Looking at the Second Life 2016 year-end Grid Survey report

The Prim Rig, ANWR Channel
The Prim Rig, ANWR Channel – blog post

On January 2nd, Tyche Shepherd issued her year-end summary on the general size and state of the Second Life main grid.

In all, 2016 has seen a slightly larger loss of private regions compared to 2015: 992 private regions (Full and Homestead) removed from the main grid in 2016 compared to 825 the previous year. This represents a reduction of some 5.6% over 4.4% for 2015. In terms of grid size, the loss of private regions was slightly mitigated by an increase in Linden owned regions, leaving the grid with a net shrinkage of 884 regions overall for 2016.

Taking the year-on-year figures from 2010 onwards (that being the last year the grid exhibited a growth in the number of regions), we get the following breakdown for private regions:

2010 2011 2012 2013
2015 2016
24,483 23,857 20,994 19,273
17,775 16,738
810 3% 626 2.56% 2863 12% 1719 8.2% 673 3.5% 825 4.4% 992 5.6%

While the loss is something of an acceleration over 2015 and 2014, it is still not as drastic as the declines in private regions seen in 2012 and 2013 . Nevertheless, it does indicate a further drop in approximate gross monthly revenues for the Lab. Working on the basis of Tyche Full Private Region surveys I have to hand, a breakdown of recent monthly revenue from private regions can be given as:

  • November 2013: US$3,857,000 (+/- US $52,000)
  • March 2016: $3,385,000 ( +/- US $43,000)
  • December 2016: US$3,162,000 (+/- US $39,000)

This represents around an 18% drop in monthly revenues over a three-year period. While uncomfortable, it’s not outright alarming at this point in time, representing an average loss of about US $19,305.55 per month, compared to the staggering US $63,500 (approx) per month loss the Lab experienced in  2012.

Of course, a loss is still a loss, and sooner or later, continuing revenue decline will have an a visible impact. But it is hard to determine when that might actually be. The surface evidence seems to be that at this point in time, while of concern, the decline isn’t adversely affecting the Lab’s ability to do business. They are still continuing to invest in both Second Life and Sansar, including recruiting for positions working on both. While it is hard to be precise, a reasonable estimation suggests that the company is generating around US $49 million in revenue through Second Life. While we don’t know how much of that is bankable as profit, it’s still a tidy sum in terms of operating revenue for a company of LL’s size.

Some have raised concerns over how much of an impact Sansar will have on SL’s landmass in 2017. I actually don’t think it will. While I anticipate the decline in land will continue (but hopefully at a slower rate than 2016), I simply don’t think Sansar will have any immediate impact on Second Life one way or the other. Not in its first year, at least.

To me, the more interesting question is what can LL do to further offset revenue drops incurred by region losses (and sadly, the answer isn’t simply to reduce tier: that could actually do far more harm than good, given the amounts involved). The Horizons initiative, for example, is one way of spawning additional revenue. We’re now around half-way through that process, and I estimate the Lab has generated around US $45,000 from it thus far. 2016 also saw the private region buy-down offer, which appeared to be enthusiastically received, although numbers are far harder to ascertain on that. Are we liable to see further initiatives in 2017? I’d actually be very surprised if we didn’t.

Private estate numbers ups-and-downs in 2016
Private estate numbers ups-and-downs in 2016

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A Look at Tyche’s private estate survey March 2016

Rocca Sorrentina
Rocca Sorrentinablog post

Tyche Shepherd, who tracks land statistics in Second Life, issued a full Private Estate survey at the end of March 2016. It’s the first such survey she has published since the end of November 2013, representing a 28-month gap between reports. Given this, it makes for some interesting reading, some of which is highlighted below.

Overall, the distribution of regions between Full, Homestead and OpenSim in March 2016 remains very similar to that of November 2013 (in fact these figures tend to  remain fairly constant as representative indicators of region distribution).

March 2016
53.9% (+/-1.28%) 45.6% (+/-1.28%) 0.5% (+/-0.18%)
November  2015
53.8% (+/-1.30%) 45.5% (+/-1.29%) 0.7% ( +/-0.21%)
Surveys based on 4,208 accessible regions in March 2016; 4,402 accessible regions in Nov 2013

However, Tyche indicates that, overall, the amount of private estate land has consolidated more within the top 20 estates over the 28-month period from November 2013 (39.5% of private estate land) through March 2016 (49.1%; +/- 1.3%). Using supplied list prices, Tyche estimates that the top 20 estates account for some 40.6% of total private estate tier, compared to 30.5% in November 2013.

