Server class distinction to be eliminated

At last we agree

I think your dissatisfaction all along has been that the grandfathered tier sims are transferable to newer residents. I don't think it wrong that there be perks for "investing" in the platform during the early days. Beta accounts who took the financial plunge into Philips vision of the future were rewarded with lifetime charter memberships and free land for as long as there is an SL. Is it wrong that they still get these things? Is it wrong that LL rewards customers who had faith and invested when everyone else said the sky was falling?

Every person who buys a sim is investing in LL and the future, it's a big chunk of cash to drop on the purchase and a monthly cost commitment. This isn't a $14.99 a month WoW subscription, this is thousands of dollars. If LL goes poof, you are SOL. The Oldbies who purchased sims invested in a struggling platform run by The Love Machine, which used to fall down and not be able to get up for days at a time. People who purchased sims are what allowed LL to grow, we are investors too. There will come a point where accounts your age have their special little perk, I don't know what it will be but there will be some major change and you will get grandfathered in. People who come later will think it's unfair. Be gracious with them.

It's not "I need X price forever" ~ remember we are in a live market, and markets change. If anything, tier will stay flat or go down.

Look at the macro trends. SL is roughly flat, userwise. This is not a market that is trending up much. Price increases now would be a very, very dubious thing to do.




They aren't making 100 less than they could. Attempting to raise the rates would cost them a net 195/mo each, and worse.

It's dominoes, think it through.

Boost 13 regions by 100 USD each for me, and suddenly those, plus the other 36 simply aren't worth the hours spent.

The first 13 can knock down the rest if I'm hit hard enough and suddenly enough.

And if that's true for me, consider the mega barons with much worse occupancy than me, *real* worker salary overhead that I don't have, and a far higher percentage of old regions than I have.

Kaboom.

It wouldn't be 2000 regions, it will be closer to 5000.

Sound dramatic? It kinda is.

Occupancy rates are so thin and hard to sustain, the entire rentals market is ridiculously fragile. Plus, a lot of estates don't carry the reserve margins they should.


* * * * *

Incidentally, this scenario would be a lot like last year's Wall Street crash.

As markets turned down, investment funds required more collateral to cover their risk properly ~ just like estates have to maintain tier reserves in proportion to their size. And they couldn't come up with the cash, and there went the whole market.

Example: Tier on 100 regions goes up by 100/month.

That extra 10,000 month tier is just the beginning. Monthly risk exposure just went up by 10,000 so it's important to have say, 3 x 10,000 capital on hand to maintain the same actuarial position you had before the hit.

So that first month is going to cost the 10,000 additional, PLUS you have to come up with another 30,000 to cover your position. Then next month you get hit for another 10,000, and another, and another... the first 90 days is 30,000 raw cash gone, plus another 30,000 now locked up in reserves. Net impact in the first 3 months: 60,000 USD.

Just play the risk tighter to the vest, you say? Well, estates don't collapse because of theoretical economics, they collapse when the reserves go to zero. Unless you make craploads of money in real life and can pay these kinda bills. I'm a baby baron, and my tier is nearly 9000 a month. For just about anyone that's not a multimillionaire, it's important to be serious about actuarial risk.

* * * * *

I too don't feel the need to maintain transferability of 195/mo regions, I think it sort of goes against the spirit of the thing, insofar as you want to reward oldbies that stick around.

At least, that's my feeling about it, even knowing that it's "against" my financial position. It's sort of an ethics thing.

Anyway, this has been an interesting discussion ~ I'm out for a bit, and I hope all the points everyone brought up made for an interesting topic from all sides.

No, this might be closer:

When the last class 4 sim has been converted to a class 5, I see no reason to continue to reward those sim owners for just having owned a previously class 4 sim on the premise they might be an oldbie. Oldbie perks should be for oldies only and they should be declared as being an oldbie perk so there is no confusion.

I don't see this the same way, I think many people *want* to believe it is an investment but really it isn't. Have I invested in my ISP or cable company because they come and install a line and modem for me? Nope, I have paid for a service and continue to pay for that service.
If land really were an investment, I would expect to see a forecast schedule and an investment prospectus for it. We are all just customers who pay for their product, a service package.

This topic comes up exactly the same way every time LL makes a land policy change.
If buying land with LL is an investment that we are all gullible as hell as it is a very poor investment indeed, with virtually no prospects of getting any better.

