Second Life Tier – Again?

User Complaints

When a company recognizes they are losing customers and market share they usually start looking to see what the competition is doing and what customers are saying/complaining about their service/product.

The we can see the Lab looking for information and ideas to improve player retention. But, we only gets bits and pieces here and there. A hint of something they learned in usability studies… well, that tells us whatever they told us and that they are doing usability studies.

I see our perception of their actions as being highly distorted. We get to talk with a few of the Lab’s software engineers. We seldom hear anything from management types. We also know there are other engineering groups within the company that we never hear from. Occasionally Oz Linden or Maestro Linden bring some of them out to explain and discuss changes to the system. So, we get glimpses of the other teams.

We also know that the Lindens we can talk with have restrictions placed on what they can say. It is management that imposes those limits.

So, we can only guess at what may be going on within the Lab. Since 2011 when Rod Humble spoke about where he was taking SL we have heard almost nothing significant about directions the Lab is moving. Well, other than Patterns and other games. But, those are not about SL.

When I go back and listen to Rod’s speech at the last SLCC meeting (2011), I find that many of the things he wanted to do are being done. Many are still incomplete. But, the things he discussed are being addressed.

For instance Bake Fail. An entire new system for rendering the avatar has been developed, Server Side Appearance (SSA). Once that system was  in place it was found that the Inventory System had problems that still cause Bake Fail. For months that problem has been a target for improvement efforts.

The bandwidth load that Second Life places on the Internet connection was contributing to Bake Fail and numerous other problems. For months the HTTP connection processes used have been a project for system improvement. Now they and inventory API’s have been mostly rebuilt and are still being improved.

Will fixing Bake Fail and Inventory reliability increase player retention? I think so. But, this is less a feature that will attract new players/users than it is one that annoyed people causing them to leave. I think people should be moved to question if the cost to benefit ratio for such projects works out in the Lab’s favor. Taking each project on its own, I don’t see that it does. If I consider them part of some overall plan, then I see it may possibly work out. I am certain the Lab thinks they will because of the effort, time, and money being expended.

Mobile

We all know that everything seems to be moving toward the mobile market. Blogger after pundit has written about how the Lab needs to develop a lightweight viewer for mobile devices. My thinking is that as Second Life is now and the current state of mobile technology it just isn’t possible to move the desktop experience to a mobile device. I expect to see something usable with a year or two. But, a lot has to change. I see some indications the Lab is making those changes.

I expect the Lab’s management to be looking at numerous technology advances and considering how to recover a $12 million per year and growing loss. Otherwise they’ll be out of job and the investors will be out a fortune. That writing is on the wall in big letters.

We know they are looking at Oculus and LEAP. I see articles on how the Oculus team is looking at getting the Oculus head set working on mobile, which seems ludicrous to me. But, that team has some pretty heavy hitters that think it is a good idea.

If Oculus 3D can run on a mobile device, then I see no reason the render process of Second Life won’t be able to run on mobile devices. But, neither of those things can happen today. If you go into Google Play and search for 3D apps you’ll see the state of the art is primitive… compared to desktop gaming.

Is SSA a step in that direction? Does it provide a technical demonstration of what server side rendering and image processing can be? Does the SSA project provide the basis for making decisions as the Lab looks at going to mobile devices? May be, I lean toward thinking it does.

The Interest List is a project that attempts to get the world rendering more quickly. It also strives to reduce the render load on the device GPU. Using the Interesting RC Viewer I think they have certainly made a big improvement.

The Interesting project also includes improvement to caching of the world. Those are both things that will be needed by mobile devices. I use a 4gb cache on my desktop and with the Interesting Viewer changes, that cache is now running 3.7gb actual. My phone now has 65gb of storage. So, storage is no longer a problem for mobile.

Good caching will reduce the bandwidth used. I am not sure they have that worked out all that well yet. But, they are improving it.

28 thoughts on “Second Life Tier – Again?

  1. “meaning I can see no reason to motivate them to lower tier and cut off the income they have. Doing so would be foolish.”

    Both you and Hamlet seem to believe cutting tier prices equates to cutting revenues. I disagree, and suspect many supporters of tier reduction do as well.

