Tier cuts: looking from the Lab’s perspective

Apologies to those who may have received notification of an early version of this post being published at the weekend. Slight error on my part hitting the wrong button when trying to clear-up some old drafts.

Tier has long been an issue within Second Life, one which has been exacerbated over the last 24 months by the ongoing decline in private region numbers, which form the greater proportion of LL’s revenue. The decline has been tracked across the weeks and months by Tyche Shepherd via her invaluable Grid Surveys. In 2012 alone, the grid has suffered a loss of around 12% in private regions. Such is the concern over tier that it gets raised following articles which may not be related to the subject – such as LL moving to promote SL through Amazon.

This decline has been subject to many calls for the Lab to reduce tier, with some recently advocating it should be cut by one-third. However, as both I and Tateru Nino attempted to explain in June 2012, while cutting tier may appear the obvious thing to do, it may not actually be the easiest or most comfortable thing for the Lab to do.

Crunching Some Numbers – the Lab’s Perspective

While I have covered some of this ground before, I thought it interesting to look at some numbers purely from the Lab’s perspective, using Tyche’s Grid Survey and survey summaries as reference.

Private regions losses through 2012 (click to enlarge)
  • As of December 31st, 2011, monthly private region revenue for LL was approximately $5,006,000, with a margin of error of +/-$60,000
  • As of December 31st 2012, monthly private region revenue for LL was approximately $4,244,000 per month, with a margin of error of +/- $53,000
  • While acknowledging we have yet to see Tyche’s 2012 end-of-year survey, that amounts to a drop of $762,000 through the year, or an average of $63,500 per month

If there is no reduction in tier, it is probable that the current decline in private region revenue will continue at or near the 2012 monthly average of $63,500. However, were the Lab to cut tier by one-third, they immediately slash monthly private region revenue by $1,400,520. That’s equivalent to 4,747 full private regions vanishing from the grid – 1.6 times more that the total number of private regions (full, Homestead and OpenSpace) lost in 2012.

Even allowing for the tier cut stimulating the demand from new land (and there are problems with that, as discussed later in this article), and assuming set-up fees remain unchanged, it means the Lab would need to see the equivalent of 1,337 full private regions added to the grid in the first month following the cut just to match the revenue loss suffered had they not cut tier (i.e. the difference between $1,400,520 and $63,500).

Obviously, in subsequent months following the tier cut the total number of new regions needed to offset revenue losses does drop as tier for those added cuts in. But it still means that the rate of demand needs to remain in the high hundreds (i.e. an equivalent of over 500 full regions a month) for around 4-5 months. Even were this to happen, it would still take at least 7-8 months for LL’s revenue to recover to pre-cut levels.

Thus, from the Lab’s point of view, such a substantial cut in tier represents a huge risk. Would it in fact generate the necessary demand in the first month to offset such a heavy initial loss in revenue? If not, what might the demand be, and would it be sustainable over time to offset losses and recover revenue to pre-cut levels, and how long might this take? Or would it simply lead to a short-term spike in demand before numbers drop once more, resulting in monthly revenue losses in the hundreds of thousands, rather than the tens of thousands?

Even a more modest tier cut of 10% may fail to offer a significantly brighter picture for the Lab. While the revenue shortfall is significantly lower than for a one-third cut, the question of sustainable demand for new land remains; particularly as a 10% cut is only $12.5 a month removed from tier for a new Homestead region. Such a relatively small reduction might not be seen as attractive enough to bring about sustainable demand for new land sufficient to offset a revenue loss which would still be significantly larger per month than had tier not been cut.

There is another factor which must be considered here as well: the huge amount of unoccupied land already available in-world. As I pointed out back in June, any tier reduction could very well stimulate interest in this available land first, rather than leading to a direct demand for new regions. While this may well be good for estate owners, it doesn’t actually initially result in any more revenue arriving in LL’s coffers – again leaving them uncomfortable with the idea of making any tier cut.

Nor should it be assumed that the Lab is in a position to absorb any reduction in revenue simply on the basis of their tier fees being so much higher than those levied by other grids, thus affording them greater margins to play with. While it is true that LL charge significantly more in terms of tier compared to other grid, it should also be remembered that they have significantly higher operating overheads (which other grid operator, for example, employs 175-200 people with all the attendant costs, corporate liabilities, etc?). Like it or not, these overheads do much to define LL’s fees – so any comparison based purely on tier only tells half the story.

