Anshe Chung has made their buckaroos and done quite well. In fact, it’s a model a lot of other people followed along: purchase and run a private estate in Second Life, a.k.a. “sim” or simulator, and rent or sell the land off it to other residents, essentially doing what Linden Lab is doing.
After all, by charging the same amount as Linden Lab for monthly land tier, you can make a healthy profit, and the virtual land on your sim is easier to sell and lease because you are likely to take payment in Linden Dollars (L$) on a weekly basis. This saves all the Euros on VAT taxes and just plain makes it easier for a lot of Second Life users who want land.
The problem with Second Life is that Linden Lab isn’t only the government which is able to print-up money whenever they see fit, but they also are God in that they can create virtual land as they see fit. In fact, tier fees for virtual land is Linden Lab’s bread-and-butter. They need people to buy land.
However, there’s a few problems that have been working their way through the system for quite some time, starting with the United States Congress.
It is illegal to transfer united states currency through the Internet for gaming (gambling) purposes. Allegedly, Linden Lab investigated the possibility that they could be challenged under law and decided it is safer to simply ban gambling outright.
This put a massive dent in the SL economy – and it still hasn’t fully recovered. On top of that, the issues in grid stability, usability, first experience and a slew of other things has caused membership to begin stagnating. On top of all that, high oil prices in the real world are causing real life people to pinch real life dollars so they can put real life food on the real life table and keep the real life roof over their real life heads.
So, what happens? Well, for starters, not going to be throwing real dollars after phony ones. Either need to earn L$ or do without. This, in turn means a bit less virtual shopping. Not to mention the user base is falling flat and premium memberships have declined in growth and may actually decline for real.
On top of that, Linden Lab drops the starting price of private virtual estates dramatically while dumping more virtual land into a new continent, all while collecting up old abandoned virtual land and putting it up for auction.
So what we have now is a land-glut.
We have a Second Life Recession. Yes, it may just be the typical summer slow-down, but it still hurts. Hopefully Linden Lab can keep the fine-balancing act going. Or there will be a lot of people who really get really hurt, really.
Arifi Saeed has a great article over at his blog about the Second Life land crisis. If you have or are thinking about virtual land in Second Life, you’d better take a read at what he has to say:
The short term fix has been to lower the setup fee (’purchase price’) for full private sims from $1695 to $1000, make it much easier and quicker to buy private sims, make it easier and more flexible to buy openspace sims (with all the 16536m2 territory but less than a quarter of the prims of a full sim), and toss a lot more newly created mainland virtual real estate on the market as well. The result has been the huge expansion in virtual territory celebrated in the recent LL blog — and to create a major real estate crisis in Second Life by expanding the supply far in excess of real demand.
——————–
But that would mean the total destruction of the illusion that there is any real value in Second Life real estate as an asset and totally bankrupt all current land owners in Second Life. It would eliminate the Anshe Chung model of an owner/reseller of land in Second Life completely. And doing so would, of course, totally alienate a very large proportion of Second Life’s longest term and most loyal residents. Unfortunately, that process is now quite well underway.
Source: http://arifisaeed.blogspot.com/
Filed under: Socially Mundane | 2 Comments
Tags: Linden Lab, Second Life, Virtual Land
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We certainly are seeing a land-prices correction. However, I think this one was engineered and is long in coming.
18 months ago, the squeeky wheels were whining, “land values are increasing too high, too fast! We need cheaper land, especially since the First Land program ended!”
The “economists” at Linden Labs agreed – they did want to keep land prices in a more accessible range. It is virtual land, after all! So they released a bunch of new land; formed a new continent as I recall. Somewhere in the neighborhood of 8.3 million square meters of new land in just 3 months, wasn’t it?
Most of us expected to see land prices fall immediately – or at least within about 90 days. I held off trying to expand my land holdings and build an estate at L$10/meter. I ended up waiting over a year for the prices to finally come down!
Far from being a “recession”, what’s amazing is that it took so long for the prices to reflect the huge glut of new land created. I’d say the SL world economy has surprised many people at how resilient and stout it is.
I question causation connections between the gambling ban and these land prices. But economies are complex things, even virtual ones. I wonder where we could dig up stats & figures that would let us assess the effects of the gambling ban. Could it be that concurrency has leveled off *simply because player cannot gamble* in SL? I find it hard to conceive that the bulk of concurrency growth was due to players logging on to gamble.
It has me chuckling to see people complain when land prices go up, and then they complain when land prices go down. SL or RL, the whining seems the same.
I agree with you. And I also concur there is no direct correlation regarding the gambling ban with land prices, except in this: a lot of those casinos and anyone who wanted to partake in the gambling business bought up or rented a lot of land.
On the banning, they all moved out quickly. This created a massive glut of available land and many private estates were hit hard. Many were dumped and put-up for sale. This on top of the sudden and massive decrease in spending. The same with the sudden addition of VAT for all the Europeans. There also is the banking ban. The economy has taken one “hit” after another, and nothing positive to boost spending has come from Linden Lab that I am aware of, since “Flexi-Prims” was introduced in 2006 (allowing creators to produce want-to-buy wares.)
The casino ban, and VAT and banking ban also happened to be about the time Linden Lab began releasing one new continent, and since then their most recent continent, adding more land to a world that already has a glut that needs to be recycled. This is all well and good as new user counts were still on the rise.
However, the main caveat was and still is that premium membership growth is stagnating. And only premium accounts are allowed to buy and own land on any of the “mainland” continents. Yet Linden Lab had until a week or two ago, continued releasing land.
Economies do not turn on a dime. What is happening now, in terms of cause-and-effect is due to whatever got the wheels turning four, five, maybe even six months ago.
What’s happening now is that land prices are falling drastically. Too drastically in fact that Linden Lab admits openly in their blog that they have overshot their own goal of L$6 to L$8 per square meter and have temporarily stopped releasing new land.
There are a lot of forces at work. And I for one am not complaining. Just saying it’s one of those annual Summer crunches that seems to happen every year. On top of that, with the U.S. economy feeling the pinch (among the rest of the world with regard to oil prices, etc.,), more an more people aren’t going to dump real life dollars into Second Life. This adds to the downturn in spending.
Just saying it will be a rough Summer as it is every year. And some who own estates, like I do, are reevaluating how they are used and marketed.
It used to be when I put land up for sale on my own estates, they were snatched-up within hours. Now, they sit for a week or two before they are even noticed. Literally. Because there are so many listings of land for sale right now, with everyone dumping their properties and hoping to make something back before flat-out abandoning, all listings of land for sale, including estate land, are lost among all the others. It is certainly a buyers’ market.
So, converting my once residential sim to full commercial space for my and my significant other’s own wares. I won’t even bother leasing space out, will just use it for our own purposes where we will have greater ‘market’ control on it.
The SL economy does this every year. For anyone older than 18-months, it’s been seen and experienced before.