Some recent events in my RL work, followed by a discussion with Crap Mariner, caused me to start thinking about the topic of SL land tier again. Let’s start by admitting that the cost of virtual land in Second Life is high. If you want a sim of your own (an OpenSpace sim, a Homestead, or a full sim), you have to pay a price that is rather unattractive to most users, especially if we are to compare it with OpenSim-based grids like InWorldz or Kitely. This price is often cited as one of the main contributing factors to SL’s on-going region loss, if not as the single most significant factor. It’s true, of course, that virtual land ownership in SL has been in a steady decline for quite a few years now, and I’m not going to tell you that the monthly tier (not to mention the initial set-up cost, if you are to rent directly from LL rather than a landlord) is not high.
But this is pretty much what the situation has always been like. The cost of virtual land in SL has been pretty much stable throughout the years that Linden Lab has been using the tier model. But, back in the days when SL was the darling of the tech media, people were far more willing to turn a blind eye to this high cost.
The role of RL economy (or it’s the economy, stupid)
Back in November 2013, I dared say that the global financial crisis (which was triggered by the Lehman Brothers collapse back in 2008) has played a significant role in the issue of region loss. I wasn’t the only one that attempted to say so. Inara Pey had done so, albeit several SL and OpenSim pundits opted to unceremoniously dismiss this explanation because it didn’t fit their own theories. Now they’re changing their tune, although I’ve yet to see one of them admit they were wrong.
Anyway, before the economies in RL took a nosedive into the current death spiral, people had more available income. They were earning more money than they do now: For starters, they had a job which gave them money. Now that the fundamentalists of the austerity camp have imposed their religion on us, if people are lucky enough to still have a job, they’re making less money than they did before. Maybe even 1/3 or 1/4 of the money they used to make – yes, it’s that bad. To this, I will have to add the massive tax hikes imposed on the middle and lower classes by the austerian fundamentalists (taxing the provocatively rich oligarchs is entirely out of the question, you see), which makes putting food on the table difficult for numerous people who, not so long ago, used to lead a comfortable life and saw their entire world come tumbling down overnight.
These people are (or used to be) the middle class. And, like it or not, they form a significant part of SL’s user base. To these people, SL is now a luxury. So, sooner or later, they abandon their sims or their parcels, they downgrade their accounts, or, in some cases, cash out and leave altogether. The tier was always high. Yet, when they had money and when they had access to extra liquidity, they didn’t mind this cost. It was manageable for them. Not anymore.
So, why doesn’t LL lower tier to draw more users in?
The short answer: It can’t. The long answer now… *sigh* Sadly, people who present a tier reduction as the way for LL to attract more customers are beginning from a false assumption. They assume that there are thousands, if not millions, of people out there who want to join Second Life and build the homes, islands, even entire continents of their dreams in it, but the only thing that stops them is the cost. To be honest, this is exactly the way I feel about recent predictions that High Fidelity and/or whatever virtual world evolves from the Oculus/Facebook collaboration will have a… billion users. Get real. Please.
Inara Pey tried to explain that a reduction in tier would instantly reduce LL’s income from SL without any guarantee that this income would be covered by new land rentals. And do you know why? Because the number of people who want to join Second Life, or any other similar virtual world for that matter, is finite. Second Life does not convince everyone to join it, simply because it’s not for everyone. Second Life and similar virtual worlds simply do not offer everyone a compelling reason to join – and this goes some way to explaining the current low user retention rates.
If we’re to believe the infographic offered-up by LL at the time of SL’s 10th birthday, 36 million user accounts have been created so far, yet only about a million are considered to be active. Let’s consider here the fact that many of these accounts are throwaway (or stowaway for later use), accounts created by griefers, trolls, stalkers, copybotters and other lower forms of life (and SL, sadly, has more than its fair share of them). Let us also consider the fact that many users create a number of alts for legitimate purposes and not for acting like jerks. How many unique RL persons are in SL? Would you say I’m too pessimistic if I guesstimated that SL is used by about 500,000 unique RL individuals?
For all the investor-baiting talk of making SL and similar (existing or under development) virtual worlds “mainstream” (you have to love buzzwords like this), SL is a niche product/platform, and is more than likely to remain like this for as long as its type of virtual world exists. Not that there’s anything wrong with that. It can still be a niche product and thrive. Of course, I have to add that SL enjoys a rather poor reputation, and this makes a massive wave of new sign-ups highly unlikely. Examining the reasons for this reputation and what can be done about it is far outside the scope of this article, so I’m not going to dwell on it.
Why can’t LL lower tier?
Besides the fact that a tier reduction is unlikely to generate a massive wave of new user sign-ups or enough new land rentals to recoup the revenue loss that would result from a tier cut (especially considering the current financial situation worldwide), it is simply technically ad practically impossible, implausible and unreasonable for LL to reduce tier.
The Lab’s personnel numbers nearly 200 people, most of which are programmers, sysadmins, engineers etc. They need to be paid, and also LL pays for their benefits etc. These people are responsible for the continuous development and evolution of Second Life and other LL products. Also, not only does LL have to pay its employees and fund the development of SL and its other products, it also has certain costs it cannot avoid if it wants to keep SL and its other products running. It needs to pay for the maintenance, upkeep and upgrade of its data centres, and it also needs to pay Amazon for its cloud services. Guess where the money to cover these costs comes from? Yup, it comes from your monthly tier, it comes from your premium account subscription, it comes from your L$ transactions, it comes from your content upload fees, it comes from your marketplace fees.
But the tier is still too high!
As said earlier, I’m not going to argue that the tier is high. It may be too high for you, and I must say I’ve occasionally had difficulty covering mine. This, however, is subjective, as this assessment is based strictly on each individual user’s priorities and available income. If we want to assess the issue of tier objectively, we need to understand what kind of services Linden Lab offers to its users.
I know many of you will say “oh come on, I can host my own megaregion on an OpenSim grid for much less money” or “I can host my own grid somewhere.” Fair enough, and power to you. But none of the OpenSim grids invest so much in infrastructure and server/viewer development as LL does. Furthermore, if you’re going to self-host, you assume full responsibility for your grid; you’ll have to manage and maintain it yourself, you’ll have to guard it from attacks, and so on. Oh, and if you host it on a dedicated server, you’ll also need to schedule regular backups to avoid data loss, as hard drives on servers do fail. And yes, you’ll still have to do all the admin work yourself.
The Lab’s people work to offer you a relative peace of mind. They do all the admin work for you. They back up things for you. They ensure that the grid is up and, whenever something goes wrong, they work to restore full and proper functionality as soon as possible. They work to ensure your inventory doesn’t magically disappear. They host your inventory, they host your regions, and they work so that you won’t have to get your command line-fearing fingers dirty. It’s a full managed service, pretty much like the one offered by the likes of Rackspace. If you want to see how much such services cost, here’s Rackspace’s pricing for managed dedicated servers. And that’s pretty much standard fare throughout the industry.
So no, the tier in and of itself is not too high – at least, not if we want to be objective in our assessment. It’s high, but it’s not too high, and it’s not the one and only reason why people abandon their virtual land holdings; it’s not even the most significant reason. Likewise, it’s not the one and only reason, nor the most significant, for the lack of new user sign-ups.
- A real-world explanation of Second Life’s region loss (this blog)
- The tracts of our tiers – by Inara Pey
- Pricing for Dedicated Servers by Rackspace
- SL tier-related articles by Inara Pey