Deltango Vale

In January 2007, an iPhone 1 cost $500. In January 2007, an estate sim cost $295 per month. In July 2013, an iPhone 5 costs $200. In July 2013, an estate sim costs $295 per month. See the problem?

Sure, some aspects of SL have improved, but nothing compared to the basket of infotainment goods and services in the world 2006-2013. The iPhone did not exist in 2006. Nor did the Kindle, nor iPads. A 2006 graphics card or processor is valueless today - scrap. Facebook was a niche product. Twitter was something you heard in trees from birds. A whole new universe of infotainment was created between 2006 and 2013 - and the prices of those infotainment goods and services have collapsed as the quality skyrocketed (well, except for Facebook, which is free anyway). By comparison, Second Life is a 10-inch black & white TV costing $1,000.

Interesting how Linden Lab stopped publishing quarterly economic data in January 2008 ("Second Life Virtual Economy Key Metrics beta Through January 2008"). Fortunately, I have all the spreadsheets. I sent copies to Tyche Shepherd at Gridsurvey on the off-chance she might have missed one or two, but she had them all. The numbers don't show land ownership or Premium membership by nationality. Needless to say, those Europeans who sold their land and downgraded to Basic membership are still counted as avatars.

Bless you Maddy. I think you are the first person ever in this forum to understand the concept of relative prices.

You are correct that the number of estate sims increased from September 2007 to September 2008, at which point, they peaked and have been falling ever since. There are several possible explanations why the VAT effect does not appear in that timeframe: European landowners were irrelevant, the European market was insignificant and I am completely wrong in my analysis because Europeans never have and never will contribute very much to Linden Lab revenues. This, though, contradicts Linden Lab's stated attitudes and goals concerning the globalization of Second Life. In January 2008 (the final economic report from LL), US residents represented 34.96% of avatars and 37.69% of user hours. Also in January 2008, Premium memberships fell for the first time ever. Europeans gleefully swallowed the 20-25% price increase. I was there. They didn't. Europeans sold out to incoming US residents. On the other issue, yes, I believe SL would be much bigger if membership and tier prices were lowered back to their 2006 relative price. The relative price of SL (relative to other products and services in the infotainment market) has risen steadily since 2006, to the point where it is now roughly three times what it was in 2006. Second Life is certainly not three times better than it was in 2006. Bottom line: Second Life has become increasingly expensive over time, first to Europeans (landowners and Premium members) then later to all others (landowners and Premium members). The quantity of estate sims is now back to where it was five years ago in July 2008. Second Life is not growing internationally; it is not growing at all. It has become a niche product with a hardcore userbase who are willing to pay the (relatively) high prices. I would call that 'missed opportunity' and 'stagnation'.

Premium Membership fees are only one aspect of the loss. More important was the loss of European landowners (some of whom owned hundreds of estates, not to mention all the mom & pop landowners). Many European landowners were also business owners who shut down their businesses when they dumped their land. They had not only invested money, but a great deal of time in SL. Also, let's not forget the non-European business owners who were renting from European landowners. They too were adversely affected when their European landlords sold out. Linden Lab's change of policy had a negative domino effect across all of SL. There is simply no way to see the "clumsy" and unnecessary loss of European investors, landowners and Premium members during the critical growth phase of a new product as a good thing.

I'm talking about European customers paying fees directly to Linden Lab. These included Premium Members and landowners. More free accounts doesn't make up for the loss of paying accounts. That's just the money angle. Reputation is equally important. "We collected European VAT charges in a clumsy way." (Philip Linden) and "Linden Lab has made more mistakes about Second Life than anyone else ever has." (Ginsu Linden). Well, the mistakes kept on coming for another five years.