An Elephant In the Room

The flip side to all this is that clearly, the current situation vis-a-vis revenue loss cannot be allowed to continue indefinitely, because there will come a point where it starts to hurt LL and possibly result in drastic action on their part.

So what can be done?

It has been suggested that a cut in tier coupled with an increase in prim counts / land capacity in regions would help. However, this would still mostly likely mean only a very modest reduction in tier which (again) might not be enough to stimulate the demand for new land. And that’s assuming LL could easily and acceptably increase region prim counts; this is by no means a given, even if OpenSim grids manage to do so.

Perhaps a better alternative would be to combine a modest tier drop with a reduction in region set-up fees. The precedent for such an option is already there. The October 2011 “Land Sale” saw set-up fees suspended for a weekend, with the result that 508 regions were added to the grid in just 48 hours. While this was subsequently eroded as the realities of tier kicked-in, it did demonstrate that such fees are a barrier where land is concerned. Therefore, cutting set-up fees to a “reasonable” level and coupling it to a modest tier reduction might strike more of a favourable balance – although the very big question of sustainability would remain.

New products offer LL a means to strengthen its revenue streams - but will take time to mature
New products offer LL a means to strengthen its revenue streams – but will take time to mature (see below)

The most viable option perhaps remains the “de-emphasising” of land as the major source of revenue generation. In this, LL need to look further afield than simply trying to push the Marketplace and Premium memberships as these are clearly limited options. Simply put, there are not enough users in SL for Premium membership to seriously compete with land, and it is questionable as to whether SL would be able to support the numbers required for it to do so. Equally, any push with the Marketplace can also only go so far; show merchants they can enjoy greater success through the Marketplace than with in-world venues, and they are going to  ditch land holdings and impact tier revenues.

A more sustainable option lies in the company developing alternative revenue streams – such as via new products, as I again pointed to back in June 2012. But this isn’t going to happen overnight; it takes time for products to establish themselves, and right now none of LL’s line-up looks to be a major earner any time soon. Nevertheless, new products might encourage investment in the company, helping to both offset current revenue losses and possibly provide a means for LL to offer some tier easement down the road.

Ciaran Laval, in cogitating this very matter, has suggested a number of ideas for leveraging aspects of the SL platform itself as revenue generators, such as advertising through the websites and in entering into strategic partnerships with suitable companies. Advertising  would appear to be well worth consideration, with both the Marketplace and my.secondlife.com offering potential, given their traffic numbers. They may not be huge earners if leveraged, but as the saying goes, “Every little helps”.

A very rough mock-up of what ads on the Marketplace could look like
A very rough mock-up of what ads on the Marketplace could look like

Cohesive Strategies

While tier / revenue is very much an elephant in the room for the Lab, it is by no means alone. There is also the matter of user retention – a subject which is actually intertwined with that of tier, but which I’ve deliberately avoided discussing here so as to keep this article to a manageable length. However, the reality is that it is unlikely that any single act by the Lab is going to resolve the issue of declining tier / revenue (or the issue of user retention). Rather, matters require a cohesive set of strategies in order to be resolved sensibly and in a manner that doesn’t unduly damage the company or SL in the process.

Therefore, perhaps the real question is whether the Lab is actually working on such a set of strategies – and when might they offer some assurances they’re doing so?

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With thanks to Ciaran Laval in casting an additional eye over figures, etc.

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39 thoughts on “Tier cuts: looking from the Lab’s perspective

  1. Premium could be an option if:
    The alowed M2 per tier level was raised and more adult land auctions (meaning make more continents then Zindra Adult as well) wouls show!
    But 1st LL needs to ensure that being in world can be a positive experience and they really need to adress and solve technical issues before they try to go mainstream!
    The fact that there are more newbies showing (really ones, not alts) also make me understand the need for the Lab to create toturial land zones, where new accounts would rezz and only allowed to leave after doing it (like it or not, Bethesda use this for long and it works on their games!) so when leaving at least twhy would understand the basics (editing appearance, rezzing and linking 2 prims, creating an outift using my outifts folder, searching, moving around, understanding the use of a Ao and so on, like a 20 min mandatory toturial!).
    Other way, SL needs to get more realiable and stable before trying to get more users, or at least keeping the old ones in!

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    1. Adult areas a re growing across the grid, as Tyche’s surveys demonstrate.

      As to technical issues – these are precisely what the Lab is tackling, and has been tackling for most of 2012. It’s also fair to say that SL, overall is relatively stable given its massive complexity, although more does need to be done if exceptionally high levels of user concurrency is to be acceptable.

