Open Source Spinoff of Second Life Slowly Smothering Revenue Base of Second Life Itself

Hypergrid Business reports a new high for OpenSim grids, with 144 regions over the past month, and smaller grids attracting new users. Not entirely coincidentally, this news comes at the same time we learn that Second Life lost about 200 private sims in just two weeks, which brings the total loss, counting the 650 gone since the start of 2011, to 850 or so. This is deeply concerning, because private sims represent 80% of Linden Lab's revenue. This is also deeply ironic, because OpenSim is an open source spinoff of Second Life itself. However, in all likelihood, OpenSim isn't adding absolute new users to SL/OpenSim, but merely scavenging from the existing SL userbase, while also undermining Second Life's revenue. To be sure, not all or even maybe most private SL landowners who give up their sims move to OpenSim, but in my opinion we're seeing at least some exile effect in this HyperGrid chart.

And once again, this returns me to what is unfortunately a recurring theme to this blog: Second Life cannot survive as the niche it currently is, for at the moment, it is being undermined by an even smaller niche. The only way forward for SL is to replace its land revenue model with Premium accounts and other revenue streams, and the only way to fully replace the lost land revenue is for SL to have millions of highly active, highly monetized monthly users, not the hundreds of thousands it has now. To pretend otherwise is simply not realistic. And since OpenSim's survival also depends on Second Life's continued health, my strong advice is this: If you do give up your SL sim for OpenSim, at least get an SL Premium account, as an investment in the future of both.

Chart credit HyperGrid Business.

Comments

[Wizard Gynoid]

Rather, these unsurprising statistics simply illustrate that SL's land prices are too high and customers are going where they can get more bang for the buck. Sorry, but I feel no obligation to buy a Premium account to support SL. If Linden Lab is smart enough to offer s service that is of sufficient value to paying customers, then it will survive. I hope it does. Economics 101 says that if you lower the price, more people will buy.

[Allen Kerensky]

I've been in SL since 2004 and on OpenSim since 2008 and I'd have to disagree that there is even a loose correlation between rise of OpenSim regions and loss of SL regions.

Here's why:
Most people running OpenSim couldn't or wouldn't afford an SL region - even if there was no OpenSim alternative. Many (most?) people running OpenSims of their own *were never in the market for an SL region in the first place* because LL prices regions far outside the real of hobbyist or casual owners.

Using myself as an example, I've never been able to afford or cost-justify a region, especially with the steep down payment and requirement to own a full region before being able to get openspace or homestead. So, I've never owned a region, nor am I ever likely to unless I really wanted to run a US$5000+ a year "business" in SL just to pay first year downpayment and tier with some slim profits (which I wouldn't because SL is a horrible business platform, but that's another discussion).

So, I'd disagree on the correlation between "rise of opensim" and "drop in LL regions" - LL caused that themselves by booting education sims who were still happily paying education rates even years after opensim was available. LL caused more *people* (not regions) to migrate to OpenSim through bad customer service and inflicting random policy-based damage on formerly paying customers and their businesses (Zindra? Kicking teens off to merged teen grid? need more?)

The main damage LL has caused themselves is Land Mismanagement... which Jack Linden used to specialize in. You see, anyone looking to buy a sim can easily do the math that the price has stayed the same despite SL growing from less than 100 regions to more than 30,000.

Most other businesses exhibit some price drop through efficiency and economies of scale. But LL kept the price artificially high the entire time, despite becoming more efficient at region management through automation. And the price of web servers and web services is a model that is in stark contrast to LLs, and yet that model is what people expect and compare virtual world hosting services with. LL doesn't get that, and likely never will.

So, in the end - LL pushes more people away through lack of customer service, angering the userbase year after year, and keeping their prices astronomically high (how much for a core???). So, only those with the USD$ to waste can have regions in the first place, and the rest of us run OpenSims.

LL would do well to look to Netscape Enterprise Server to see where this all ends up... but they haven't listened to me since 2006, and I don't expecting them to restart anytime soon.

[Pathfinder]

"...OpenSim's survival also depends on Second Life's continued health..."

Not sure I agree with that statement.

OpenSim currently focuses a great deal on maintaining feature parity with Second Life.

Cut loose of the burden of that parity, perhaps OpenSim would have the freedom to blossom into a truly novel Future of the Metaverse?

[Oddball]

Now I see why LL is letting people buy whole regions without a set up fee!