Many people believe the euro is artificially high for two reasons: 1) high government bond yields (because of high risk of default) in some of the dysfunctional economies of several member states. Such bonds have to be paid for in euros, which pushes up the price of the euro. 2) Questions about Germany's willingness (and ability) to pay for it all. Yes, the German economy is doing well (exporting high-quality manufactured goods to China and the rest of the world), which boosts the euro, but the whole euro project looks increasingly unsustainable. Presuming the euro survives at all, the idea of the euro reaching parity (and falling further) against the dollar is quite reasonable. But I digress. Note that the UK price (including VAT) is the same as the US price (without tax). If CCP were simply pricing in tax, then the UK price would be in line with the euro price. But all this is a digression as well. The bottom line is that until September 2007, LL was treating VAT as a cost of doing global business. Second Life was growing rapidly, revenues were increasing, profits were increasing and, throughout that whole time, LL was treating VAT as a cost of doing global business. LL changed its policy in September 2007 - right in the middle of the growth phase - knocking out most of the European investors (landowners, Premium Memberships) and doing so in a way that badly damaged LL's reputation internationally.

Crudely, £10 = US$15 = 12 euros. The separate UK price was introduced about a year ago. Before that, UK residents paid in euros. CCP does not add tax to these prices; the tax is included in the price. Yes, the euro price is slightly out of line with UK and US prices, but it has more to do with choosing a psychological price-point base (9.99 v 14.99, one or the other) and fluctuating exchange rates than deliberate price discrimination. I believe CCP anticipated that the euro would approach parity with the US dollar (which it is slowly doing). In which case, I understand why they would have left the euro price unchanged (because it would fall in line with US and UK prices). The goal is broad uniformity, not price discrimination.

Hey Maddy, It's a mistake on the page. The UK prices include VAT.

The best source of economic data for SL is Gridsurvey.com. Since Linden Lab's primary income is from land tier, the best proxy for estimating the revenue stream is quantity of estate sims. Before 2008, Linden Lab proudly published quarterly economic data, including Premium Memberships. They stopped publishing data in 2008. As for CCP Games, information is scarce, but this article provides guidance. Since publication, the subscriber base has increased from 400,000 to 500,000. If so, then CCP Games revenues may have eclipsed LL's revenues of about $75 million annually. The important thing is that CCP revenues are rising and LL revenues are falling (down from a high of roughly $100 million).

CCP Games is a very successful company. It has offices in Iceland (high costs, high tax), Georgia (low costs, low tax), New York (high costs, high tax), Shanghai (low costs, low tax) and Newcastle (low costs, high tax). It sells its product in the global market at a uniform price. All costs, including sales taxes, are included in that price. (Note, UK prices include VAT, even though it is not marked.) CCP games sees itself as a global company in a global marketplace with global customers. Linden Lab, on the other hand, sees itself as a California company with US customers. That is one of many reasons why EVE Online is growing rapidly and Second Life is in decline.

Microsoft, Apple and Google are mature businesses with near-monopoly control over core products used by the majority of Earth's population. Linden Lab in 2007 was a tech startup with a niche product hitting the initial growth phase. Because of their scale and scope, Microsoft, Apple and Google products enjoy low price elasticity of demand. That means customers are less sensitive to price fluctuations - they are more willing to accept price increases. Second Life suffers from high price elasticity of demand, which means that customers are more sensitive to price fluctuations. If the price of Windows or an iPhone were to rise 20-25%, most people would moan and complain, rant and rave - and still buy Windows or an iPhone. When prices for SL jumped 20-25% in 2007, most European customers and investors dumped virtual land and Premium Memberships like a hot potato. It took only a mouse click to give up what had suddenly become an overly expensive hobby. The initial growth phase of a product is critically dependent on speed and reputation. Sometimes, it is only a matter of a few months whether a product will succeed or fail. It's all about catching the wave and riding it boldly. Facebook is a prime example. Love it or hate it, Facebook didn't mess around. It grabbed its chance with both hands - and won. Linden Lab fumbled the ball when it really mattered.

@ everyone Again and again, people are missing the point. The REAL issue has nothing to do with tax. The REAL issue is about costs, prices and markets. See earlier post. In 2007, Linden Lab had a choice: absorb VAT as a cost of doing global business, have lower profits in the short term, grow the European market, have bigger profits in the long term charge VAT, have bigger profits in the short term, shrink the European market, have lower profits in the long term If the word 'VAT' drives you crazy, substitute any other cost instead: electricity, office rent, wages etc. The issues is not about VAT, it is about costs of doing global business and strategies for success. Linden Lab made the classic mistake of sacrificing long-term growth for short-term profits. Bottom line: Linden Lab has no vision, no ambition and no business sense. The company has repeatedly made strategic errors that have severely reduced Second Life's potential growth and profitability.

