Jack answers

Jack Linden Says:
April 8th, 2008 at 6:53 AM

Thanks to all of those that have commented. As I said in the post, of course this will raise questions and we will answer those in a further post, probably today. We just felt it important that with the new Land Store on the way soon, we should give as much advanced notice as we could.

In addition we will add an FAQ to the Knowledge Base shortly.

A few points in response to the comments on this post..

As Gwyneth in post 136 rightly points out, technology and service costs vary over time and we as a business have to respond to that in sensible ways. In addition, we have to continually assess our business model and make changes where we need to. By and large we have worked hard to keep prices static for long periods, and when we have had cause to increase prices in the past, we allowed grandfathered monthly fees to continue because we value the time and energy those people had put in. Nearly 18 months on and that grandfathered pricing is still in place for many island owners.

This was the right time to reduce the setup price of an island. As any business would, we will review the effects of these changes over the next period and make adjustments or leave them unchanged according to how it goes. If we are able to make savings, then we feel that passing those on to our customers is a good thing.

For those that have purchased an island recently, we will of course be providing some options and I will explain how that will work in my next blog post.

The other land threads weren't good enough for you?

yeah well the other posts in the original blog weren't good enough for Jack, he deleted posts to add this one, in all likelihood those objectors who already posted there will miss that Jack posted so much later anyways and it answers a few points that imo would have got lost in a 175 post thread.

A lot of people won't read the blog comments since they're of little value other than drama (same with highly debated threads really), or they wouldn't check back after it reaches 150.

This contradicts what he said yesterday which was that if you had bought an Island before yesterday, you had to pay the full $1695.

Looks like they are reacting to the uproar this has caused for recent Island purchasers. I hope the compensation is fair and also helps those who bought Islands a while back.

They should also give discounts for those who buy or bought multiple Islands.

Umm sorry, most of us want this post, I suspect, it being big news, if it doesn't interest you don't open the thread.

Ummmmm sorryyyy..... ummmmmmmm....

wot was the question?

Jack said it "of course this will raise questions" so make your own up

Will there be a baron bailout by Supply Linden ala Federal Reserve??

There were several ways they could have passed on changes without causing such uproar, one would have been to make an offer of "Buy 3 get 1 free". I mean whenever I've visited Manhattan I often find a get a free beer after I've purchased three in the same bar!

On the subject of ordering new islands ..

What they should have done was delivered however many islands that they could in a hurry to people who had ordered them at $1695

THEN once supply (and labor w/e) was low,

Offered this big price break ...

All current orders that had not yet been "delivered" should have immediately gotten the price-break.


Thats just basic. You don't give the people who received their goods a refund, but you also don't charge people who are still waiting on delivery a higher, outdated price.

The difference is, that you don't pay extra fees for that free drink every month, even though the drink is drunk!

Look, get over it.

It's marketing plain and simple. There are more people holding off buying because they do not perceive a sim to be worth almost 2k.

So to maximize the profit, ll will ramp up sales by lowering the price.

This will not be the last drop in price, there'll be further drops in price as the perceived value drops until the price hits rock bottom which may be close to zero dollars.

Once again, the mistake here is thinking you are buying a finite resource like real land. You're not. You are buying space on a server of which, for all intents and purposes, the supply of is limitless.

http://www.robert-mckinney.com/Documents/Pricing_To_Maximize_Total_Profit.pdf contains the basics k.

Look at it.

And your evidence of this is? $1000 is still a hefty sum. Those who are in the land game and watching their assets plummet are going to be reluctant to go out and buy more, just take a look at the fall in the price of mainland going on right now.

Tier is the key issue. Hence why a class 4 sim often sells second hand for more than a class 5.

What about open space sims? We now pay more for 4 open space sims than one full one?

I think it's amazing that people have been complaining for months all over the blogs and fora about how expensive everything is. The "cost of entry" and all that.

Now they lower a major price by a big margin and what happens?

People start complaining that the prices are going down.

LL is never ever going to keep everybody happy - there are going to be people complaining no matter what they do.

And what is the take-away from this? To me, it's don't buy land in SL as an investment, because land prices can change really, really quickly.