[Ziki Questi]

Ham, I know people who own *dozens* of OpenSim sims (not sure what you mean by "OpenSim grids"—isn't there only one OpenSim grid?). They're so inexpensive they just create them for fun, and have told me they haven't even visited some of them in ages (plus, many of them aren't even online most of the time). I'm sorry, but I have a really hard time seeing the correlation between that and Second Life.

Furthermore, to even assume that there's a correlation between the number of sims in Second Life and OpenSim is HUGE leap ... where is that data from? Where do we see that the SAME PEOPLE who might be leaving Second Life are flocking to OpenSim?

What percentage of the new OpenSim sim owners are Second Life sim owners?

What percentage of the new OpenSim owners increased their land holdings in OpenSim and *decreased* their land holdings in Second Life?

What percentage of the new OpenSim owners have owned land in Second Life?

What percentage of the new OpenSim owners purchased sims in and also *retained* their sims in Second Life?

MAYBE there's a connection, but this just reads someone looking for readers rather than posting serious analysis. Please. If you stopped looking for the most dramatic headline could be a serious journalist.

[Ziki Questi]

Pardon my initial remark, as when my eyes were bulging out by the time I finished reading your post ... As yes, there are multiple grids running OpenSim ... Regardless, I'm having a difficult time seeing the direct connection that you report between the decline in the size of the Second Life grid and the growth of the OpenSim grid.

[Will Burns]

I agree there is a correlation, however it has more to do with other factors. The OpenSim growth is merely a symptom but not the root, nor would I say that Premium accounts are an answer for a revenue model - if anything, Premium Accounts should be focused on *less* than they are now.

There is likely one good revenue model that Linden Lab should be focusing on right now to bring them into the future and increase sustainability for a healthy platform - and it's the revenue model they routinely ignore, despite being their largest growth asset.

I won't go into those details here, because I (and I'm sure others) have better things to be doing than reading a detailed write-up about it. Suffice it to say, land sales go down, OpenSim goes up simply because it's a dirt cheap alternative, leaving Linden Lab to scratch their rockstar heads over how to fix the draining bathtub. The fault isn't on OpenSim, that's just a symptom. The solution isn't focusing on Premium Accounts either.

It can be fixed, for the benefit of all (including playing nice with OpenSim in the process) - But I suspect I won't see anything close to it before the days when Linden Lab turns into something so off target and scope that it may as well be an entirely different product and platform. Just ask Mr Humble, and his vaguely related side projects at Linden Lab.

I suppose this is what high profile leadership gets you in a platform market they don't actually comprehend.

[Hamlet Au]

"I'm having a difficult time seeing the direct connection that you report"

I didn't say it was direct: I said, "in my opinion we're seeing at least some exile effect". Even if the connection was only a partial, however, it's cutting into SL's revenue base. And the fact remains OpenSim is growing (but not very largely) while Second Life is shrinking (while not gaining many new users.)

[Johnny alt]

Hamlet you said :
'the only way to fully replace the lost land revenue is for SL to have millions of highly active, highly monetized monthly users'

The only way LL are going to attract 'millions of highly active, highly monetized monthly users' is to dramatically lower tier costs.

It's all about land. Land is the game.

If LL lower tier costs, people could 'PLAY' the 'GAME'

300USD to play a game is TOO MUCH. Get real LL.

[Ziki Questi]

> "I'm having a difficult time seeing the direct connection that you report"
> I didn't say it was direct

But your headline says, "Open Source Spinoff of Second Life Slowly Smothering Revenue Base of Second Life Itself" !!

That's not direct? ;-)

We're all on the same page here, wanting virtual worlds to grow. :)

[Madddyyy Schnook]

Well here is one person who has sold 2 island full prim and now renting a 1024 instead. Oh and yes, i am now in the process of moving to a new grid were i will only need one island since they hold 45k prims and lots of other great features.

And i know of at least 4 other business's who have also done the same.

I have been in SL since 2005, written books on Second life and taught many 1000s for free. Now its time to move on to a place with features i want, and more freedom. If LL lowered the pricing instead of lowering the server space i rented then i might reconsider. I know plenty of business's who advertise and demo in opensim and build in sl. money is hence then at least for builders and creators not being respent on hugely overpriced server rental and buggy clients.