In terms of regions held, of these top 20 estates, seven are actually under the Anshe Chung Studio (ACS) brand, accounting for 19.1% of private estate holdings, compared to 13.8 in November 2013 for ACS; again a significant increase.

Grandfathered Homesteads stand at around the 85.32% mark for 2016,  compared to 82.4% in November 2013. The year-end reports do not indicate the percentage of Full private regions that are Grandfathered, but in a comment on SLU following the Lab’s announcement on Grandfathering and buy downs, Tyche indicates that the current number of Grandfathered Full private regions stands at just over 11%.

In terms of private region decline on the grid, Tyche offers the following:

November 2013 March 2016
28-Month Region Loss
%age Decline
19424 17549 1875 10.7%

Comparing annual region losses for the period January 2012 through December 2015 shows that overall, while the decline still continues, it has slowed considerably as a percentage of the total grid since hitting a peak in 2012. However, 2015 did see a slight increase in the rate of decline, but just under 1%.

2012 2013
Loss %age
2863 12% 1719 8.2% 673 3.5% 825 4.4%

In terms of revenue for the Lab, in  November 2013 the Lab was generating approximately US$3,857,000 (+/- US$52,000) per month. By March 2016, this figure was approximately US $3,385,000 ( +/- US $43,000), representing a 12% decline in monthly private region revenues across the 28 months.

While this is a drop, and allowing for the fact that figures can only estimated, it would suggest that the Lab is still generating around $49 million revenue from tier (private + Mainland) at this point in time, representing approximately 80% of their total revenue. Taking into the assorted costs involved in running, maintaining and enhancing Second Life and the company as a whole, this would suggest the Lab is still reasonably profitable.

Which is not to say there are not other clouds on the horizon. The recent buy down offer on regions could pose a problem to small or medium-sized estates where full regions are concerned (given that the majority of Homesteads are already Grandfathered), as they may find meeting the up-front US$600 difficult to meet. If so, this could make it even harder for them to remain competitive on pricing with the larger estates, and potentially lead to further consolidation of land among the latter at the expense of smaller operations forced to turn in their cards.

Tyche’s ongoing reports make for interesting reading – particularly these month-end reports, which have been sadly missed (and my thanks to Ciaran Laval for pointing-out that we now have a new one to look at). As such, I hope the March update might signal the return of these reports are returning to something of a more regular appearance, assuming Tyche has the time to pull them together!

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Lab: get grandfathered tier in 6-month buy-down offer

secondlifeOn Monday, April 4th, the Lab took a step to help those who are leasing a region (full or homestead) directly from the Lab with the opportunity to reduce their tier payments, by paying a one-off fee.

The blog post announcing the offer – which runs for a six-month period from April 4th through October 4th, 2016 – reads in part:

From today until October 4th, 2016, you can “buy-down” your Full Islands and/or Homesteads to the grandfathered maintenance rates. By paying a one-time fee up front, you’ll be entitled to lower tier rates on your land for as long as you hold it (and remember, we now also allow transferring grandfathered land).

The pricing for this offer is as follows:

  • Full Island:
    • One-time buy-down fee: $600
    • Grandfathered maintenance fee: $195/month (regularly $295/month)
  • Homestead:
    • One-time buy-down fee: $180
    • Grandfathered maintenance fee: $95/month (regularly $125/month)

If you plan to hold onto your land for longer than 6 months, this is a great deal for you!

To take advantage of this offer, you’ll need to submit a Support Case using the Land & Region -> Region Buy Down case type. In that case you can provide us with the names of the regions you would like to buy down, and we will assess the appropriate buy-down fee per region.

There are some caveats to the offer: it cannot be combined with Education and Non-Profit discounts, nor can it be applied to Skill Gaming Regions. The quoted prices are also exclusive of VAT, if applicable.

Coming on top of the recent changes to region set-up fees, which is also referred to in the blog post, this is an interesting move by the Lab, indicating that they are trying to mix things up a little in an attempt to try to help with the issue of tier.

