April 7, 2008 by Ciaran Laval
Posted in
The latest LL blog announces pricing structure changes to land. Super smashing great hey?
You can now get an island for a bargain USD$1000! Woohoo! Unless of course you've just ordered an island and then you have to pay the old price of USD$1675 and watch your investment fall over night.
Then of course there will have been those who ran out and purchased open space sims and now find that the super smashing value they appeared to represent, was not great value at all.
I bought my island last year so it's not new. However I've been paying a shed load in tier, had VAT thrown at me and now I find LL are wiping hundreds of dollars off the value of my investment. This really isn't encouraging. However it could be worse, I could be a land owner who placed a hell of a lot of faith in LL and has seen thousands wiped off their investment.
I invested only what I could afford to lose so I can't complain, but I will say this, I have absolutely no confidence in this company to be able to look after my investment anymore so I think the time is right to start downgrading my mainland tier payments.
I know some people will chuckle about this, indeed probably more than some as landlords in SL are apparently in bed with Satan and are all evil. However this is a huge kick in the teeth to the estate owners who own the vast majority of Second Life's land, something like 80% is private and it's just taken a huge hit. Biting the hand that feeds you is always dangerous.
Ask yourself this, if you'd ordered an island this month, would you be happy with a decrease of around 40% in value before you'd even got started?
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Man, I come back and see this...
I'm half tempted to disappear again.
I'll have to get some rest (14 hours in planes and airports), then I'll get back to this and consider what I should think about it... :-(
Second Life Consultant
Yup - about $17,000
That's about the change in the value of my land between two days ago and yesterday.
But of course, this isn't totally surprising, and I too went into this with eyes open - and realized that LL could at any time make changes that would have a big impact on my investment.
I'll be honest, though - this is just another disappointing bit of news for me - even though overall I think it is good for SL and really good for people that want to get their own islands and didn't have the startup cost - a 40% drop in price makes it much more attainable.
But I reflect back on the last year.
Tier increases of 50% (just as I was getting into the estate market)
Gambling ban (I ran a poker room when the policy changed)
VAT (europeans are still leaving SL in droves and it made the land biz more difficult for sure)
WSE stuff (WTF? no need to say more)
Scammers (Montana Ryder, Kejo Merlin, SkyRanger Hammerer, others - i lost millions of Lindens to these ppl)
Island price change (lost $17k USD in a day)
Texture thieves (I have never put out the line of skins that i developed - which took hundreds of hours - what's the point - if they are any good - they will be available for 50L on the next corner within a week)
And through all this, I have never taken a dime out of SL for myself - I wanted to grow something, build something neat.
I am a pretty positive person usually. But geeeeeze.
Ok - I realize it isn't all about me - lol. sometimes you are the pigeon, but most of the time you are the statue. I guess I am feeling just a little shat upon today...
dd
You didn't lose anything
Your statement: "And through all this, I have never taken a dime out of SL for myself - I wanted to grow something, build something neat."
Explains why you haven't lost any 'investment' whatsoever. it's just like the stock markets. When they take a nose-dive, what do you do? Do you bail as fast as you can and dump everything for whatever you can get from them to salvage it?
Or, do you remain calm and simply sit on what you have?
When the stock market takes a nose-dive, you haven't lost a single cent... until you sell.
The same is with private islands. Until you sell - they haven't lost any value. Unless of course, you are a land-flipper like Sarah. now, I really do feel for her because she was playing the actual real estate business. Anyone doing the 'land baron' thing with estates got hurt.
I own an island and the price drop doesn't bother me a bit. In fact, it's encouraging me (read; making it damned tempting) to buy that second island I've been thinking about for so long.
What I'm worried about is the statement that "maintenance fees" (read: estate tiers to Linden Lab) will be "reevaluated in Q3"
Ah but
I do dabble on the stock market, very small, buy low, sell high, there's some free advice :p However the difference is that here we have a case of Linden Lab devaluing your holdings, it doesn't matter if you're selling or not, your assets are devalued.
The question is whether those assets will ever rise again and that seems highly unlikely, prices are only likely to continue downwards. Now I'm sure most estate owners realised that their island will devalue over time, but to devalue them by this amount, that's irresponsible. However it's not only estate owners who have this issue, more pressing will be for those who own estate land, there's more movement in land sales than actual estate sales and those prices are also down.