      As far as new user tutorials, etc., are concerned, there is strong evidence (from user exit surveys, etc.), that things like tutorials and learning areas don’t actually lead to a greater user retention. This is not to say they are not required – any basic walk-through is perhaps better than nothing at all – but that they don’t actually lead to any significantly greater levels of user retention.

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  2. Part of the problem is that rental from a “Land Baron” is so much cheaper than paying LL direct. The Tier is at the highest rates for the smallest plots (other than the 512-free for each Premium account). Whoever pays for a whole region, they can undercut LL for smaller parcels. And, when you figure in the Stipend, what I pay for Premium membership is about the same as a Land Baron needs to earn from a 512-parcel.

    It’s those in-between Mainland parcels where the Tier looks expensive. If I want 2048 sq. m. why should I pay the LL rate for it? That’s where Tier payments have the potential to be cut, not the Private Islands. And that’s the level where you might find people willing to pay money for their fun.

    The downside of that strategy is that some of the Land Barons will quit. They cannot make as much money out of those small parcels if LL cut what they charge for the Mainland. On the other hand, a Land Baron can set up themes for an area: there are some huge themed private estates.

    And another element of the strategy might be for LL to cut back on the number of Mainland regions. They kept adding chunks of Mainland as numbers grew, and maybe it’s time to remove some of the incomplete continents. Gaeta I looks like a possible candidate. (Northernmost Mainland) There are people with parcels there, so it isn’t a trivial move. Expect drama.

    It may also be possible to close the last fragments of Teen Grid Mainland. And is some of Zindra superfluous now?

    The impression I get of LL over the past couple of years, post Mark Kingdon, is of a strategic planning shortage. I suppose Rod Humble backed the new products, but I am unsure whether there is any plan for SL itself.

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  3. Well, this looks for LL like a danged if they do, danged if they don’t thing: No matter what, they’re gonna lose lots of money. Maybe they’ll lose more money now if they cut tier a bunch, but on the other hand, they’ll likely lose at least that much money in the long term, too…. just not all at once. On the other hand, if they bite the bullet and cut tier now, maybe they’ll stop or slow down the slow decline, and a year from now maybe look better financially than they otherwise would have at that point if they’d not cut tier. Or something.

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    1. Right now, cutting tier will hurt them far more than not cutting tier – unless the decline in private regions suddenly and massively excalates. Yes, they are continuing to lose revenue by not cutting tier, but at present it is more “manageable” than any large-scale cut, inasmuch as the last couple of years show it is somewhat more predictable loss. To the corporate mind, sticking to what is known in the hope of putting other plans into plan with offset the damage is preferable to taking a dive into the unknown and potentially doing little more than speeding up the inevitable.

      Of course, the other factor I didn’t mention in the article (quite intentionally) is whether LL see a need for SL as we know it today survive beyond another couple of years.

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  4. Excellent report; the numbers make a lot of sense when explained like this.

    While I’m sure there is no “easy way out”, when it starts to hurt LL, Rod will have to face the problem: he has too high running costs. Well, and allegedly, a high margin as well, so, fo a while — many years, perhaps — he can cut the margin, keep tier high, see revenue drop, but keep the company intact. And hope, as you suggest, that in a few years their new revenue sources from the games and whatever they launch next start to kick in.

    So… there are options to dramatically reduce the infrastructure running costs, and LL is aware of them (e.g. just take a look at Kitely). However, as you put it so well, the biggest problem is the staff, not the infrastructure. You can cut on hardware and bandwidth using more clever technology, but there are still those 175-200 people to pay every month (as well the office space for them all). While cutting infrastructure costs means keeping the margin high (even if income drops), which makes the stakeholders happy, there is a turning point somewhere in the future when there are no more possible optimizations. Suppose the limit is having “zero” infrastructure costs. How much does LL have to charge for tier if they only need to deal with the remaining running costs?

    Actually, quite a lot. Probably LL could cut 10-20% of tier and still have the same revenue, but, well, they wouldn’t be able to go lower than that.

    And, of course, they cannot cut on the staff. One reason OpenSim grids can offer such low prices is because they don’t need to keep a permanent staff for developing the server and the viewer — they just use open source versions, which they don’t develop, nor maintain. Since they’re small (compared to SL) it also means a small tech support staff.