@ everyone Actually, the real issue has nothing to do with tax. Read that again. The REAL issue has nothing to do with tax. Imagine if US costs (utilities + wages + office rent) were 20-25% higher than European costs, would you pass those extra costs onto US residents alone? (Most people in this thread would probably say, "Yes, why should Europeans subsidize higher US costs.") So you decide to charge US residents an extra 20-25% to cover those extra costs, Is that a smart business decision? You make bigger profits in the short term, but you would lose money in the long term as your US market dries up. This is exactly what happened to LL. Most Europeans pulled their money out of SL in 2007. Many, if not most, downgraded their memberships from Premium to Free. Linden Lab lost the European market - and all the profits that once came from it.

Yup, you are one of the few European landowners left in SL. Most withdrew their money back in 2007 when LL added 20-25% to their costs. Essentially, LL sacrificed its growing European market to maintain short-term profits. In the long run, of course, it has cost LL dearly, but VAT was only one of a handful of strategic errors that undermined Second Life. Bottom line: if you live outside the US, don't own land or pay for a Premium Membership. SL is heavily biased in favor of US residents. The only reason I remain a paying contributor to the SL economy is because I hope another company will buy Second Life and achieve its true potential. I must admit, though, my patience is running thin.

EVE Online is not exactly my cup of tea, but it is, without question, the most vibrant and successful virtual world in existence. CCP Games is so loved by its userbase that the hiring of an ex-EA executive was met with deep consternation. (Electronic Arts has been voted the worst company in America two years in a row.) As we all know, Rod Humble, CEO of Linden Lab, hails from EA. He seems to have brought the EA culture with him. What drives me crazy - what has been driving me crazy for five years - is the failure of Linden Lab to realize the true potential of Second Life. Unlike CCP Games, Linden Lab appear to be a bunch of rank amateurs hellbent on messing up what could easily be the biggest thing since the widespread adoption of the internet. The future is virtual worlds. It's blindingly obvious to everyone except Linden Lab, who are instead tinkering with petty projects while the golden goose is dying of neglect.

SL is like Detroit. It's going nowhere until a new management team rebuilds the technical infrastructure and reverses years of bad policy decisions. The only alternative to SL at the moment is EVE Online, which is growing like wildfire under a brilliant management team. I pray daily that CCP Games will buy Linden Lab and take SL into the 21st century.

Thank you for your post. It's nice to know Rod is still alive. It is also nice that Rod is broadly supportive of Second Life. Needless to say, we get this snippet of Rod's thoughts courtesy of you posting an interview from your own website into the General Discussion Forum. Forgive me, therefore, if I contrast Rod's almost accidental communication with the SL community with the communication process of another VR company that has not only been around ten years, but is growing steadily. Oh, and, btw, here's what the management and staff do for fun: Regarding VR presence technology, see: http://community.eveonline.com/news/dev-blogs/eve-vr-an-experiment-in-bringing-virtual-reality-to-the-eve-universe/ So, thank you Rod for your brief message via Jo's website. Great that you are doing stuff (whatever it might be). Wonderful that you like Second Life. Nice of you to show up every six or seven months with a tweet or two, but, y'know, it just doesn't cut it. In fact, it sucks. Write 100 times on the blackboard: "Must do better."

Seems it's old home week - or maybe a high school reunion - but some mystical vibe is tugging our weary bones back to these bleached white pages. I myself have been absent until fairly recently - poking my nose in more out of morbid curiosity than a desire to engage yet again in tired, old issues that comprise the banality of Second Life. It will soon be seven years since the golden days of 2006. How does one relate to such a distant time and place? I barely recognize SL now, with its j0nn23yyy7qwww Residents and poor fitting clothes. It takes me back to grade school rather than high school, with Teacher inspecting our desks for contraband lipsticks. I suppose SL will be renamed Kid-Grid soon. Perhaps this was always the limit of LL's ambition. It does make me a bit nostalgic, though, to remember my first year in SL. It was so vibrant and exciting then - packed with people seeking dreams and treasure, the clubs bursting with energy, the shops so full you had to bang against the glass to get in. The forum too bristled with intelligence and creativity. Who can forget Argent Stonecutter's pithy demolition of fools and fanatics? SL was also much more international. Those were wonderful days before LL converted SL into a California-centric world. There was so much promise, so much opportunity, all of it squandered in the name of benign conformity. And so, here we are, a few of us old timers, playing with the embers of the fire as it burns low, dredging up the last of our stories in the hope of postponing the inevitable end of the party. One by one, tired and weary, we drift off to bed.