[Ignatius Onamatopoeia]

/me does the backstroke in what Hamlet once called "the pre-beta shoals of Open Sim."

Hey y'all...OpenSim grids are not worlds with a critical-mass populace, except for InWorldz and Avination. But OpenSim rocks for building simulations or for RP when you only need a small core-group of users.

SL is a world, and a big one. That deserves respect. But LL is not going to get my tier money when I only need the region for 20 hours in a semester + my building time. I can get a region for 1/6 what SL cost my school...before LL ended the edu discount.

Go figure whom I'll pay.

[bongo]

LAND IS the SL game.. LAND FOR REAL MONEY, LL never got that. and thus all the badges and point ups that you can SIMS online copy and EA hire, wont solve that point.

No one can deal with a 1000 startup- 300 dollar a month game anymore... what do you think this is. 2006? Realife everyone is broke..well except for the Fathers of the LL con... who cashed out.

So now the game has moved onto 10.00 a month sims... and it continues... with slimmer margins and no big casino, just backroom card games.... 1920s meets 1930s all over again.

[bongo]

correction.. YOU gamers never got that Land was the game... LL got it, but hated it.. and its gamers..thus the ultimate fail in all policies that really were about server rentals and service at their core.

[Timo Gufler]

Only if someone could combine beauty of private islands and great geography of mainland. But is it too tough equation? Maybe there will be a grid one day, where this dream becomes true.

[Nanu]

What keeps SL from growing in my opinion cannot be fixed by a new UI, a fluffy 1st hour experience, or low land-prices.
One has to get people by simple psychology. Right now people land with their backpack (=inventory library) at a foreign airport (= help-island/ info-hud) where they don't speak the language, don't know anybody, don't know what to do here etc etc. In other words:one feels completely lost.
Every new player needs to feel at home, needs to feel safe, relaxed. SL needs a 'home' for every player, private, secure ... (not the stupid Linden Homes) ... a bit like in the Matrix ... the white space before you log onto 'mainframe'.
This could be a mini-sim, 24x24 meters/500 prims/ maybe 4 hours temp-rez (to get people to buy land later) ... which is a private space for every av, reachable with a 'home' button highlighted on the UI at any time. Like a home-page, a set-up space, to customize your av in peace, to do first attempts at building, to rezz stuff, test the UI, to get attached to the possibilities
...
All this is not possible right now ... landing among some jerks and you cannot rezz anything ... i almost left again after 1 day in 2007. And whenever i was home-less in SL ... i stopped buying stuff, i stopped building, i stopped logging in so often, i basically almost quit every time that happened.
Simple psycholgy ... give people a private (not accessible, not cam-able, not grief-able) mini home ... a base from which to explore the world ... a secure space to build up empathy with this game ...
my 5 cents >.<

[Ezra]

Hamlet, how long are you going to try and push a message that charging for land is a bad revenue model for Linden Lab while pointing to land growth in OpenSim as proof?

As everyone seems to have to remind you of: OpenSim growth is proof there's a lot of interest in personal land ownership, not any opposite.

Why aren't you publicly asking the question of why OpenSim is growing in regions while Second Life is shrinking in regions? You know its the cost differences. So why not address it? It may not fit your argument towards your ideal image of Second Life but it'd be a genuine and honest evaluation of what's really going on.

A lack of interest in paying Linden Lab for land isn't a problem. A lack of interest in continuing to pay Linden Lab for the prices they want to charge IS the problem.

We the "residents" haven't actually been quiet about the fact that we WANT to give Linden Lab more money, if only they didn't want so much of it per region.

If you really want to use your blog to push real solutions for Second Life stop trying to convince me and others that what we really want is to pay 9 buck a month for 10 steps in one direction of land and a weekly welfare check via Premium Accounts. We're telling you exactly what we want, cheaper tier, and until we get that the consequence of private region sim bleeding will remain.

[Hamlet Au]

"Why aren't you publicly asking the question of why OpenSim is growing in regions while Second Life is shrinking in regions? You know its the cost differences."

Yes, and I've actually mentioned it several times. For instance, in this post:

"How Second Life Land Prices and the Real World Financial Crisis Are Choking Second Life: Dane's Story"

However, it's impossible for Linden Lab to lower its sim prices too much without taking a huge revenue hit, so it's a non-starter to talk about doing so. Linden will do one-time discounts like the one they announced for this weekend, but ultimately they can't change their pricing structure much. Even if they cut their sim prices in half, that'd still be too expensive for most people, and likely not increase total land ownership much... and the company would no longer be profitable.