    I have no idea about the staff distribution at LL, but I can very well imagine that the largest group are software developers, by far. Tech support used to be the largest group, but it was also the cheapest one to keep (lots of Lindens tended to work from home). As they moved away from free tech support, it means keeping a small staff of Concierges. So pretty much everybody is doing some kind of development — on the servers, on the viewers, on the Web services which tie everything together. Even the infrastructure team is allegedly very small — at some point, they just had 2-3 people, then it was rumoured that they had half a dozen. The more everything gets automated, the more they rely on things like Amazon and other third-party services, the less infrastructure engineers they need.

    But developers, well… they need them. A lot of them. We all would like them to have some more. And the current business model for LL has its limits, and changing it is not an option.

    So, hmm, I don’t know. I suppose, since the landmass contraction is way slower than how it expanded from 2004 onwards, that we will only start to worry by 2020 🙂 Until then, hopefully LL straightens out their alternative sources of income…

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    1. Gwyneth, in one of your (excellent) posts I discovered this comment which, among other things, proposes something that might give LL an option of making land rentals (either directly from them or through a land baron) more attractive. The proposal is for an intermediate offer between homesteads and full sims. Grace, the comment author, suggests that offering land with the same area as a homestead or full sim, but with 1,000 or 2,000 more prims than those of a homestead – for a somewhat higher tier than that of a homestead, but of course lower than that of a full sim, would be an attractive choice. I’m not sure what LL’s techs would say about the suggestion for on-the-fly land reconfiguration; that would perhaps require some serious programming work under the hood.

      I know that I wouldn’t mind paying 50 euros/month extra in tier to have my homestead turned into a region with the same size as a full sim, but with half the prims. In fact, it’s an offer that I’d seriously consider if it was available.

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  5. There would be a way to significantly lower tier for a large part of the residents. That is all residents from Europe, which have to pay between 20 and 25% VAT on their tier. I for example had to pay 360 USD for a sim, instead of the usual 295 USD. As far as I understand, the Lindens had to charge VAT, because they had an office in the European Union, but they don´t have that anymore, do they?

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    1. As I understand it, under EU regulations, LL are subject to VAT for the supply of electronic services regardless as to whether or not they have EU offices.

      See this UK HM Customs and Revenue document on the subject, which also covers the provision of Special Services. Specifcally, note the cited examples.

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  6. Not as much of a sticky situation as we like to make it out to be. Yes, they should be cutting the tier costs down significantly, but also supplementing (evolving) their main source of revenue in order to counteract the loss of initial revenue from the tiers.

    What Linden Lab is doing right now is neither, and as a result they are on a sinking ship without a mesh bucket. So long as they continue trying to market it like a video game while new users figure out it’s not, they’re barking up the wrong PR tree. The same goes for stepping on their own community who offer roughly the same things LL continues to offer but better… it’s misguided at best.

    Amazon itself is asinine to offer packages from Second Life. It’s a blatant ignoring of their own Marketplace, and the endless content that it contains, not to mention the ability for Linden Lab to utilize their own tools in ways that the community cannot… which is the root of the problem here. Instead of focusing on offering things the community isn’t already offering… Linden Lab is offering essentially the same things and acting like it’s better.

    It’s not.

    Linden Homes are piss poor by comparison to any other home and land rental a user can get. A weekly stipend of L$ for being a premium member is not an incentive since it’s pretty much exactly what you’d pay as a free member and buying the same amount of L$ directly. Premium Sandboxes are pretty much bunk as well, since the cost of a parcel to rent gives you your own space with more ability. Premium “gifts” fly in the face of the countless number of things openly available (and often far better) on Marketplace by the exiting community.

    And now land… for Linden Lab it’s a sinking ship because the whole ecosystem is being mismanaged, man handled and mangled deliberately under the assertion it’s a good thing when it’s everything but.

    Linden Lab simply doesn’t know what to do about it, so they may as well be taking shots in the dark and missing the barn completely at this point.

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    1. “Not as much of a sticky situation as we like to make it out to be. Yes, they should be cutting the tier costs down significantly, but also supplementing (evolving) their main source of revenue in order to counteract the loss of initial revenue from the tiers.”

      Which is pretty much my point :). Although I’d venture to suggest the latter (evolving their main source of revenue) is a requirement in order for the latter to come about (cutting tier costs), as the two are unlikely to come fully hand-in-glove.

      On PR and marketing – I somewhat agree, although I can see some of the reasoning behind LL’s push with SL to places like Steam. As you and I have discussed, SL isn’t a game, but it has many capabilities which allow for game-play which could be leveraged in terms of attracting potential users. However, as you rightly point out, these pushes shouldn’t be a single focus, but need a constructive, positive overall strategy behind them which ensures expectations are managed and suitable direction is provided to ensure people accessing SL not only have a basic grasp of what it is about – but can actually find their way to the things / opportunities which actually encouraged them to sign-up in the first place.