The 6-month period of the offer means those who take immediate advantage of it will effectively break even on the one-time fee cost, and will continue to enjoy the grandfathered tier status for as long as they hold the land. And, of course, grandfathered regions can now be transferred – although this does incur a further up-front fee (US $600 for a full region, $225 for a Homestead, for example).  At the same time, it potentially offers the Lab something of a cash injection, making it almost a best of both worlds offer.

Tier will remain a contentious issue within Second Life, but the Lab is hoist by its own petard  when it comes to taking broader steps with tier and possible tier reduction; there is only so much the company can do without risking hurting itself. As such, this is something of a welcome move, although it will be interesting to see how far down it reaches.

Second Life land set-up fees reduced

secondlifeLand costs in Second Life are one of the most controversial issues to discuss. While it is often claimed that “the tier is too damned high”, the Lab has always been somewhat hoist by its own petard in having virtual land fees as the mainstream of its income. As I explained at length in January 2013, this actually limits how much the Lab can actually do with regards tier without potentially hurting its ability to function.

However, one area that has always seemed unaccountably high is the one-time set-up fees charged for private regions. These have stood at US $1,000 for a standard full region and $375 for a standard Homestead region (both inclusive of the first month’s tier, and ex-VAT where applicable) for many years, which has always come across as an exorbitant  amount to charge. There have been numerous calls over the years for these fee to be reduced; in my 2013 article linked to above, I went so far as to suggest a reduction in set-up fees coupled with a modest reduction in tier might be a way forward for the Lab.

The Lab, though, seemed steadfast in its approach. Tier would always be difficult to adjust, and they appeared reticent to play with the set-up fees. But on Tuesday, November 17th, that latter point changed.

Crossing Sands; Inara Pey, October 2015, on Flickr With immediate effect, set-up fees for all private island products (unthemed and themed) in Second Life have been reduced by 40% (image: Crossing Sands MarinaFlickr)

As announced in a an official blog post, the Lab has confirmed that with immediate effect set-up fees across all private island products (Full, Homestead and OpenSpace, both developed and undeveloped), have been reduced by 40%. This means that the set-up fees for all classes of private island product are now (ex-VAT, where applicable):

  • Full Private Island US $600
  • Themed private island US $629
  • Homestead region US $225
  • Themed Homestead region $250
  • OpenSpace region US $150

What’s more, anyone who has paid a region set-up fee in the past 14 days will receive the difference in fees back as a credit(in US Dollars to their account balance.

This is undoubtedly a step in the right direction – although how much of an impact on land usage it has will be interesting to monitor. In October 2011, the Lab abolished all set-up fees for a period of one month in a “land sale”, which saw  689 added to the grid, a net growth of some 508 regions for the month. Unfortunately, such was the situation then that, as the realities of tier kicked-in, the increase in regions was all but negated in a few months as the heavy decline in region numbers continued through 2012.

As it stands, it is fair to say the global economic situation has improved since 2012, and people have again found themselves with more in the way of disposable income in their pockets they can put towards tier. This has likely to have been a contributing  (but not the only) factor in the slow-down in regions losses seen in 2013 / 2014. But will a cut in set-up fees be sufficient to fuel a further sustained slow-down in grid shrinkage which has accelerated slightly in 2015? That’s something only time will tell, although I’m admittedly sceptical.

Which is not to negate the move by the Lab in any way – rather the reverse, it is most welcome, if perhaps a little overdue.

Venexia; Inara Pey, June 2015, on Flickr Tier has been a significant contributor to the loss of regions in SL, including places such as Venexia (above) and its sister region, Goatswood.  Whether the reduction in set-up fees will help slow this situation down is an open question.

Changes to Transferring Regions

Alongside the set-up fees reduction for private regions, the Lab has also announced changes to transferring regions with grandfathered pricing, with the blog post stating;

Previously, Private Islands with grandfathered pricing would lose that status and revert to the usual schedule of land maintenance fees when the regions were transferred to a new owner. Today, we are changing that policy to make it easier for these regions to remain on the grid if and when they are sold to new owners.

Effective immediately, both Grandfathered Full Private Island regions ($195/month) and Grandfathered Homestead Private Island regions ($95/month) may be transferred to new owners without losing the discounted pricing.

However, this news come with a caveat: the one-time transfer fees for grandfathered regions are increased, with grandfathered full regions costing US $600 to transfer and maintain the grandfathered tier, and homestead regions US $300 (both fees per region, and exclusive of VAT where applicable),