AzureIslands downsizing 5% (or so)

Azure finally told their residents about their downsizing last week; nearly all of the other large major estates had downsized earlier in the year. 5% isn't very much, but then I'm not sure that the 2 sims next to ours that were nuked in September (and others like them) count as part of the 5%. The notecard sent by Azure to residents of targeted sims is below.

Dealing with Azure has always been clean -- by which I mean, the sims themselves perform very well, the covenant is clear, tier payment is straightforward, and support - while not always swift - responds. This message, sent about 3 weeks before targeted sim shutdown, is no exception. In September, when we queried them about the fate of our neighborhood, the message was very similar to that below.

But Azure fosters no sense of community, and provides only the lightest of themed land. I've never seen an advertisement anywhere for AzureIslands. They seem to be coasting on past reputation, while Mr. Zaius develops his ideas for OpenSim.

If SL resumes growing (well, according to LL SL has been growing continuously, ROFL), I think that there will once again be terrific opportunity for estate managers. But, the estate owner will have to add value by theming or some other differentiation - imho, gone are the days when a baron can keep tenants just because s/he runs land well.

Your thoughts?

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Hello,

This notecard is being sent to certain customers in our estate and unfortunately it's a rather important notice. From the start of this year, due to economic forces from last year to price increases for a good portion of our estate from Linden Lab -- we've been hit with a rather tough set of decisions. While we have tried at length to negotiate a solution to the issues at hand, we have finally reached a point that other large estates came to earlier this year. Simply put, we have to close a small number of regions.

We have selected roughly the bottom 5% of our estate in terms of consistent residency. These are regions we have been unable to make a solid return on investment and unfortunately this is affecting our estate as a whole. We believe that by closing down just this set of regions, we will likely be able to maintain the rest of our estate for as long as Second Life exists.

While we understand this might come as highly distressing news that we have selected the region you live in for closure, we are prepared to assist as much as possible with a transition. We are prepared to offer the following:

- Any available property in our estate can be obtained from us for free. No up front purchase, cost you may simply have it just by asking us. You may select a larger property or a smaller property, without question. If you own multiple properties, you may pick an equal number of properties should you wish.

- While all the regions selected are closing on October 31st, you are free to move into your new property immediately and you will not be expected to pay tier until November 21st. This is upward of over a month in free tier if you take advantage of this offer.

- One of the popular additions to our estate have been homestead beach regions, which offer more privately spaced out lots for folks to call home. We have a small number of these regions on reserve that we're offering exclusively, though these regions will go on general sale November 1st. They are named: de Vico, Singer, Aquarius, Olbers, Tempel, Lulin

If you have found a property that interests you, all of which can be found via http://www.azureislands.com -- please contact us at either [email]support@deepthinklabs.com[/email] or sending an IM to Support Azure. We strongly suggest email as the best means of contacting us.

On October 31st, all selected regions will be closed and all content still rezzed in the region will no longer be available. We need all customers to collect their objects prior to this date, as we cannot assist you past this date. If you do not wish to take advantage of our move and free tier offer, we will not be able to credit you in another fashion.

Please be sure to contact us if you need assistance selecting another property to move to. Again, we apologize for this inconvenience.

-- The Azure Team

Downsizing is sometimes needed and as the note explains, they simply aren't making a return on these regions.

I'd be very surprised if Azure aren't one of the estates Linden Lab are talking to and offering beta testing of perks. Azure were promoted on message of the day but in terms of stability it sounds like they're doing the right thing here and they are being straight and honest with their customers, which is good to see.

Adam's a decent fellow and a smart guy when it comes to business. When you have that many regions, it's not just tier and fees but paid support, too.

He's doing a very responsible thing, trimming the sails so disaster doesn't strike. If only all people in the business did the same as he's doing, we would all look better.

And he's very right about the impact of market forces and increased costs. I put the brakes on expansion back in Dec 08, or I would have to be doing the exact same thing he is right now.

Sign of the times!

I pointed out on SL blogs that the grid has shrunk by 1300 sims from Oct 2008 to Sept 2009.
LL needs to promote their SL platform....the growth is very stagnant....it's visible in the Content economy and the Land economy....on both Estates and Mainland.
You wonder what LL are playing at?