Linden Lab shouldn't encourage an economy and then stomp on it so hard. They should have been more creative with these price cuts, offering deals to existing estate owners, dropping the price for new estate owners slightly, offering extended free tier on new purchases etc.
completely agree.
They tried applying Occam's razor and ended up doing a bit more than a circumcision.
Bobbit, anyone?
a href="http://www.knowprose.com/secondlife_consultant" target="_blank">Second Life Consultant
Yeah I get that
You're right of course - I don't actually "lose" anything until I sell. But I was planning on doing exactly that - over the next little while to slowly make a graceful exit from the land biz.
I guess timing is everything. Now, that is a lot less attractive...
In the light of a new day - I am not feeling as shat upon - again you're right - now is the time to be patient, not to panic.
dd
Totally get where you're coming from...
I can completely understand where you're coming from Ciaran, but having said that, I think that the idea of virtual land being an investment isn't really tenable. The price for real world land maintains value because there's ultimately only a limited amount of it: we can't build more Earths if it gets too expensive.
In virtual spaces, though, any such scarcity is both artificial, and temporary. Unless Linden Lab remains the sole supplier of virtual territory (unlikely) and decides to maintain an artificial scarcity (which may not be in its interest), the price of "land" will always trend down over the long term. In the short term, that trend will be slow. But ultimately, it will be very quick. Think of the cost of web hosting, and how it's trended over the past ten years.
I know this isn't any consolation if you've viewed the value of virtual assets as being something that's an investment. But as an investment, it really was never a good one. Calling it "land" was always a misnomer.
Risky
Oh for sure it's a risky investment Ian. However the area where I expect to see rivals or other worlds who link to the main grid leading to lower prices is in terms of tier. That's more akin to webhosting.
Over time I would expect prices to come down. Indeed if LL had announced a new class of island on new hardware, that was actually cheaper, this would have made more sense. I buy computers year on year and have seen prices drop rapidly. What I paid for 500 computers five years ago was a hell of a lot more expensive than what I will pay this year.
If LL had announced a 30 day "sale" again that would have made more sense. However it's not just island owners who are hurt by this, those who have purchased plots are hurt too, it's too steep a price drop.
To play the devils advocate...
To play the devils advocate for a moment, you know what you paid for, you got what you paid for at the time and there was never any guarantee when you bought your land that you would be able to sell it at around the same prices as you bought it.
Has your islands changed at all? No, they are still the same square meterage, still the same prim count and still the same hardware. You still have exactly what you paid for at exactly the same price and you made the choice to buy at that price.
Big businesses change the prices of things they sell all the time. If I bought a big screen TV yesterday to see its price cut today I may be a bit annoyed but if I bought it a month ago or a year ago, not so much.
So lets look at resale. Well everything being equal you pretty much had a reasonable chance of selling (and I mean Island transfer here, not just selling estate plots and charging tier) at the same price you bought. But you had to realize there was a chance you couldn't. There was a chance LL would go to the well, there was a chance you would have to sell quickly and under market value (I don't know, maybe due to illness say) and of course there was a chance you could sell for more than you paid. Either way your taking a calculated risk (you said so yourself) that you should have walked into with both eyes open.
So, lets look at the economics. On the sim I rent my land, the land owner now charges 10,000L$ per 4k plot per month (it recently went up too). That does seem to be average for commercial land from reliable sources that does allow people to use weapons. So, given 16 plots of that size on an island, he's making 160,000L$ or (at LindeX rates) just over 600USD a month on a full island. Take tier from that, and you've paid back your initial investment in 6 months (assuming the old SIM price). After that its pure profit and the ability to sell the island after, even if you get 1L$ for it your coming out ahead.
If you buy from him rather than rent, its 39,999 per plot (IIRC) and 8k tier. Thats 639984L$ (2400 USD so he immediately gets the price of the SIM back plus 800USD profit) and 128000L$ (480 USD, 185USD profit) a month tier.
So will we see a decease in rent/tier prices on estate land? I'd love that but I doubt it. People still have to cover their tier plus you never see an estate owner put the price down once they consider the island purchase price to be recouped. Will we see more islands? Yes, but will they be from reputable people? Who knows. Personally I'd always go with someone with a decent reputation, like Sarah Nerd or my current SIM owner, than some new unknown.
