Linden Lab instigate price rises: backlash plus

In a move that’s already garnered some heavy criticism, Linden Lab today announced some significant prices on a type of land called Openspaces. It’s the type of land meant for ‘light’ use. Over the past seven months that Openspaces has been available, some have exceeded any sane definition of ‘light use’.

That’s not a bone of contention – but Linden Lab’s response to it is. Instead of warning or banning the offenders, all Openspaces owners are being slugged with an extra US$50 per month (from $75 to $125), effective 1st january 2009. In addition to that, the previously available educator discount is being removed. From an Australian perspective, our current exchange rate woes mean that the cost hit is even higher.

To use a real-world example, this decision is the equivalent of a local council informing all ratepayers in a particular zoning area that they have to pay much higher rates each year because someone in their street has ignored zoning regulations. Add to that the real world economic situation and you can imagine the push back from Second Life residents. It’s actually one of the more nonsensical decisions I’ve seen Linden Lab make and aside from some short term revenue gains it seems the end result will be an even greater momentum for OpenSim grids who provide more competitive pricing. The educator discount hit is particularly significant – they’re a key demographic driving innovation and interest in virtual worlds and treatment like this is far from deserved.

No-one can fully blame a private company from seeking to increase revenue, but when the rationale doesn’t match a community’s expectations of fair play, only dissent and an impact on the Second Life economy are the likely outcomes.

What are your thoughts? Is this decision going to affect your current land holdings or influence your future purchasing decisions?

Update: There’s an excellent roundup of the coverage and protest options on Vint Falken’s blog.

Update 2: Linden Lab CEO Mark Kingdon has communicated a backdown on the pricing policy.

Comments

  1. This will affect my land holding. Demand for SL land just isn't there, so I will be abandoning all 48 of my open spaces.

    Well done LL

  2. Diag Anzac says:

    I can understand why people would be upset about this. If, when they reduced the price of these Openspaces, they were only meant to be used as oceans and forests (as they had, generally, in the past), why did they increase the prim count? That seemed to imply that this was aimed at people who wanted a full island which could cater to one or maybe two residences, with some space around them.

    It looks like that concept was more popular than they anticipated. I know that I considered it, but that was at the time my general interest in SL was beginning to wane, so I decided not to go for it.

    They should offer a “mid tier” sim, at the new $125 per month price, with the increased prim allowance, and also a “low tier” sim, which is more like the original Openspace, with the lower prim count.

    And yes, with the non-US currencies diving as compared to the US dollar, it is a bit of a double slug to the rest of the world. If I had been spending, say, $US100 per month on openspace about a month ago, It would have been costing me about $AUD110. Now, with a 66% cost increase, it would cost me $US176, and, with the AUD worth peanuts compared to what it was, that would actually cost me .. what … $AUD275? …. A 275% increase. Way to go!

    Aside from the Openspace issue, I'm also fascinated by what this implies about how much revenue they are getting per server. When talking about “full” non-openspace sims, I've always assumed that the “one sim per CPU” meant “one CPU per core”, and this Linden post seems to confirm it.

    So, on a single CPU, 4 core server, they are running 4 full sims. 4 x $US295 = $1180 per month.

    I work for a corporate IT hosting provider here in Australia. Our “mid-tier” server is an IBM 3650 with 2 x quad core processors. We charge about $AUD250 per server per month (so, currently, about $US150). And we are not using commodity “white box” servers – these are quality machines. The “high-tier” box is an IBM 3850 with 4 CPUs. For that, I think we charge about $AUD400 per month, currently about $US250 – in Linden terms, that would run 16 sims, which would give them about $US4720 per month revenue.

    Yes, they have their “asset servers”. We do too – we call them “infrastructure servers”, and the cost is bundled into that monthly cost. They have bandwidth costs – so do we – we have private fully managed links to Japan, India and the USA. We rent computer room floor-space off a rack-space provider. All those costs are bundled into the per month server charge. It's very similar to LL's model.

    Admittedly the company I work for runs pretty close to the bone as far as actually making a profit (by design). But, I find it hard to believe that LL are not making a huge profit, unless they are doing something majorly wrong.

    /end rant

  3. Diag Anzac says:

    “I've always assumed that the “one sim per CPU” meant “one CPU per core”, and this Linden post seems to confirm it.”

    That should have read …. “one SIM per core”

    :/

  4. hey Diag, The other complexity for LLs server pricing is Supply & Demand & Scalability.

    I have a very limited grasp on networking and all that stuff, but if they dropped server prices down to say… $150/month (which would be profitable based on your pricing for a “high-tier” or class 5 or 6) per region, takeup on these regions would be incredibly massive and the whole thing would presumably collapse under its own weight.

    Begs the need for solid inter-grid teleportation to enable and man & his dog to simply host their own region/grid privately and link it to a central grid, (kinda like what they do with ummmm, the internet, hehe)

    Would be a pretty cool model to allow any ISP to rent out a server of varying configurations and pricing and simply connect them to the LL grid for some kind of fee in a similar fashion to the way the Internet works in general.

    Might enable variations like 1024×1024 regions with 50,000 prims running smoothly with 200ish avatars hosted on a single quad core machine. Actually i'd be surprised if someone hasn't already done that.

    It'll be funny looking back in 5-10 years at our measly 256×256 regions. Reminds me of 1.44mb floppy drives.

  5. It is a complete outrage from Linden Lab to just increase the price for openspaces by 67% without any reason at all but increasing their profit margin. About 2 months back their new CEO posted a blog where you explicitly stated how profitable that Linden Lab is as a company, how much money they were making of their customer base. It seems that making a lot of money and profit wasn't enough for Second Life, they want more so they keep going on to milk money out of their customers, not just a bit of money but a lot of money. If you calculate the amount of openspace regions in Second Life times 50 USD you end up with an amount of about 10 million USD extra income for Linden Lab per year. This is not calculating all the openspaces that are going to be dumped by their owners which should also be a large amount. 1000's of people bought their openspace for 250 USD and now they have to pay up in january or Linden will close down their land which they bought and paid for.
    Such business practises show no integrity at all, companies who pull such a stunt made their reputation for the future with the general public.

  6. It is a complete outrage from Linden Lab to just increase the price for openspaces by 67% without any reason at all but increasing their profit margin. About 2 months back their new CEO posted a blog where you explicitly stated how profitable that Linden Lab is as a company, how much money they were making of their customer base. It seems that making a lot of money and profit wasn't enough for Second Life, they want more so they keep going on to milk money out of their customers, not just a bit of money but a lot of money. If you calculate the amount of openspace regions in Second Life times 50 USD you end up with an amount of about 10 million USD extra income for Linden Lab per year. This is not calculating all the openspaces that are going to be dumped by their owners which should also be a large amount. 1000's of people bought their openspace for 250 USD and now they have to pay up in january or Linden will close down their land which they bought and paid for.
    Such business practises show no integrity at all, companies who pull such a stunt made their reputation for the future with the general public.

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