.

Well i'd be surprise if Azures would be interested in "LL's under the table deal" whilst its busy shedding 5% of its holdings.

I spoke to 2 other land barons who are in the 150-200 sims bracket.....neither were approached by LL



.

Agreed, he's being realistic, he's offering a good deal to those who are displaced and everything about it seems to be ethically correct. Sure there may be some disruption and for some people it will be a pain but it's the right thing to do.

Sign of the times indeed. I just received a notice through my home estate's renter's group officially announcing the estate's closure due to inability to make tier this month. Granted, it was just a one-sim estate, but - due to LL's bullheaded refusal to acknowledge the hard economic times we are facing both in RL and SL and back off on tier fees in order to provide some relief and stabilize the in-world economy, another estate has bit the dust.

I suppose it would be nice if tier prices fell during hard times. Yet I think I would be pissed if they rose above what I agreed to when I bought them during good times.

This. I've said it many times before. It's still true.

They wouldn't need to change the actual prices, just show some actual customer service skills in being willing to work with people who are having problems. I was unemployed for a few months recently, and Linden Labs was the ONLY one of my creditors who wasn't willing to work with me to make payment arrangements while keeping my business. This despite the fact that, except for my landlords, I've given LL more of my money over the past few years than anyone else. Now, maybe concierge level customers get better treatment, but from what I've heard of sims vanishing over night, it sure doesn't sound like it.

Hi Katheryne - I wrote on various blogs more than a year ago before the actual recession kicked in....that in order to stimulate the SL economies, LL should think in lowering their entire Tier structure. At the time i wasn't aware what was lurking in front of us (i.e recession)
My point was that SL Land and SIMs are really only affordable for citizens from certain countries (Nrth America, Japan,Europe, Australia etc).....whilst a large number of SL users from less developed countries with lower National wages could hardly justify spending 295 USD per month (or any part of it) for a bit of virtual space on a computer. By lowering the entire tier structure would allow some of those citizens to at least afford getting onto the 1st steps of the SL Land market thus leading to a larger take-up of SL Land. (Mainland would certainly benefit)

I still stand by that....and even more so now with this world wide recession, which now effects even those citizens that traditionally were able to afford SL Land from their RL entertainment budgets. Unfortunately LL has a monopoly....and whilst it has this, it will steadfastly refuse to adopt policies that mirror to what's happening in the real world.

The game has moved on from the original visionaries (Phillip & co) to a more Corporate LL led by M.Linden who are all about maximising their profits regardless of what actually plays out in-world. Until a rival 3D VW emerges to dip into their market share....LL are not really pressured into adopting any forthright policies or pricing models........either that or significant number of SIMs need to be abandoned before it becomes noticeable to their bottom line profits....whichever comes first.

LL is smart not to back off on tier fees in order to provide some relief. They would undermine their own business of they did. I'd have SL rather survive with less residents, then SL collapse because LL cannot pay their bills anymore.

The business plan of the 1 sim estate simply was not good enough to make it during these times, which is sad for the owner (and renters). Estates with good business plans will make it,even with less sims. There is way too much landmass as it is anyway, so either we need more residents,or less land.

Added after I read Rene's post: As long as we do not know the actual costs of providing us SL, it is impossible to know whether tiers could be lowered. Me too, I would like lower tiers, but I doubt that it can be done.

Yes agreed there's far too much Land mass relative to regular users. Yesterday it was announced that one of SL's oldest running Estates (Azures) are shedding 5% of it's SIMs....so the trend continues.

My initial suggestion about lowering the tiers was not recession driven.....but more about SL's demographics......in that if you live in the wrong country, owning land in SL is really only ever going to be a pipe dream! Therefore i don't truly see it as worldwide platform accessible to all.

In the real world , Goverments, Banks, multi-nationals and companies will do things to stimulate the economy or the marketplace during a recessionary period....like reducing interest rates for the cost of borrowing or lowering prices of products. (e.g Car industry giving cash-backs for trading in older cars) Don't expect much relief from LL though.....imo they're clueless!