      And as we know, this is something LL has persistently failed to address positively or – particularly in more recent times – in cooperation with those who could perhaps help the most: the people using the platform.

      The Amazon packages – outside of provisioning the viewer options (which are themselves presented so poorly someone at LL deserves a good slap) – are foolish for precisely the reasons you mention.

      I’m a little astray of you thinking vis-a-vis Linden Homes. The build quality isn’t particularly brilliant, true, but I have to say I actually find mine to offer acceptable and functional living space in an area which is pleasant and more than fit my needs. As a builder, I also find premium sandboxes more than adequate and – for larger building projects – actually far more convenient than having my own land and build space. Sure, packing a build up at the end of the day is a pain, but that’s the beauty of systems like rez-faux, apply a little discipline to my building technique and unpacking / packing a project is hardly time-consuming. But this is going slightly off-topic :).

      Where land is concerned, we agree. My own analogy (used elsewhere), is that in many respects, LL have dug themselves a very deep hole and using the wood from the ladder to try and shore up the sides.

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  7. I just wish the Lindens would remove the barrier to their current Premiums easily upgrading. They get a free home (in the burbs) and 512sq (and 117 prims to use) when joining – but if they choose to move to mainland… they’ll have to purchase land and then also suffer a prim count loss (home construction uses the prims).
    That does nothing to encourage Premiums to move out of those divisive slums and expand on mainland.

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  8. Well said, Inara.

    The time to reduce tiers would have been as residents & regions were growing. Can you imagine how that might have encouraged more growth?

    In 1987, I paid $2000 for my first PC (8088, 640k, double floppy, green screen) and in 2009 I paid $1200 for my latest PC (i5 quadcore, 4GB, 500gb, nVidia, speakers, 22′ flatscreen). In 1999 I began online investing, paying ~$29 commission per trade; today I pay ~$9 per trade and my broker provides great servide. There are other examples I could cite for how technology can grow, be profitable and pass on savings to their customers.

    The Lab was smart to introduce Homesteads and Openspace, but when they increased prices they were nuts. That was the time they could have reduced full sim tiers and that would have made sense.

    Now SL has stagnated and estates are in decline. I believe you’d laid out a great case for why they cannot reduce tier. And as Gwyneth points out, maybe they could reduce tier by 10-20%, but even a reduction like that would cause changes to their strategy.

    The actual cause of the decline in regions may be debatable, but owners pay $3,600 a year for a “game” and for many that’s a non-trivial expense.

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    1. Tier is so complex and interlinked with other issues that it has taken me nigh-on a month to get this article to a point where I felt it worth publishing without it being several thousand words long and running to more than half-a-dozen pages. (I’m genuinely loathe to go much beyond around 1700 words for most of my posts (although some do hit 2,000-2,100) to avoid any rambling or a risk of tl;dr.)

      That said, there was so much more I could have said – such as LL erring in 2007/08, as you point out. That would have been an ideal time for the company to moderate tier downwards, coupled with a reduction in “set-up” fees to a realistic level. Doing so would have certainly have lead to a tailing-off in the sharp growth of any profits coming out of revenue – but it would have also ensured that land remained more viable if and when the boom did level-off / end. Although, it is easy for me to say this with the benefit of 20/20 hindsight.

      Even so, the entire dynamic of SL is so complicated, that there is no guarantee that such reductions would have halted the shrinkage we’ve seen in terms of grid size. As you rightly say, the underpinning causes ofr this are debatable – or at least manifold, and “tier is too high” is but one factor. Hence why I opted to avoid looking deeply at why the grid has been shrinking and focus on the pickle LL are now facing, as I felt this article would then end-up meandering all over the place. That said, I did touch upon one of the other significant issues, that of user retention, which does have a role to play – particularly given that the current population density of SL works out at something like 2.4 avatars per region. But beyond this are the complex factors – such as the promotion and marketing of SL and of generally rejuvenating the platform to encourage more widespread use.

      This latter point – rejuvenating the platform – is perhaps what LL has been trying to move towards. The view being that by providing means / capabilities by which SL can be seen as a productive / exciting / dynamic / fun / [add you adjective here] environment such that tier is no longer seen as an issue – just as it was back in the boom years – and people will accept it as they want to be a part of, and involved in, SL and thus naturally generate the deamnd for land.