Also, I'm not convinced there's a large market for virtual land: OpenSim is adding regions but not many actual users/landowners.

[Ezra]

So Linden Lab is the only technology company in the world that can't figure out how to lower costs in order to offer their customers cheaper prices? If somehow they are, then the only thing that's a non-starter is Linden Lab being any kind of a futureproof company at all.

Your "Dane's Story" article is a perfect example of a scenario where lower tier prices would've made all the difference in the world. Didn't the guy say there was a time when the sim actually turned a small profit with donations and all? You really believe tier being halved wouldn't have made all the difference in the world for that person and most other sim owners?

The fact of the matter is we're all still VERY interested in owning land and want desperately to give Linden Lab money for it. We're just losing interest in paying so much for the land.

You can continue to push the idea that getting us all into Premium Account housing projects is the best course of action by Linden Lab, and they'd be a fool to agree with you. Hopefully instead they'll actually listen to we the customers who're trying to give them money for something we want, land, so that we can keep doing what we've been doing by bettering the platform and giving new users more options of places to see and do things.

[Henri Beauchamp]

I said it countless times in 5 years now, but Linden Lab is just too greedy and the pricing for land ownership fees is *insane* in SL.

If they can't lower that pricing (which I very much doubt), then they are doomed in the long term.

[Pan]

"Also, I'm not convinced there's a large market for virtual land"

Not sure I agree with that, everyone I know in SL wants more land but can't justify paying the fees as they stand. It's a dream that is out of reach for most people.

I think they can alter the prices, 200 for mainland and 300 for islands, why is that priced differently? It's a Sim, it should be priced the same. Same goes for those on grandfathered tier, or getting big estate discounts. Level a full sim at 200 for starters and I think more will keep or grab an island.

Closing chunks of empty mainland would help reduce costs for LL too, pass those savings on to the customer.

I would still like to see private islands sold in 1/4 sim/1/2 sim/3/4 sim/full sim regions. That would be a private island, not mainland. Give people a smaller price to pay for their own private space and people will buy, i'd grab more land, I think others would too.

[Cube Republic]

I agree with most statements here, land ownership is to expensive.

[DMC Jurassic]

Well... You were right about one-button click from a user orientation standpoint in VWs.

[Thaiis Thei]

"However, it's impossible for Linden Lab to lower its sim prices too much without taking a huge revenue hit..."

Why? If OSgrid and many others can price land as they do, why can't LL do it? If they don't, they are going to keep loosing sims at an increasing rate.

If LL were smart they would make it easy to move between SL and other girds, and to take your inventory with you.

[Herve Leger sale]

Nice recommendations, you just gained a brand new subscriber. I'm curious if you have any follow ups for this blog post?

[foneco zuzu]

LL knows what they need to do.
Solve the jira problems that are making the ones who paid for full sims and open spaces not being able to use them!
Tiers is a problem, worst is to buy land and still not be able to use it.
LL knows their consumer base is worldwide, and that Real life recession on their majority of users is also a reality.
So LL, solve Jira's and make sure that the few that still pay tiers will stay!

[Arcadia Codesmith]

I own a large home on a sizable plot of land in Lord of the Rings Online. I don't pay a subscription fee.

Upfront cost was a little over 7 gold, which is not insignificant but which I earned in the course of normal play ("free").

There a weekly rental charge of 150 silver... which I earn as a byproduct of maybe 5-10 minutes of play. There's no real world charge ("free").

My lot is in a beautifully landscaped village, with commercial services a short walk away. The interior of my home is instanced -- it's 100% private with no way to get in or see in unless invited.

LotRO has reportedly seen its revenues triple since it went free to play. It makes money selling enhancements to the game experience and access to adventuring areas, as well as premium clothing, mounts and other cosmetic features in the game's "cash shop". I've quite happily and voluntarily spent over $100 on these features in the past year.

Now I'll grant you, LotRO and Second Life are vastly different experiences, and LotRO is limiting in many ways SL isn't (and visa versa).

But my expectation, the virtual world industry standard, is that I can own and control my own residential land without any money out of pocket. Zero. Land is not the product; land is a tool to keep me invested in consuming the product (which is the game).