    Rod has stated a few times that Linden Lab was “extremely profitable”. We see evidence of it in all the acquisitions and investments made during his tenure. When a business has slacking sales and demand issues, its not at all uncommon to cut profit margins in order to increase total revenue and total profit.

    Were Rod stating instead “we’re barely profitable but making it”, and not acquiring companies like Desura, not funding external companies like High Fidelity, and not funding the development of half a dozen new products, I think it’d make sense to defend Linden Lab’s refusal to budge on tier pricing and even outright claim they can’t do it. Considering we live in a totally opposite reality however, Linden Lab seems like a terrible candidate of a company to suggest can’t leverage price cutting to increase demand.

    I think the reality is simply Linden Lab is fine with the grid shrinking for whatever their reasons. Maybe they’re working on a Second Life successor, maybe something completely different, either way they seem content to have the grid slowly dwindle towards 0 in the years ahead.

    • The thing is you have no numbers to back up your position, that cutting tier fees would increase revenue. Managements job is in part to maximize revenue.

      • “The thing is you have no numbers to back up your position, that cutting tier fees would increase revenue. ”

        And you have no numbers to back up that cutting tier would reduce revenue, yet that doesn’t stop you from sharing your opinion, does it?

        As consumers the best thing we can do is give feedback; if Linden Lab charged less, I’d pay them more. That may not be your stance but its mine and others, and so its fine that we believe if Linden Lab slashed prices, Second Life would start growing again along with Linden Lab’s revenues and profits.

        • Actually I do have numbers to show revenue would drop. Lowering the fee is an obvious reduction in revenue. that is simple math.

          What you lack is the numbers and data to show that more people would want regions at a lower price. That is opinion.

          My numbers are suggested by Kitely, which has a lower price. Look at the number of people buying regions there. Do you have any information that shows more people than the number purchasing there would buy regions? No you don’t. That means the Lab’s drop to Kitely prices could not be made made up by taking even all Kitely’s customers.

          My point is simply you have nothing supportive to convince Linden Lab you are right. I have very simple math and sales rates of lower priced regions.

          • “Lowering the fee is an obvious reduction in revenue. that is simple math.”

            Wow. That’s really surprising to read from you. Have you never heard of economic tenets such as “price elatisticty of demand”? http://economics.about.com/cs/micfrohelp/a/priceelasticity.htm ?

            The basic idea is that revenue is only maximized when a product or service’s price is correct. Finding what’s correct sometimes means lowering price to raise demand and raise revenues. That’s elementary, not really debatable whether or not its apart of common sense economics.

            Two quick ways to raise revenues is either to raise prices or increase sales, and the Law of Demand dictates we lower prices to increase sales. Raising prices isn’t an option for Linden Lab; they’ve tried it before and what’s resulted is years of years of dwindling region counts.

            Another option of course is Linden Lab improve the value of their offerings. But despite Second Life receiving some of its biggest improvements ever during Rod’s tenure, even venturing into competing with customers, region counts are still dwindling and user concurrency is still stagnant.

            Maybe Project Interesting will reverse things. Or Fitted Mesh, but probably not. It’s going to come down to evaluating pricing eventually, or shuttering. The free market dictates that.

            “What you lack is the numbers and data to show that more people would want regions at a lower price. That is opinion.”

            I’m sure you know no matter any numbers or data, no business can guarantee the success of price cuts. So yes, its my opinion, but not I’m sure how that matters given its impossible even for those most in the know to say for a fact whether tier price cutting would or would not work.

            “My numbers are suggested by Kitely, which has a lower price. Look at the number of people buying regions there. Do you have any information that shows more people than the number purchasing there would buy regions? No you don’t. That means the Lab’s drop to Kitely prices could not be made made up by taking even all Kitely’s customers.”

            When drawing comparisons like this, “all else being equal” is a very important idea in basic economic principles like the Law of Demand. Kitely and Second Life are too different to state that because Kitely’s prices don’t work for Kitely, they won’t work for Second Life.

            “My point is simply you have nothing supportive to convince Linden Lab you are right. I have very simple math and sales rates of lower priced regions.”

            In actuality we’re both just consumers with no real numbers or data to state one way or another whether price cutting would work. You aren’t any sort of an authority, and nor am I. The only difference between you and I is I don’t care about convincing you that your opinion is wrong; you may be right, but you also have no proof that I’m wrong other the economics you’ve attempted to skew, that I can’t agree with.