As I said, I invested what I
As I said, I invested what I could afford to lose. I did have my eyes wide open, I realise this could all go belly up.
Sim owners have additional costs than merely tier. They might pay estate assistants, they might engage in advertising.
In my case I've sold some plots, if I ever chose to sell then island I'd ensure that I paid those people back for their investment, they have also seen their investment plummet with this announcement. However I'd pay them back what they paid me. If someone pays me for a plot then I deduct that price from the value of my island. I stopped selling plots when people put their plots up for sale and left without paying tier, I bought those plots back myself rather than take their investment away from them (as I could have done).
This isn't like buying a TV, LL's initial investors did so because they felt the product would grow. They did so in the belief that they were investing in a project. If they didn't believe that then LL wouldn't be here in the first place. Yes they know they are taking a risk but their eye is on growth, not on taking a hit.
The whole TV analogy would work if they were announcing class 6 islands, with $395 a month tier for this price. Hey those outdates class 5 islands don't cut the mustard anymore.
Sarah Nerd was new once you know :p I actually rent land from Sarah myself.
Who Cares about the real person behind the Avartar.
I'm so happy you bought this topic up Ciaran as I read over the blog today I felt it was necessary to read what I just read off the blog one more time. It is at times like this people who have made this there full income that it effects the most and LL should be ashamed that they are lowering prices after the fact they decided to raise them to just price gouge the economy in SecondLife. I read on the blog on secondlife about someone who lost a great
deal of cash here. I also read where they said that now I know why people go postal well I laughed at that but to be really truthful this is a really good example. For what no reason at all did LL need to lower the island cost if that was the case they need to credit those people account the difference for what they intially cost but I've once remember someone telling me not to put all your eggs in one basket but I'm really kinda shock to see LL to do sonmething like this. Some of the people that LL are hurting are paying them way over 100,000 USD in tier payments and you'd think that if someone was paying that kind of money you'd actually show some consideration and care as to what the customers opinons are. This is LL problem they need more staff and need people who are going to value people opinons.
Best Regards to the Estate Owners,
Agreed
LL definitely need more staff, they also need to communicate changes better. This consistent overnight announcement policy doesn't help people to make long term commitments.
"For what no reason at all
"For what no reason at all did LL need to lower the island cost..."
Because lowering the cost lowers the cost of entry to island ownership, making it more attractive to more people, and thus selling more island. More islands in use stimulates the economy in other ways, too.
I'm still waiting to be
I'm still waiting to be compensated on all the money this past week that LL has cost me to lose with SL not working properly. You would have thought by now we would have been compensated. Even giving every avatar a 1 month membership added to their account.
People buying these islands right now will be suckers in Q3 when their tier prices go up by 25% or more. Linden Labs is looking to make more money for themselves & not the people using their service. In 5 months we will see these same islands everyone got sucked to buy right now being sold for $750.00 because they cant pay tier anymore.
They have shown they do not care about the end user. If they cared they would have compensated us. Xbox live had a few problems for a few people at Christmas that couldn't log on. At least Microsoft gave every single users of xbox live a free game for compensation. That wasn't much but it was better then nothing.
We are all losing some money because of LL faulty software. Its time they make a change & start giving us what we are paying for. Money breaks everyday. There is NO REASON new sims should be getting sold so LL makes more profits when current SIMS don't even function right. This would be like GM or FORD selling cars that they knew had problems. When they find out about problems those cars get stopped on the assembly line & changes are made. They don't keep selling the broken cars. Linden Labs is selling us all broken software that can't work 24 hours without tons of problems.
Linden Labs won't IPO because if they did the FCC would be looking into their money scheme they are pulling on us all. If they IPO that means we the shareholders must be listened to. LL don't want that or they would listen to our opinions now.
I'd be ashamed if I worked for Linden Labs knowing that other companies look at their blog & see all these things breaking everyday. I know I would make sure big businesses were not seeing those problems.
I'm sure in the next 2 hours money goes stale again....
A different anonymous
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OK
I will simply write 'Thanks to Ian Betteridge for putting some sense back in this thread'