I think SL's future lies in taxing transactions between residents, in exchange for premium product placement and promotion accessible through the client.

Integrate Marketplace tightly to the client, have some sort of preview feature to thoroughly examine products in-world before you buy, and watch revenues explode even as the demand for ugly strip malls falls off a cliff.

Bonus feature: offer access to Marketplace to OpenSim and other compatible worlds for merchants that choose to participate. Now you're cooking with rocket fuel!

[sirhc desantis]

:) I still smile as I always read this as "SL loses a chunk the same size as (a certain other grid)" with the obvious reaction - meh. Still a great quiet place to experiment and prototype before bringing builds back to SL. And yes Thalis I move stuff between grids all the time - easy if you made it in the first place.

[Dale Innis]

Your headline is annoying enough that it's hard to take the rest of the piece seriously; but maybe I'm just oversensitive. (As you actually point out in the piece, any correlation is highly speculative, and land shrinkage in SL may very well have essentially nothing to do with growth in OpenSim, which makes "slowly smothering" utterly the wrong words when not accompanied by "possibly".)

I imagine LL will continue to do things like this month's estate signup fee waiver, to encourage land sales. It's fun to assume that they are stupid and will either do nothing or do entirely the wrong thing, but it's also silly. They have alot more information about their balance sheet and plans than we do.

The "Second Life can only survive if it gets millions of users" claim is indeed a recurring theme, and just as unsupported as ever. At least you seem to have dropped the "SL must become just like Twitter and Facebook!" thing.

As a mainland fan, I would love to see the Lab lower the tier boundaries (i.e. allow someone paying a given tier level to own a bit more land). That would lower the amount of unowned territory, making the mainland in general more attractive, and tending to lead to more people wanting to pay the Lab to live there.

Maybe I will write a weblog entry about that. :)

[Hamlet Au]

"They have alot more information about their balance sheet and plans than we do."

Yes, and my thinking is based in large part on talking with dozens of Lindens, past and present. All of them confirm off the record that Second Life's land revenue is not sustainable, and that SL needs mass growth to replace that revenue. But this is also evident from publicly available evidence, as I've continually pointed out, but for some reason some people continue denying that reality.

[Ezra]

How is something in great demand and profitable to supply "not sustainable"? That's where you keep missing everyone.

Yes, Second Life is bleeding regions currently but that's entirely due to tier costs, not a lack of demand. If you can't show a lack of demand for land then there's no point in arguing Linden Lab should stop providing and profiting from it.

It's also, as always, a false argument you're pushing to suggest "massive growth" is somehow a competing idea with Linden Lab selling land. Its like saying we need mass fire to replace things that burn. Any massive growth depends on a massive amount of things to do and see. We the users create creatives for one another and we need land in order to build those experiences. If less of us are buying and retaining land, its because land is too expensive, not because we don't want it.

Brave of you to say some Lindens are telling you from the inside that Second Life's land revenue is unsustainable, which implies "all" of "dozens" of Lindens believe Second Life will eventually fail unless selling land is abandoned as a revenue model. So that means we should all be scared to death so long as Linden Lab is selling land, huh? Was all that stuff from Rod at SLCC about Linden Lab being a very health, profitable company a load?

You're the only one clamoring about land sales being unsustainable, Hamlet. For whatever reason you want Second Life to be something else that it isn't now. What that is tends to change every 4 months, but if you want to start speaking on behalf of those invested in the platform as it is, please start pushing cheaper tier as a solution to any land revenue woes Linden Lab has. Not this months "only way".

[Hamlet Au]

"How is something in great demand and profitable to supply 'not sustainable'?"

As I've explained several times already, there's not a great demand for private sims -- only 5500 or so people own them, and about 1000 of their sims will be gone by this year. And as I said in a previous post, this is like saying AOL's dial-up subscriptions are in great demand and profitable.

[Ezra]

That's 5500 willing to pay $295 a month per region and hand cash to Linden Lab directly. That's not the totality of everyone actually demanding and being supplied virtual land. Why gaze so shallow?

You seem to ignore the fact that a whole lot of those 5500 are land barons, suppliers. They'll only demand as many regions from Linden Lab as their renters make worth their while. They aren't bringing money into Second Life they're profiting and cashing out.

The renters however, are the tens of thousands actually cashing their checks from their jobs and bringing money into Second Life and making up Linden Lab's revenues.

