much smaller grids like InWorldz plugging along.

o.O

can you define what SL is within one precise sentence? (like you can with facebook or WoW)
then you know who your potential customers are, how many there are and how to target them with advertisement... for catching them for growth.
but... as far as i know.. nobody up to now was able to define what SL actually is and therefor it never could be thrown into a certain category, never really associated with a catchy image...
actually SL can never mass-grow due to its basic lack of being define-able... which actually makes it so interesting for the people who use it.
Give SL a reason and it can grow. Give SL a reason and it will die.

AdrienPfalz

Secondlife needs to stop worrying about profit. They should keep developing the gamee, put more money in, fix the lag problems and it will result in more users being comfident in their sims and products. Also they should be more consistent with the economy and care more about the community.

Hamlet Au

"I ask this because who in their right mind, having a company with over a billion dollars worth of revenue, would start talking like 'we need to shut everything down and destroy all our customers' hard work and creativity!' over the loss of a couple million dollars of that revenue?"

I'm not sure where that billion dollar revenue figure comes from, LL reported just $75 mill last year.

To answer your question, if Linden loses its profit margin, my educated guess is the investors will do some or all of these things:

- Make even more drastic staff layoffs than the 30% cut last year.
- Cut back nearly all production and development of SL.
- Sell off the company or just SL to an online game publisher or another entity.

The investors were almost certainly expecting to have an IPO or another huge liquid event years ago. As that gets less and less likely, they'll probably want to cut their losses and sell. They could likely make most of their investment back from selling. Or, they'll cut back the company's overhead as much as possible, and frankly, bleed the remaining sim owners, until they get their investment back that way. (That kinda seems like what they're doing now.) In either case, SL will wind up a shell of its former self, or worst case scenario, just not exist at all.

Ciaran Laval

@GeneVincent Tigerpaw "One problem with premium accounts for UK and European users is the VAT added to the price. We pay more than users in other parts of the world. As a service based in the US, why are we paying this extra amount? It does reduce the number of premium account users signing up."

We're paying this extra amount because people in Brussels have their noses firmly in the trough, this is all to do with greedy politicians and isn't in any way, shape, or form Linden Lab's fault, their only fault was the way they introduced it (I found out whilst checking my account balance one day, they hadn't notified us).

The European Union are simply greedy, complain to them, not Linden Lab.

Arcadia Codesmith

You can say, "it's just the slow economic recovery", but that doesn't change the fact that lower-priced alternatives to Second Life have been gaining ground at a crazy rate even as Second Life loses paying customers.

You can say, "Linden Lab shouldn't be so greedy", but as a for-profit corporation its entire reason for exisitance is to maximize returns for owners and stakeholders.

So tier rates have got to be more competitive (for the end user: sorry, barons).

But there have to be sufficient revenues to make up the differences. Most of that will come from volume; if average users can afford a full sim (say, for $15-$30/month), I wouldn't be surprised to see a tenfold increase in sim ownership.

Here's one piece of tech that would make that more achievable: instancing. Most sims don't need to be persistant if nobody is there (exceptions include breeders, but persistance could be a premium add-on).

Allowing sims to load on-demand means you can run many more sims on far fewer servers. It also makes it easier to design and deploy space-intensive applications like RPGs.

SL can survive and thrive in a more competitive market space, but its not going to get there if we can't (cliche alert) think outside the box. Clinging to the current pricing structure (and resultant elitist landowner mentality) is failsauce.

Jeremiah Whitfield

If LL get's rid of the marketplace a new one like Xstreet or SLBoutique will simply pop up again.

It's a sign on the wall that SL is just to hard to use for most users.

anotherdeadavatar

So many experts, so little time. ;)

Gwyneth Llewelyn

Hamlet, at a profit rate of 5-10 million US$ annually, LL's investors have long ago recouped their investment, probably 5-10 times over, which is rather good in the venture capital business. I wouldn't worry about LL's investors, they're the happy ones in this whole business. When Bezos and Omidyar left the 'Lab, they got way more out of LL than what they had invested, and the current group of investors haven't put a cent in LL — they just reap the rewards :)

So that's not an issue.

A shrinking landmass is a psychological problem (there is nothing wrong in getting rid of "empty sims" anyway), not truly a financial one. It makes residents grumble and complain; it makes journalists worry; and that kind of negative feedback cycle will only make more residents sell their land and leave, even if they haven't got a logical reason for doing so. But they have a psychological reason, and that one is far more harmful than "reality".

I share the feelings about LL's dilemma: they need to cut tier to sell more sims, but the only thing that they cannot afford to cut is tier. So what did LL do so far? Diversify the source of income. Currently this means the fees from the LindeX and from SL Marketplace. The latter, however, as it becomes more popular and makes more transactions will give residents a bigger incentive to close their shops and drop even more sims off the grid, so the long-term strategy is hard to predict. I can imagine that the 2.8% loss, or whatever it may actually be, can be compensated by increased sales from the SL Marketplace, but for how long?