            • I know about elasticity in economics. But, you can’t show any numbers to indicate the amount of elasticity in Linden region pricing.

              Also, while the economic rule you are quoting and looking at holds true for large markets almost without exception, in small market segments there are numerous variations to the rule. There are scenarios where increasing the price increases sales and reducing price decreases sales. The theory allows for positive and negative elasticity. For instance the price of pacemakers does not increase or decrease demand. Pricing can shift market share but demand is controlled by other factors. There is no idea in the concept of elasticity in pricing that it drives sales in only one increasing direction. So, quoting the theory does nothing to prove your point.

              A Lexus costs more than a Chevy. People buy Lexus cars. Decreasing the price would sell more Lexus cars, increase demand. But, would the company make more money? Car prices are elastic. Manufactures figure out what price gets them the highest profit margin. You simply have not shown that calculation for Linden region sales.

              Not all markets have a high degree of elasticity or variability in demand and supply. So, unless you can provide some numbers to backup your thinking that elasticity and current pricing is not optimal, you are just voicing your opinion.

              Since changing the tier fee requires convincing the Lindens your position is correct, the burden of proof remains with you. My claim is current pricing is set by the free market and reflects seller/buyer agreement on the value of a region and there is nothing to suggest lowering the price will increase the Linden’s income via increasing demand. Simple math says income will reduce in proportion to fee reductions without a corresponding increase in region sales. There is a lack of demand as proven by Kitely’s lower prices. If people were flocking to Kitely in large enough numbers that a Linden price cut could be competitive and gain enough customers to offset the revenue loss, they might be able to make more money. But, you can’t show that is the case. Since I don’t see the demand for regions, I cannot see demand being increased by the Lab cutting prices. The people just aren’t there and Kitely shows that.

              Theories are nice. Economic theories are well proven. But, not all theories apply to all situations and specific products are often exceptions. Economic theory is not a causative thing. It is a descriptive thing and can be predictive if you have all the pertinent aspects correctly accessed. Unless you can show some significant proof that cutting price will increase the Lab’s region sales, you are just hypothesizing which theories you think will apply and that is a miss use of the theories. You have no proof they will work as you think for this specific product in this specific market segment with its unique economic characteristics. You have nothing to base the predictive qualities of the theory on.

              I am pointing you to RL data that the market is not there and that regions sales are inelastic. Thus it is a simple math calculation.

  2. er… LL takes a percentage from MP sales they can’t take from an in-world sale.
    Why pay tier? Here be humans, Open Sim is great for being completely alone and isolated. Why be here? Here is stuffs that would get ripped (more) in other worlds.
    Tiers are getting lower each year, as they remain the same.

    • Your point that tier is getting lower has some merit when one considers inflation. But, inflation is supposedly below 10%. So, $300 last year and paying $300 this year should feel like paying $270. But, it doesn’t because wages are not going up 10% per year. So, unless you are seeing a 10% gain year to year, your thinking doesn’t really hold up.

      • Considering the average annual Consumer price increase of 2% between 2006 to 2013 a sim would cost us$3.540 in 2006 and would have cost us$4.066 in 2013 but in 2013 the price is still us$3.540 while the server specs have improved dramatically. We get a lot more sim for less the price.

  3. I often wonder why the lab doesn’t subcontract coding and implementation out to the IT powerhouses of south/southeast Asia. Wages for equivalent skill-set/work hours would be slashed, and policy direction, proof of concept and QC could still be run from the USA if desired. Leasing servers where costs are lowest would also seem financially prudent.

    • Well… HealthCare.gov might be a reason.

      The coding and tech in Second Life are very unique. They tried contracting out the SL Viewer once, that I know of. That was a disaster.

      You probably have never written a software coding agreement. Trying to come up with a specification for what one is buying and is to be provided is a major obstacle. Add in language problems and I think outsourcing would be a major headache.

      I don;t see SL as a good candidate for outsourcing.