I have already given you a pdf, if you want more evidence then do a google and read the wikipedia entries. If you seriously want more evidence, take a course in marketing. I'm not here to do your homework.

Yes, tier is the key issue. I expect that as time goes on, tier will also drop. Why? to increase the profit by maximizing the number of people paying it. This is where those graphs in the pdf i gave you are really good to look at.

If you are running a business you should also be declaring those profits on your tax return.

If you are in fact paying tax on your profit, you are then able to write off the costs, including depreciation. In my country you are able to aggregate those costs and write off losses against profit earned elsewhere.

In this case, you would write off your loss against your rl income, and gain a nice fat tax return check.

I have some sympathy for those people who are feeling financial pain, but as in all things, don't buy what you cant afford. You perceived the value of what you bought, agreed to that value, and paid that value.

The bottom line for me is having fun in sl. If i make a linden then i'm happy, if not then it's cool too. I never ever want to be in a position where i have to rely on those lindens, but i do appreciate that there are people who do.

So don't risk what you cannot cover. If you're going to go hungry in rl by buying a sim, then don't buy a sim. If you think you can do well in business by buying a sim, be prepared to write off the entire cost of entry as a legit tax expense. Anything else is personal fun, and you're up for it.

I'm really confused by many of the responses to this action by Linden Labs. I have been in SL under various avatars for the past 2.5 years, own sims and mainland land and never once did I ever really consider my land to be a serious investment. In my view land in SL is nothing more than a proxy for allocating CPU time, memory and storage resources much the same way companies offer shared web hosting, etc. I'm not trying to say I don't value my land because I do value greatly because of the things it has allowed me to create and the people I have met because of it. I just never could view the land itself as a serious investment because it isn't based on a scarce/finite resource like land in the real world. As the cost to create land drops (due to lower technology costs, economies of scale, competition from other worlds and open source alternatives, etc.) toward zero the value of the land itself can only decline and may even drop to zero at some point. This just seems like a "natural" product evolution.

Am I missing something?

It can be viewed as an investment because one can profit from land dealings.

Rockwell that is a fair point. However wouldn't most seasoned investors see it as an extremely risky investment? The scarcity of the product is controlled by a 3rd party (LL) that in some ways has a vested interest in making the product as widely available as possible not in maintaining the price of the resource. The resource being traded is also becoming less costly to create over time and is virtually limitless in the quantity of it that can be created.

Some money can certainly be made short term through arbitrage - but as a long term investment? I just don't see it. Am I really missing something here?

Oh save me the marketing lectures lol but that document is bloody funny because of this:

"McKinney’s First Rule of Business: Customers must be richer after doing business with you

If you are to stay in business long-term, you must run your business such that your customers are richer after a purchase than they were before the purchase. This is my first rule of business. For example, Customer D is $20 richer after a purchase than before, because he values the product at $141 yet he only paid $121. Sometimes companies are so eager to get every penny from a customer that they will forget this and squeeze the customer—just remember your last used car purchase. This type of practice will stunt or even destroy your long term business, but sharing the value created by your business will make you grow. Besides, it is the right thing to do."

I want island.
Anyone able to give me the money for one?
LOL
Just joking

Land is a poor long term investment, that's for sure (maybe a few exceptions can be made for the very old "classic" mainland sims). Land can be profitable for traders with high turnover. Extremely risky? Of course. Are we compensated for that risk with outsized profit margins? Yes, I believe so. Sure, now we're paying the piper, but if you've been trading mainland actively and shrewdly, you've made good money.

I don't have an issue with the fact that they lowered prices. My issue is that they lowered them so drastically overnight. It makes for an unstable economy. It undermines consumer confidence. It evokes fear for the future. It comes during a period of extremely poor performance for the platform.

It makes it seem like they are desperate. Personally, I am looking at it now as just the start of prices being slashed. The first real indicator that virtual land in SL won't be worth much and won't cost much in the coming months. Of course, they will keep tier high.

They should have lowered it 20% at most, not 40%. In my non-economic expert opinion.

The bottom line for me is that I have NO trust in the people who manage SL. They make one poor decision after another and they can't fix the Grid so that we can enjoy it, let alone run a business on it.

$1000 is way too high. I would not invest in this company at any price.