      Problem is, I really don’t think anyone at the Lab has an earthly clue as to how to achieve this. And if I’m honest, I don’t, either.

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      1. I think one way to turn SL around would be for the leadership to come out from behind the wall they’ve created and pickup on this “secret sauce” idea. Early in Rodvic’s tenure he was intent on defining that secret sauce, but it appears the lesson he took away is that people like to build or create things. So he lead the creation of new products that don’t relate to SL. If that is all he got from his journey into SL, he needs to get an alt and go back.

        Rodvic and other board members need to go to the SL’s wonderous places, walk around, fiddle with Windlight settings and shoot some amazing photos. They need to go to events like RFL or BURN2 or SL10B (we do) and talk to people (we do) and participate in activities (we do). They need to get a nice homes in fun regions, like the Blake Sea, and go sailing and meet other boaters and the guys in the SL Coast Guard, maybe even join.

        They need to wander around to music clubs, then pick a fav and hangout there from time to time, maybe even take their wives. If they are a bit on the rascally side, they should try their luck picking up a virtual girl or maybe sleaze around in SL’s “adult” clubs and checkout a sex bed.

        They need to understand that feeling & notion that, in the past, led LL to declare “we are creating a new country”. The problem with SL is that LL seems to have “lost that loving feeling” and need to recreate a sense that they see a bright future. Jus sayin *smiles&

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        1. I’m not sure there is a “secret sauce” to Second Life. There may be a range of flavours, but no one single magic thing or aspect. People come to SL for many and varied reasons, and as such, have many disparate views on what SL is to them and why they stay. So in that respect, you might say that in trying to create any “secret sauce” you’re going to have so many cooks wanting to add their own ingredients, the recipe will be spoiled.

          Perhaps that’s the realisation Rod came to.

          Do those at the Lab need to spend more time in-world? I’m not actually sure on that, although I would like to see the company reverse its policy of disengagement from its user base and be far more communicative with us, show a willingness to listen, and simply work with us to better promote Second Life.

          I’m also not sure that LL was ever about “creating a new country”. Sure, Philip Rosedale talked glowingly in those terms, but I’m entirely unconvinced his views represented those of the board. Hence why he had to go in the first place. Leave us also not forget that as late as July 2010 he was still talking in terms of SL “not being about money”; not exactly the kind of comment which is going to have those who have invested their money into the company jumping up and down with joy over.

          I have to admit the negativity which often surrounds LL’s move to diversify surprises me. In most businesses diversification is seen as broadly posotive – particularly for companies like LL which have but a single product with (whether we like it or not) niche appeal for the for foreseeable future. While being niche is not necessarily a bad thing (as I’ve said myself in the past) there is also the hoary old business axiom that such companies need to “Be careful their niche doesn’t become a tomb.” So I do still feel that, in principal, LL’s moves to diverisfy are actually positive. As I’ve said in the article, it may take time for additional products to establish revenue streams of their own, but they may benefit the company (and by extension, possibly SL), simply because they could lead to further inwards investment – something which is currently unlikely with SL.

          That said, whether the initial releases from LL are quite the vehicles to achieve this is highly debatable, and not something I’d be prepared to put money on…

          There’s also another aspect to all this – and obviously, I’m speculating wildly here – and that is whether one of the “new” virtual worlds LL is working on being something that could make the entire discussion over tier redundant?

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  9. Reblogged this on Being Yordie Sands and commented:
    Inara Pey is one of the well connected SL bloggers. She’s taken an objective look at why the reductions of tiers is a major problem for Linden Lab. If you own a full sim or even a homestead, this is a meaningful analysis.

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  10. All this debate sounds reasonable but for one thing, and it is a thing that has stymied Western commerce for at least the last 25 years. Short-termism. No-one looks beyond the immediate future…does everyone regard economics with a draw distance of 12 months or less?

    Why is it still, in the face of this decline, impossible for me to buy a homestead unless I already own a full-region? That is something that I have never really understood. I suspect it says more about Linden Lab’s lack of faith in its own product than anything else.

    In the face of SecondLife’s current instability, something radical needs to be done, and done quickly.

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    1. /me hugs you

      I was writing a reply to Yordie and so didn’t read this when it came in – but short-termism was very much on my mind in adding my comments on the time when LL should have perhaps cut tier / set-up fees, as I do feel that an inability to see beyond the immediate future did perhaps blindside the Lab to the fact that the inexplicable boom the platform experienced 2006 through 2008 was unsustainable, and as such, they should at least be ready to deal with a downturn.

