Impact of SL Marketplace's Increased Commission Rates: Meh to Massively Catastrophic, Depending Which Developer You Ask

In case you missed it, Linden Lab recently introduced an increase in commission rates to the SL Marketplace, going from 5% to 10%:

On December 2, 2019, commission rates on Marketplace sales will become 10% of the item price. This will be the first commission increase since the Marketplace debuted a decade ago. This new rate remains significantly lower than most digital content commissions across the industry. Apple and Google charge a 30% commission on sales in their app stores, as do many other popular virtual worlds, VR and gaming platforms, such as Oculus and Sinespace. This fee change helps offset our costs as we invest heavily in new Marketplace features and improvements, which remains the Internet’s largest user-created virtual world Marketplace with more than 5 million items. 

From one point of view, that's just an increase in 5% -- from another, it's also a doubling of the commission rate.

What will the impact be on the SL economy and to individual content sellers? I asked several well-known owners of SL brands in recent weeks, and their answers ranged from meh to massively catastrophic on a personal/professional level.

In roughly that order, here's Daeberethwen Arbenlow of ANATOMY, Max Graf of Rustica, Anke Hatchuk of Dysfunctionaliry, and Froukje Hoorenbeek of Dutchie Furniture & Homes:

Daeberethwen Arbenlow of ANATOMY:

I am not changing the price of my items in-world or on the Marketplace. I don't think that would be fair to consumers. I don't think it is a world-changing amount and it seems to me like the price of doing business.

That is not to say I don't think it's annoying. But I'm not changing how I sell stuff because of it. For a real life perspective, I sometimes get price increases on items that I sell in my real life business. I also have a 10% surcharge on blonde hair colors. I do not make my blonde hair colors charge 10% more, I just make sure any of my overhead can be covered. Since I don't really have any overhead in Second Life, it's not a factor for me.

Max Graf of Rustica:

Aside from all the additional fees that have been adding up over the last few years and the lowering of tier prices, the amount of time and effort it takes to produce an item with which you can compete in the market has increased dramatically over the last decade: Mesh, complex multi-texturing, HUDs/menus/animations/scripting functionality, marketing and blogging… these all add up, yet the fees for items generally do not reflect those additions to workflow over time. I have tried to refrain from price increases over the years but with so much more work and so many more fees it is hard to consider going forward without doing so and still be able to survive, let alone compete in the market.

The amount of work it takes to produce an item now is many, many more times what it was even at the beginning of mesh, let alone sculpty or prim build eras.

Lastly, there are considerably more stores now than there were years ago. It is a lot more competitive; the slice of the pie has not grown comparably to the number of stores competing for that slice.

Anke Hatchuk of Dysfunctionaliry:

It's the boot in the butt for me to raise prices. I've needed to anyways to make up for all the other nickeling and diming they've been doing, but this sorta assures me it is the right decision. I am making a similar amount of L$ since the past 7 years, but the amount I am getting in my Paypal is much less than it was 7 years ago.

This isn't life-changing, but it is sorta the straw that broke the camel’s back for me to reevaluate my pricing and business plans. I took a second job RL recently since things just aren't really cutting it right now. Sadly, this means I cannot afford to spend as much time on SL creations, both in quantity and quality.

Froukje Hoorenbeek of Dutchie Furniture & Homes:

I sell most on the Marketplace. And it’s my most important advertisement tool. I see people come into my store [in SL], try out something and buy it on the Marketplace, even though being right next to the vendor. 

As a EU-based creator, I lose over half of my income to Linden Lab, Paypal, VAT. To Linden Lab in sim cost, essential for home and garden [items for sale], upload fees, ad costs, exchange costs, and much more..

There is so much spinning -- carefully avoiding the word “lying” here -- in their messages. “10%, much less than elsewhere.” But if you calculate everything they make us merchants pay for carefully, they are very close to other platforms.  