    • If LL would have 1000 coders at work outsourcing would be an option. LL has just 50 or so coders at work. The rest (approx 200) is support. The servers that run SL are not typical TB storage servers. They are high end fast machines and the prices for high end fast machines doesn’t differ from near or far. For connectivity they need to be near fast backend bones so that limits options for location.
      LL has outsourced (parts of) “support”.

      • They use open source on the viewer, which is a type of outsourcing I suppose.

        But, I just don’t see the server side as a good candidate for outsourcing.

        • Open Sim was created by Linden Lab, something that is forgotten too often too easy. It’s not retro code as it’s stated in some articles, it’s LL code that was open sourced.

          The outsourcing of support was something that has gone wrong in the past but now with a different party it’s ok-ish.
          The Linden Lab practice is to take over, incorporate and eject redundancy. (feeds, marketplace, windlight for instance) It works but leaves maintenance holes that are quite hard to fill. Most holes are not in the critical code but anything web based.

          Linden Lab is a company with a luxury product. When economy goes down so go sales. When the US economy went bad, the EU kept SL up. Now the EU is bad and the US hasn’t recovered completely yet.

          • I suppose that depends on what you mean by created.

            http://opensimulator.org/wiki/History

            • The starting point for OpenSim was libsecondlife, a project that was (informally) endorsed by Linden Lab. Or, someone left something somewhere or something without approval.

            • Linden and IBM worked together for a time. But, I don’t think the code used by Opensim came from SL. Do you have any solid hard information otherwise?

  4. I believe that LL are working on lots of alternative ideas – and as is often the case only one or two will make it. A mobile cut-down sl, another gaming-based product utilising the created products in sl with the user experience features, and eventually the products of High Fidelity are all possibilities. The thing they need for all these projects to work is a good user-base ready to populate it, otherwise it becomes an empty world, which no matter how good it is it will struggle (i.e. Cloud Party or Open Sim).

    The best way to keep the user-base and income stream is to keep tier at the present levels – any increase, or indeed fall, causes that very large amount of people who own land but log in once or twice a year to ask why they are here – just think how many subscriptions you think about cancelling when they notify you of a change in costs.

  5. Can you explain the maths that lets you conclude that there is a 20% drop in one year? For me the timeline from 2010 to 2013 are three full business years. So it is a 20% decline in 3 years and roughly 6,5 % – 7 % per year (I am aware that it’s not correct to just divide a number when it comes to percentages). An almost 7% decline certainly should be worrying any business, but it’s not as dramatic as loosing one fith of your business in one year.

    • From 2011 to 2013 there has been a 20% loss. You are welcome to convert that to annual losses.

      • I guess it’s a typo im your text then. You write “That is a loss of about $12 million per year or about a 20% loss.” Shouldn’t it be “…of about $12 million in three years or…”?

        • The advantage of a free world is each person can do what they want based on what they think ‘should’ be. You seem to think things should be annualized. I don’t. I prefer to look at the overall loss in that period.

          • You wrote “per year” in your article and I am trying to hint you to this mistake. Taking your unfriendly tone up, I’d say: It’s a free world and you can continue to ignore that.

            • Ah! you are right… I probably shouldn’t have structured the sentences that way. But, it is a $20 million loss for the year in 2013 from the income level of 2011.

              The ‘unfriendly’ tone is your inference.

  6. Your comments on this blog post are arrogant and narcissistic. You have formulated something wrong and then you’re making fun of those who make you aware of it? Very weak!

    I also get the impression that you still haven’t understood that your simple math is wrong. Both in your article and in your comments.

    • Well, that is your opinion. I’ll respond with mine. I think you said a lot about your self.

      The arrogant behavior is in your assuming you knew what I intended to write in the subject article. As I explained to Estelle, I did a poor job of writing the sentence. The omission of a single ‘article’ in the sentence meant my failure to get my thought across.

      I’ll explain it another way to you. In 2013 $12 million was lost in a single year from 2011 income levels or 20% less from those levels for that year. As I conceded to Estelle, I did fail to make my intended thought clear in the article above.

      The narcissistic behavior you accuse me of is described most aptly in the second paragraph here. So, I just see your comment as transference.

      That you chose to attack me personally rather the discuss the subject on a point-by-point or expression of support for Estelle’s position show a lack of civility and manners, common in those with narcissistic personalities. Transference is revealing.

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