"Anyone who imagines differently should explain why they think that TPVs saved SL." ----------------------------------------- TPVs saved SL because V2 was a disaster of galactic magnitude. Phoenix and Firestorm have been adopted by the vast majority of SL residents because the V2 viewer was an unholy kludge based on a misplaced philosophy, designed by a rogue team in secret without any input from the userbase then patched like crazy as a result of howls of protest from every corner of SL. I remember even Desmond Shang - yes, calm, cool and collected Desmond Shang - holding his nose at V2, pleading with LL to fix it because he HAD to use it to avoid liability should anything go wrong inworld. Thank all the gods for TPVs.

Yes, SL is still here - at about the same level it was in 2008. SL has survived five years of weak leadership, poor strategy, bad management, underinvestment, damaged branding and downward stagnation. Linden Lab is now in purgatory with CompuServe and Yahoo. It is therefore a testament to the initial genius of Second Life as a virtual political economy that has kept it alive in spite of Linden Lab's best efforts to mess it up. Imagine what SL could be under good management! As for 2014, I believe Linden Lab is sick to death of Second Life and wants desperately to sell it. I also believe that vibrant, innovative companies such as CCP Games have proven the business case for virtual worlds. It is only a matter of time before a smart company buys Second Life and reaps the rewards of its true potential. See: http://www.forbes.com/sites/insertcoin/2012/12/28/eve-onlines-executive-producer-explains-how-the-game-is-still-growing/ http://www.businessweek.com/articles/2013-04-18/multiplayer-game-eve-online-cultivates-a-most-devoted-following http://uk.ign.com/articles/2013/05/14/how-eve-online-still-thrives-10-years-later

Thanks for the link. I carefully followed Darrius' instructions and got the system to update. I hate the new direct delivery system because it is unbelievably complicated (impossible to manage without Darrius' notes) and quirky (transfer failed, delete entry, transfer failed, delete entry, transfer failed, delete entry, transfer succeeded, edit original entry to point to duplicate entry then delete dupicate entry.) When I originally signed up for direct delivery, I thought the inventory folder replaced the Magicbox. It seemed like an intelligent and convenient improvement. Hooray, just change the item in the folder and Marketplace would go get it. Boy, was I wrong. If Linden Lab were God, the human race would return to the stone age within 20 years.

Mother of God! Does one have to go through all this simply to change the item to be delivered? Can't Marketplace just deliver what's in the inventory folder? Magic Boxes were a million times easier to use.

Can anyone explain the Byzantine method of getting a new (updated) item delivered instead of the old one? I switched from Magicbox to Direct Delivery several months ago. I sell and rent land on Marketplace. I 'sell' notecards (for L$0). I have one notecard per land listing. The system worked fine until now. I have an inventory folder in which I keep items (notecards) to be delivered. Today, I edited and saved one of the notecards. I foolishly expected this is all I would have to do. Obviously not, because the new item (edited notecard) is not delivered when I do a test from Marketplace. The old item (old notecard) is delivered instead. I changed the Description and contents of the item (notecard). I did NOT change the Name of the item (notecard). I did NOT change the name of the inventory folder. There are no old copies (of the notecard) in my entire inventory. I did a synch from Marketplace. I waited and did another test. I relogged the viewer and tried everything again. I tried to upload the new item (edited notecard) via the Merchant Outbox, but Marketplace created a new and empty duplicate listing. Surely this can't be right. I deleted the new empty/duplicate listing. The old listing remains. I searched the knowledgebase and found no information on how to update an item to be delivered. So, how on earth do I deliver the new item (edited notecard) instead of the old one (old notecard) without deleting the old listing and creating a new listing?