I have been a good and successful SL creator for many years. I gave it everything, in support for the community, in developing better products... [But now] I feel like they are using us to fund Sansar.

I’m thinking about going to do something else. I have been successful in other jobs, I did well in SL, I can do it again, no doubt. But I can only do things with my full heart and soul into it. if I do something else, SL will lose me.

Ultimately we'll have a better idea of the overall affect of the commission increase by the state of the Marketplace in coming months, especially after the holiday season. (If we see, for example, a sharp decrease in private sims, this fee bump is probably a culprit.)

Much more thoughts on this Plurk thread here.

Comments

[Tankgirl]

Why does only the male creator gets his last name mentioned? A bit sexist, isn’t it?

[Indyra Seigo// {Indyra} & {Petite Maison}]

It's a false equivalence that they are comparing themselves to Apple and Google in order to explain the doubling of their Marketplace commission. Apple and Google have hundreds of millions of individual users. SL has less than .1% of that. This increase can neither be justified by how many items there are for sale nor can content creators ever expect to make Google and Apple marketplace like profits on the SL Marketplace. The comparison is absurd. I predict sellers will simply pass the cost on to buyers in the form of higher prices. I suspect Linden Labs would just like to squeeze a few more bucks out of SL before they decide to it finally shut it down and focus on Sansar.

[Claudiairis]

SL charges for uploading mesh objects (the cost varies according to complexity),
charges for uploading textures, animations or sounds. Charge for the land where the stores go, charge for everything and we should not be surprised by the changes in this regard. The premiums increased, they want an elite that pays more, and meanwhile the technical problems continue, and a new product, Sansar that does not give more than losses ... No support to the creators (many really great). It is not a game, we all know it, it is a big and huge business and they run it like a company. The creators must learn a lot, several programs, in addition to trying to be original, not copy, have quality, etc. The vast majority sells very little, and many will increase the prices of their products, so it is happening in SL, which does not benefit the common user. The little machine to make money, for now continues ... (Sorry use translator, I'm Spanish speaking)

[Clara Seller]

LL should make lower commission fees on Marketplace an incentive.

The fees should be really high on a creator who isn't Premium and doesn't hold land for commercial use.

There's a lot of ways to approach this, like actually being engaged in the inworld commercial situation. It would be work. LL doesn't seem to like that much. LL is now inserting itself aggressively into the residential land game, maybe they should think about commercial. Maybe they should look at events and think a little harder. Maybe they should look at main streets. I don't know. It's not my job to save their game, but they really should start making it theirs.

Extracting money, without looking at the big picture, is going to bite them from behind.

[Iggy 1.0]

How do they make any money from MP commissions, in any case? This is all using their created currency.

Any fees should be applied with players (no, I do not call them residents) change Linden Dollars to a fiat currency or purchase them in the first place. Otherwise, it's all Monopoly Money.

Maybe this new "cashflow" inflates LL's profits on paper. That would look good if they needed to sell the stagnant but still profitable SL.

[FlipperPA]

I don't get why they keep it as a flat rate. Back in the days when I created SLBoutique, one of the things I did was give creators incentives to lower their rate. IIRC, the commission started around 8%, but creators could get it down to 2% if they listed enough items, and provided enough freebies for the community. It encouraged creators to participate, and help out the community.

[Madeline blackbart]

Im just gonna say (getting off track I know) that tankgirl kinda has a point that its odd only one creator has there last name listed? Surely they're all worthy of that.....?

[Wagner James Au]

Definitely was not intentional, beyond the fact that Max is a common first name while all the other developers have very unique first names, so I added his last name at the last second. But it's a fair point and I apologize for the appearance of disparity; updating now!

[myprepaidcenter]

Impact of SL Marketplace's Increased Commission Rates: Meh to Massively Catastrophic, Depending Which Developer You Ask. On December 2, 2019, commission rates on Marketplace sales will become 10% of the item price. This will be the first commission increase since the Marketplace debuted a decade ago.