I think it's safe to say that tier could be lowered, the question is whether it would be wise to do so.

When you look at mainland, the prices are low right now, from the time I've been here they have never been this low. Now at the time they were higher people kept saying the initial cost put people off owning mainland but the drop in prices has not seen a rush of people buying mainland, so lower tier could well be the same, it might please current owners but it may not stimulate growth.

For the last few Quarters, LL and all their chief principles keep bragging on how profitable LL are...almost gloating, whilst highlight that LL/ SL does not behave like other companies in a recessionary period. Well that's hardly surprising is it?

Given the percentage of land not occupied in both Estates and Mainland, it's not impossible by lowering Tiers by say e.g 10 to 15%....might not lead to greater occupancy of SL Land thus providing them with similar bottom line profits. Then there are side effects too....more land occupied translates to more committed SL'ers.....ones that will need prefabs, furniture, landscaping products, plants etc as well as everyday avatar items......it stimulates the Content economy too. Which in turn leads to more Lindex exchanges (paying tiers & rents, buying more products)....--->.more Lindex commissions for LL and possibly more 5% commissions via XStreet too.

IMO "Purchase" prices has never been the real issue in SL....back in 2006 when i was flush with disposable RL income, i didn't think twice paying 125k for a 1/4 sim of Estate land (my 10th SL day)......the problem has always been those re-occuring charges...the TIERS (or rental fees based on Tier costs).

Mainland plots could be priced at "zero" Lindens right now....and it still doesn't follow that they'd be a mad rush for people to acquire those lands. Firstly one has to consider Premium subscriptions (72 USD pa), then the LL Mainland Tier structure on top. It's the tiers that are the killer....always has been imo!

Expect that to change radically very soon. Blue Mars are expected to drop their NDA on pricing very shortly. It will be very interesting indeed to see how LL react when they see what the competition are offering.

Rock

Developing a "Pricing model" is a science in itself, only skilled Accountants are able to do it. If you get your "assumptions" wrong, you can effectively screw up the entire Business model. It's probably harder for LL to develop....as there's no comparative 3D VW models out there to use as a benchmark. At the moment LL doesn't even have a CFO (no replacement for Zee Linden)....so one wonders if there is anyone skilled enough at the Lab to develop one?

I think one has to almost work backwards....determine your target profit margins as they should know the bulk of their running costs (ie. staff related costs, office related costs, asset related costs etc), the revenue side is harder to determine as it assumes certain growth or sales (could become eventual sale targets). If you don't get the desired results (SIM price) you start using "what if" scenarios...which might include adjusting staffing levels (Usually the largest running cost). This entire process will go through countless number drafts once you start applying input from Management & Product Managers to the model....until you arrive at the desired result.
I have done a few in my time, ironically one was for Organic London office, which the current LL CEO actually arrived from -lol

For any up and coming 3D VW company venturing into this market it would be easier as they have LL's pricing model to refer to as a benchmark. It would be much easier for them to undercut the LL pricing system.

See, that's the tricky thing about economics. Sometimes less really IS more. Consider this: Right now, LL is making x profit with their current tier structure. Right now, there are not as many new sims being brought online as there are sims being taken offline, so - at the current rate of growth, LL should expect to see profit dwindle as more sims are sloughed off by people who can no longer afford to keep them.

OR, LL can take a temporary hit to their profits by lowering tier. At the least, this would slow down the bleeding out of sims, and may even slowly reverse the trend. It may actually rekindle the land market as tier comes down to a level more people are comfortable with paying. If done right, then the increase in landowners will more than offset the loss from lowering tier.

Exactly Katherine ! (You must be an Accountant or Economist!)

This is where developing a correct Pricing model comes into play! Less (lower Tiers) can really mean more (overall revenue)

Neither, actually. I'm actually a retired electronics technician working on my BS in software engineering.

Which just goes to prove a point: If *I* can come up with stuff like this, why can't LL?

oh cool....yes it makes you wonder what is going on at the Lab. I have been following the Tyche Shepherd thread on SLU for nearly a year now.....she does some interesting weekly stats on grid growth or contraction.