For whatever reason you don't want to acknowledge or account for the above. I guess because a fragile reality of only 5500 people actually wanting land and bringing money into Second Life to pay for it would actually support your "unsustainable" argument. Well, that's too shortsighted and worthless an insight to base any subsequent thought off of.

While it doesn't matter to you and so you don't account for it, I'm sure it matters to Linden Lab that Second Life is infact made up of tens of thousands of check cashers that buy L$. That everyday they go on to rent everything from entire full regions to small 512 sq. m. parcels from those 5500 you hinge your doomsday theory on.

You can't gauge the demand for land and the stability of it as a revenue source based on the middle men. If the land barons of those 5500 disappeared tomorrow, new middlemen would appear. That dial-up analogy of yours doesn't work as myself and others pointed out to you in that blog post. A more appropriate analogy would be you asserting that if a convenience store closes, Coca-Cola is screwed because obviously demand for soda has dropped. It'd make as much sense to assert there's dwindling demand for land because those paying the $295 price point are shedding regions. What's the story with the tens of thousands that pay the 5500? What would lower tier, to a point that's still profitable per sim to Linden Lab, do for Linden Lab's bottom line if suddenly an order of magnitude more renters of subdivided parcels suddenly became direct Linden Lab customers and cut out the middlemen?

I highly doubt you're going to give a genuine look into this very real problem of customers anxious to give Linden Lab more of their money, but can't due to too high price points. The market speaks, quite literally in the case of all the comments you get on this blog (but ignore), and Linden Lab gets in its feedback channel, and what we're saying is lower tier prices Linden Lab and please let us give you more of our money; through middle men or directly.

[Hamlet Au]

"You seem to ignore the fact that a whole lot of those 5500 are land barons, suppliers."

I didn't ignore that fact at all, I wrote about it months ago. Trouble is, unless SL starts strongly growing, there's not enough renters to keep most of these big estate owners afloat over the next few years.

Read:

http://nwn.blogs.com/nwn/2011/04/second-life-revenue-estimate-5k-users-pay-80-income.html

While most of those estate owners probably get Linden Dollars from other Residents to cover their tier, through rentals, the number of Residents participating in the economy has remained flat for at least the last couple years. So even a small shift or decline in their overall economic activity would probably be felt by these estate owners.

[Ezra]

The blog post you pointed me to has a comment thread with arguments against what you rehash now. So no need to retread those grounds, whether you listened and understood or not.

And yep, a lack of regions being affordable has a trickle down impact on everyone. The bottom line is this: you bring up a legitimate problem in Second Life bleeding private regions. You just don't seem to want to understand that its happening because tier is priced too high. You don't seem to understand that when private regions are bled, there's less things for all of us to see and do, and consequently less incentive to be active in Second Life or use it at all. There's no "massive growth" in users to be had without massive growth of land ownership, and that's not happening unless land is more profitable.

Second Life is a platform. It can't grow without first being affordable enough. The interest is there, 16,000 sign ups a day that are mostly lost because barriers are hit. Do you really think the price of land is not one of those barriers? If making land cheaper isn't the key ingredient to "massive growth", then praytell what is? I guarantee if you go off on a tangent about Facebook integration or anything that's failing competitive virtual worlds like Blue Mars right now, there's little reason to be surprised if there's a backlash from those of us actually invested in Second Life telling you instead exactly what would make us invest more in making a better Second Life: affordability of land.

[Hamlet Au]

"You just don't seem to want to understand that its happening because tier is priced too high."

A few comments back, I cited a post I wrote (one of many), where I wrote about... tier prices being too high. It might even be visible on the same page where you just typed this very comment. Maybe you somehow missed it?

[Arcadia Codesmith]

Here's the bottom line: Linden Lab MUST maximize value for its stakeholders. It cannot and will not ask them to take a hit for the benefit of the residents. That is the nature of business, and you might as well ask an orca to become vegan as try to change that basic reality.

So if we want lower tier fees (and I belive that all but the most elitist residents want that), somebody inside or outside the Lab HAS to demonstrate that this would bring in a surge of strongly-invested residents, and that these additional residents can be monetized to a degree that exceeds current profits, to a sufficient extent that it's worth the time and expense of upending the status quo.

If you can't sing to the suits in their own native tongue, they'll just toss a quarter in the guitar case and move along.