The strategy to attract more Premium users with mass advertising (recently I was told that LL is now even using Google AdSense and not limiting themselves to the Google Affiliate Network) is interesting, but LL really requires to enhance the "privileges" they're giving to the Premium users in order to succeed. Every year I ask myself why I bother to pay my Premium fees. And every year I remember that I still get the L$500/week stipend (unlike newer Premium residents, who just get a meagre L$300/week), which, although it doesn't compensate the US$72 I pay yearly, is something that, once lost, I will never get back again. So I remain a Premium user out of stubbornness, not because it's worth anything to me.

I have no idea what LL can give Premium users without being accused of "favouritism". But apparently if their strategy is to get the million regular residents pay for their accounts in order to compensate for the loss of region tier fees, well, then they really have to give Premium users a huge incentive. And it doesn't mean restricting non-Premium users — that would not be fair — but really giving Premium users something "worth" of Premium-ness.

I've been noticing that with the introduction of Prim Equivalents for meshes, and the upcoming "Land Impact" algorithm (which might even be extended to sculpties and normal prims...), knowing how much land one needs will be seriously challenging. Now this can be a mixed blessing. On one hand, a more cost-based approach might mean a better allocation of resources — even if more sims are dropped off the grid as a consequence of LL's eventual policy change, the remaining ones might be better handled with less infrastructure, thus increasing LL's margin on what they charge, and compensating the loss of profit. Getting a 3% profit increase by improving resource allocation using their server farm is by no means impossible to do — it's well within the abilities of most engineers working as system and network administrators for Linden Lab, with a helping hand from a policy change regarding resource consumption.

But if LL doesn't go that route, it means figuring out more ways to generate income streams. Let's be creative! :) For example, I'd love to pay Premium to get a gwyneth.llewelyn@secondlife.com email address ;) (an old dream of mine). US$72/annually is probably very expensive just for that, but I pay for some "nice" email addresses I've got for other purposes US$30/year or so. And what about having your own WordPress blog running under my.secondlife.com/avatarname (and not just the Streams)? While AvaLine was a failure (who did ever pay for it?) and I have no idea if LL's "voice morphing" solution generates any money, I wonder if all those ideas couldn't simply be part of the Premium package deal. Enhancing it with a LOT of functionality might be able to attract enough Premium users, I don't know...

Still, the issue is that a shrinking landmass will naturally make residents worry. And to revert that, tier must go down, which is exactly what LL cannot afford to do (not now, and probably not ever!). The only thing that comes to mind is to seriously reconsider re-engineering the whole infrastructure and run sims way more efficiently and with a higher density — this might allow a reduction of tier prices if and only if the running costs get dramatically reduced as well. If one cannot attract more customers, cutting costs is the best solution.

Firing staff and freezing development is hardly a good strategy in this scenario — it just means that eventual cost savings from a different infrastructure will never be accomplished since there is nobody to implement them!

Hamlet Au

Gwyn, my understanding is that the original Linden investors haven't taken much profit. Instead, they allowed that profit to go into developing Viewer 2 and other initiatives, in the hopes that this would lead to massive growth and an IPO. Instead, they're looking at a declining profit margin based on a revenue model they can only bleed for so long.

Krinkles Q. Klown

30% staff reduction. Dwindling virtual land ownership. Mainland Moderate land virtually worthless. Zindra move mismanagement. Embarrassment over adult content. Adult content makers/land owners death-marched to the ghetto continent. Content theft rampant. Marketplace essentially a failure. Stability issues. Lost inventory. Lost objects. Networking issues.

The list goes on.

The loss of $1 million revenue a month when your company is valued at $249 million is not a drop in the bucket. And anyone who says normal economics don't apply to a virt-world doesn't understand economics. The most basic law of economics is the Law of Supply and Demand. The demand for SL® is dropping, steadily and inexorably. Retention numbers are a joke.

Here's another joke: Linden Research Inc.'s service levels. 5 to 10 business days to respond to a ticket from a premium account or land-owner. Foolishness.

Of course LRI's Peter Gray is going to pooh-pooh the drop in revenue. "There's nothing to worry about! The ship is unsinkable!" cried the good Captain of the Titanic. We know where that attitude led.

Virtual junk and exclusive sandboxes ain't enough to win over a customer into paying $9.95 a month. I talked to 24 non-prem customers about why they don't go prem. Invariably, the answer came back in one way or another, "I don't see any value in it."

Service + Quality = Profit. Ask the Japanese. They learned that from an American.

(Too bad LRI has their model backwards. Companies don't exist to serve their Boards. They exist to serve their customers. Philip Rosedale didn't create SL® to get rich. He had a idea that put a fire in his belly. And he figured people would buy it. And they did. Along the way, Phil caught "George Lucas Syndrome". His greed overshadowed any creativity he had.)

colosan

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