      As to Homesteads and de-coupling – Where’s the advantage for LL? It’s unlikely to stimulate the land market any more than by having Homesteads coupled to full regions. Certainly, it won’t bring more revenue LL’s way.

      Something does need to be done, I agree. But I’d hesitate at pushing LL for any “radical” action, simply because “radical” actions have a nasty habit of backfiring more often than not – and frankly, I don’t have the confidence in LL’s management to act radically without risking them bringing down the entire house (which is actually true for most businesses where “radical” is concerned). As to “quickly”, there is still more than enough time for LL to take considered and measured steps to avert the inevitable without being hasty to the point of hurting themselves and us even more.

      I’m just not entirely sure at this point in time (short-termism, etc.)., that the wherewithal is there for them to do so. Or perhaps that it is even a priority.

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      1. Inara

        You fail to see an advantage for LL in allowing Premiums to own Homesteads without first owning Full Regions?

        I would have bought a Homestead like a shot if I did not have to first buy a Full-Region. I simply cannot afford a Full Region, but I have rented a Homestead sim now for some 3 years. Surely it would have benefitted LL more had I been paying them direct rather than letting Anshe take a cut first?
        Am I unique in that regard?

        As I said, I simply do not understand LL’s position on this, you haven’t (so far as I see) provided a reason. Not that I expect you to be LL’s apologist on this point!

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        1. As to needing something by way of action quickly…. you are correct in suggesting that a hasty correction would be counter-productive..”more haste less speed” is always a truism.
          Nevertheless something does need to be done with all despatch (dispatch?) before yet more users throw their hands up in despair and quit.
          The current trend of incompetence/impotence in the face of crying need of investment cannot go on much longer without it garrotting the whole affair.

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          1. Well, again, LL are taking steps to diversify their revenue options – and as mentioned in the article, this could actually stimulate inward investment far more than by trying to get people to invest directly in SL, warts and all.

            One other aspect of the whole situation I didn’t raise in this article (having touched on it back in June) is that while it is easy to blame the current contraction on the grid solely on tier being too high, we should not lose sight of the fact that other factors are at work as well – such as the current population in SL actually being insufficient to support the grid at is current size – if, indeed, it ever was.

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        2. No,

          I said that that it fails to offer LL any significant advantage. The fact that you are renting a Homestead tends to stand proof of that.

          What does Anshe taking a cut matter to LL? At the end of the day, they still get the tier fee whether it comes direct from you or via Anshe.

          Indeed, it is the service Homesteads provide to the large estates which is very much as reason for LL not decoupling them.

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    1. Homesteads provide a service to large estates – that is, they provide a means for those (like you) who want to have a private island to do so without taking your business away from Anshe (or any of the other large estates).

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  11. Ahh I see now, so the view is “What’s good for Anshe Chung is good for SL”. I see. I don’t agree, but I do see, Inara. Thanks.

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    1. Well, that’s going to extreme a little.

      The big estates (“land barons”), whether we like it or not, are the filter by which the majority of revenue from land reaches LL. As such, I can understand LL maintaining the status quo simply because the revenue flow is established and stable. As the old adage goes, never bite the hand that feeds you – or at least, not too hard.

      Show how LL will be demonstrably better off in decoupling Homesteads and you might win them over. But remember, not everyone wants an island of their own with the cost overheads involved ($1750 in the first year, $1500 a year thereafter). Most are content in keeping their outlay a lot lower and in renting parcels suited to their needs.

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  12. Tier is high yes but from what I hear as a huge problem from new users is that the tech is too old. Graphic is bad and region crossings are a pain. LAG is everywhere. It is very hard to upload mesh. Prims? What is that??? Stone age? Few connections to social media and not possible to run in a browser. Maybee old timers fails to see this? On top of this the high tier …….

    Thanks – great blog!