[Emperor Norton]

Hamlet Au @" However, it's impossible for Linden Lab to lower its sim prices too much without taking a huge revenue hit, so it's a non-starter to talk about doing so."

So a layoff and this mass dumping of their main income stream. Sounds like Linden Labs is taking the hit whether they like it or not.

New users want to do things, so unless Linden Lab wants to to start generating content something's got to give with the absurd sim tier.

[Emperor Norton]

Also, your premium fantasy isn't work ether Hamlet, as you friend at Broken Toys is pointing out Free to Play with micro payments is the MMORG of the future. Turning Second Life into a premium only would be the kiss of death for the game.

[Emperor Norton]

Arcadia Codesmith @ "If you can't sing to the suits in their own native tongue, they'll just toss a quarter in the guitar case and move along."

LOL, no, the world doesn't work that way.

The suites want *my* money for their silly server space. Sure they invested their hard inherited but money, but I don't *need* as sim - I can't eat a sim or live in a sim and I am not one of the small few can generate an income off them.* The bottom line is its not my problem some Linden Lab investor won't be able to retire at 40 like he promised himself.

* otherwise known as a crowed sourced Linden Lab employee. Elite my hairy behind.

[Hamlet Au]

"Turning Second Life into a premium only would be the kiss of death for the game."

I didn't suggest premium only. I wrote, "Premium accounts and other revenue streams".

[shockwave yareach]

When SL collapses due to the incompetence of the lab management, Opensim is where I will be going.

SL still has the same tech problems they had in 2005 and LL has worked extremely hard to ruin the fun and wild west freedom which was the only reason to join SL. Sad as it is to say it, even the Griefers were more fun than the boring empty parking lot which is SL today. We come to SL to have fun; not to memorize 20 volumes of TOS and risk jail when some teen propositions us on land that we pay 300$ a month to "rent".

Lower prices to 200$ an island, allow people who abandoned land to get it back simply by picking up the new tier again, and leave people alone to enjoy their purchase any ****ing way they want (so long as it's not visible from public roads). Such a simple solution to fixing the sinking ship. And yet, the lab won't bother until so many people have quit that the rest of us have no reason to log in anymore, at which point no pricepoint of land will make us stay (as all our friends and groups are gone by that point).

[Virtual Clover]

I discovered SL in 2006. I was hooked solid. By my first week I was a premium member and have been ever since, as well as paid membership for my alts because of course we have alts. By the first month, I'd scraped up some monthly disposable cash and bout a 1/4 sim. I developed it and played and had a good time. The land owner bug got up in me hard. A few months later, I bought another quarter and so on until I had the sim. I had big plans for it. Only lasted a few months though when real life needs trumped virtual ones, and $300mo was simply not affordable. In 2008, again with enough disposable income, I bought another sim...paid the set up fees and that $1600 payment off the top was hard to do but I did it. After literally a month and a half, LL suddenly lowers the cost to $1000 and I was sick about it...it pissed me off enough I turned the sim in and was done awhile. In 2009, missing SL, I found a "desperation sale" and picked up an island for $400, but was once again finding myself strapped by that $300mo tier payment that was glaringly unreasonable.

I'd heard about open sim for years, didn't know what it was, listened to the arguing and gloom and doom scenarios...went to the site to see what it was and my eyes melted. Way over my head.

But in 2010, and early 2011, the Diva Distro and Sim on a Stick came available and made it much more user friendly. The reason it took me so long to adapt to was that I literally couldn't get my head around how that could be free...because LL/SL charged me a car note for a little region of lag, what was the punchline on this OS being free? I was in denial that it was really, honestly flat friggin free...and all I'd pay for is the server hosting, unless I ran it off my desktop. Instead of one region, I could have four...or 8, or 16..free. My cost for that in SL would've been over $50 grand a year.

That's called a no brainer.

Because I'd made a huge financial investment only to be faced with the reality nothing in my inventory was actually my own, I couldn't pack up and move a damn thing to my OS regions, my avatar, all of it was held hostage, while at the same time under constant threat of evaporation by asset server glitch, and the astronomical tier fee, my user hours in SL went from constantly logged in, checking SL friends the way people check Facebook and Twitter, to zero.

The only reason I log in now is to liberate my stuff. Once it's out, there is zero reason for me to return to SL ever again. I won't be buying anything through the market because I can't actually "have" it so my money's taken and I get jack shit in return.