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    1. Mera, I think you have hit what all this chatter has missed. Most people who don’t come back to SL, don’t come back because the technology does not keep up with its potential. I don’t think it would be feasible to access SL through Java and expect the same performance that you get from a viewer, but the rest of your points seem valid to me. Um, well, I don’t give a rat’s rear about connecting to social media LOL but others might. 🙂

      I do 3D graphics with avatars in software like DAZ Studio and Poser, and create what I have known as meshes in applications like Hexagon and blender. When I signed up for SL 6 years ago, the state of the art in these applications exceeded the best SL can offer today–with the possible exception of animation speeds that are probably more due to advancing hardware than to any limits of the software. Multi-user networking is challenging, I’ll grant, but that has been shown repeatedly to be abysmally crippled in SL compared to what is possible with today’s Internet speeds and home computer capabilities. I’m curious why you can’t walk out–or better, sail or fly out–between private sims, into that empty space where no sim exists. Surely a viewer can manage moving your avatar across space that has no objects to be rendered, and inserting it into sims you approach? SL could treat this as a TP, and no changes to the grid need to be made to support it.

      If the viewer could track off-sim movement, then sim crossings need not lead to viewer crashes, on forced relogs. The user’s viewer could manage the avatar’s status until it could reliably hand it off to the entered sim; and it would be aware of corners as a special situation and predict which sim the avatar should actually be handed off to. The viewer could also do a better job of managing position updates within a sim if it paid more attention to its own affairs when network or sim delays failed to provide timely updates. Pathfinding holds great promise in this regard, as the viewer downloads–or is able to download–the navmesh before it has loaded all the objects in a sim.

      Rigged mesh seems crude to me, and yet it’s SL’s latest technology? Gag. Let’s re-bone the basic avatar to allow proper emulation of human limb flexing, and make the basic avatar mesh as well. Hotpoints for collision detection that allow deformation of fabric (skirts, hair, etc.) when it comes into contact with physical objects or avatar limbs, or where it should be affected by wind or gravity, would be a low-lag feature that could increase realism greatly. There’s much I don’t know about SL’s implementation of mesh, but none of the examples I’ve seen use proportionate influence of bones on vertices….but perhaps this is a digression. I’ll hush now lol

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      1. Thanks Michael u are prolly the only 1 who agrees with me. The others want me head on a plate. So u come and rescue me on a white horse before execution? :D:D

        Graphic engine Havoc is stone age and prevents good physics yes there are other options on the market since years back. Pathfinding and rigged mesh is “new” in SL but old tech other games has used for years. So hmm yes they have something to work on but the worst problem is the userbase who hates new stuff….

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      2. One more thing, SL dont support skeletons in mesh so animals and stuff that moves creates major lag. Compared with Cloud Party and other games that supports skeleton…..

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  13. They have to do a lot of things first rebuild the whole base of the simulatar to a more mordern one its over 10 years old now and also go on FB You cant care for peoples who got 10 year old computers we live here and now! Triers is way to hig to and need to cut by 2/3 i think that will let a lot more peoples own land and make it possible to expand again they have to do a big makeup on the whole SL if they want continue to live in 5 years from now.

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    1. If the product was modern and up to date they wouldnt have to cut any tier…. atm they are stuck in this situation and I agree with Inara they cant cut tire that would be suicide…

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    2. You cannot seriously compare environments such as Facebook and Second Life; the two are very different products with very different capabilities and limitations.

      As to hardware, there needs to be a level of realism involved in thinking. The Lab has often tried to be sensitive to the needs of older hardware – hence the range of switchable options that are avilable within the viewer; they are they so that older hardware can better handle the environment. Sure, SL may not exactly look brilliant, but that’s not precisely LL’s fault. To expect them to produce a product which has cutting-edge grpahics and which runs on 10-year-old hardware is, with respect, unrealistic and unfair.

      Where cutting tier is concerned, I’m afraid you’ve not graped the essential point of this article: were LL to cut tier to any degree demanded by users, they would struggle with revenue. Certainly, a 2/3rd cut in tier as you propose would do little more than drive the company out of business.

      The only way a tier cut might work is if there is a very large and sustained influx of users into SL, who not only sign-up, but actually stay with the game long enough for them to learn about / want sizeable amounts of land. That is something which isn’t happening – and somewhat unlikely to happen any time soon.

      Like it or not, right now SL doesn’t have the population to support either a) a cut in tier or b) the number of regions on the grid.

      The bottom line is revenue model is broken, and tier cuts aren’t going to make any real difference as SL stands today, or as it is likely to remain for the foreseeable future.

      Revenue generation needs to be rotated away from land tier, and this has been the case for a number of years now. There is an argument to say the Lab has actually been trying to do so, starting with the (cancelled) SLE product. The problem is, nothing they’ve tried to date has actually worked, or has had the means by which it can work on anything like the scale required to successfully decouple the company’s revenue generation from SL land, and what they are trying now – the development of new products – is still in some respects too new to be able to judge its effectiveness objectively.

      Like

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