There is no incentive for me to remain in SL. There is major incentive for OS...aside from the fact it's FREE every month and everything is mine to do with as I see fit, the #1 reason is LAND - I can have gobs of it to do whatever I want to do...play, sell, trade, game, socialize, relax.

Here's the writing on the wall for LL - the day OS evolves enough to be *casual user friendly* and particularly so when these become accessible via a web browser, that's when LL's countdown to door closing begins. People DO want land.

They can't do a damn thing in SL without land, so they're roped into it and then held hostage by it, forcing them to become so focused on "Sell! Sell! Sell! Must make tier!!" they forget the wonder and awe that drew them in to begin with: the beauty and freedom of creating for its own sake, to develop enchanting worlds of their own...not Linden Lab's.

[Virtual Clover]

The ONLY thing that's going to save LL/SL at this point directly because of Open Sim becoming vastly more user friendly and the evolution of web based access is for LL to lower land prices, become grid friendly, and to open up the marketplace to all virtual platform users, no matter the grid, in SL or out of it, so creators can sell their goods to a wider selection for use anywhere they choose.

As long as they pull some insulting 'set up fee waived this weekend only' crap, and resume it's blind disregard for reality, LL's days are numbered. That's just the way it is.

[pixels sideways]

"However, it's impossible for Linden Lab to lower its sim prices too much without taking a huge revenue hit..."

I disagree -- the LL PR machine seems to be on a loop because they've always stated how LL has been making money (profits) hand over fist year after year so if those bragging rights were even remotely true then what possible motive (other than absolute greed) could LL have to discontinue the discount for academic and non-profit sims, many of which provide the best free experience and content in Second Life for all residents by introducing VR and the SL platform to their students who have worked on pushing the envelope of creative technology in SL?

Eliminating the academic and non-profit sim discounts has been the worst business decision LL has ever made -- slamming academic and non-profits in January 2011 with the pay it all up front in advance if you want to lock in your edu/non-profit rates for next couple of years or pay the doubled rates later. This made it impossible for many of these orgs to continue a virtual presence in SL especially in this economy where RL funding for academic institutions and non-profit orgs has substantially decreased.

LL is also going against the trend of businesses giving back so they can foster future innovators. Just look at the appalling falling numbers of college grads in the fields of computer science, engineering and sciences in general in the US. Even the US gov has been running ad campaigns to encourage kids and teens that these courses of study are cool.

If LL wants to continue to play a significant role in VR, they should continue to lead in this regard by nurturing education and innovation and offering the academic institutions and non-profits the same deal as before Jan 2011 and hope that these folks will keep the sims they have and those who left will return and that others will follow. Perhaps even throw in a free sim for every three these institutions pony up for.

As the academic and non-profit sims continue to disappear, all that will be left in SL will be shopping malls, a few LEA sims and the Zindra grid. And SL will become an obsolete Yawn-o-topia.

[Hamlet Au]

"Eliminating the academic and non-profit sim discounts has been the worst business decision LL has ever made"

It's actually a good business decision, because clearly these sims were not making the company enough of a profit. If they were, they would have kept the discount. Which is actually one reason I think a general deep discount of sims is impossible -- they tried to discount a whole market, and found that was unsustainable. It'll be REALLY unsustainable if they try to do that with the whole market.

[desdemona enfield]

Let's see... about 20K regions at 300/mo = 72M/year. Now fold in a factor for the faction of regions that are 1/4 and 1/16th strength. Perhaps an aggregate factor of 0.5?

Now each employee on average makes maybe 70K (this is california, smiles). Some make a lot more, many make less. Figure overhead of 1.4 on each employee. Hmmm... 360 people would eat up the entire budget. Does 200 employees sound right? 20M for salaries, 13M for infrastructure, and 3M (6% of cash flow) for investor profits?

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Can they run the company with 100 employees and 6M infrastructure costs? If so, they could halve the land fees.

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You can adjust with all my factors and corrections up or down as you wish, however, these rough numbers may provide a picture of the financial issues facing Second Life.

The more interesting question would be 'how can an opensim business survive while charging so much less?' free labor? cheap infrastructure? small scale simplicity?

Des.de.mona

[Sarah]

Funny thing is, as I am a creator in SecondLife I only sign in at OpenSims to flag DMCAs there for my copybotted creations. //sarcasm off

[chota bheem games]

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