I said before, it isn't just about you Desmond, it isn't even all about land barons.

If LL is so worried about losing the business of so many people and the return of so many sims, let them introduce a bulk sim deal that discounts tier for large numbers of sims owned. I suspect there already is such a thing privately, on a case-by-case basis.

I could own a class 4, I have certainly had the opportunity, so have many. I would think that there are at least a few in the hands of people who are not into land rental and are even less about to cope with price increases than you. Would we all really deserve to pay less than a person buying such a sim today? I seriously doubt it. Saying it is because we paid more for the purchase price is also a strawman, since when did LL discount tier based on what you paid from some other resident?

If there is no difference between sims, then it doesn't matter want your circumstances are, why should everyone not get the same deal? There are only three cases that make sense:

1) Because you have something that is worth preserving and it will not be preserved if you have to pay what the majority pay or

2) Because you are an oldbie and deserve some special consideration.

3) Because you have so many sims you should get some kind of discount.

The first means you should plead your case with LL for some discounts based of add value to sL and the second should be made into an explicit perk only for those LL want to reward for long service. The third has been covered above in detail.

The current scheme fulfils none of those cases and so there is no reason to keep it.

Anyway I have said my piece, this seems like a good place to leave the conversation for me also.

Looks like I remembered wrong . It's actually only 60 days notice.

https://blogs.secondlife.com/community/features/blog/2006/11/15/private-island-pricing-commitments


https://blogs.secondlife.com/community/features/blog/2007/10/10/no-q4-pricing-changes-planned
There's a few additional ones that all indicate that "no we're not touching the pricing, but we might if we ever feel like it".

The only people who might have a case are those who bought their grandfathered sim prior to November '06. Every one buying one during the rush knew they were getting pricing that might go up by $100/month at some point in time but were betting on making the most of it and having it survive 3 years probably surpassed most everyone's wildest dreams of extra income they could generate compared to those who were going to be stuck on the new pricing.

It's been 3 years now since LL originally announced the price hike and 2 years since their solid guarantee of "we won't raise it now" expired. If people haven't adjusted their income model yet then they never will. There already has been more than enough time to adjust.

Keeping grandfathered tier would have a stronger case if LL hadn't done what they did to homesteads but they imposed some extra limits and raised the price anyway (if only halfway through).

I certainly appreciate that, given the RL economic situation, this would be a desperately bad time for any fee hike (and corresponding rise in rental rates) and losing grandfathering for existing estates would surely be such a hike. So that seems like a bad idea, at least right now, even if it would coincide with the "Class levelling" of sims.

I also understand that those who bought sims at the US$195 rate made a deal, and others came into the market at the US$295 rate intending to make it work, knowing that they'd be competing with others who had that grandfathered fee advantage. Those who had to pay the higher rate presumably intended to compete by differentiating their offerings on grounds other than price. Otherwise, if it's just standard issue sandy tropical beach sims with middling estate management, it's a commodity for which competition drives margin to zero and operating cost is the only thing that matters.

That's why I was surprised that Caledon--arguably the most differentiated product in the estate market--would feel much effect compared to those commodity sellers. At first I would have expected that the viability of a lot of other estates would be much more reliant on that cost advantage. I even might have expected that they long ago would have offered Des a price he couldn't refuse for those grandfathered sims--that they would be that much more valuable to a business competing strictly on the basis of lower operating cost.

I think I've figured out why that's wrong.

Suppose I make widgets using steam, located somewhere with relatively inexpensive steam. One thing I could do is to sell my widgets cheaper than competitors in higher cost locations, and some manufacturers in my area do just that. But suppose I discover that by using a lot more steam, I can make really Wondrous Widgets; even with my steam cost advantage it costs me more to make Wondrous Widgets than it costs to make plain old widgets in higher cost locations, but I can still make a profit if I sell at the very high end of the market.

Now my government goes to Copenhagen or something and puts on a special tax that raises steam prices to parity with the world market. My local competitors who have been using their cost advantage to sell cheap commodity widgets are pretty screwed: now they have to compete without that advantage, so their businesses become less profitable. But I'm in even worse trouble because Wondrous Widgets require so damned much steam to produce, and they're already priced at the high end of the market, so raising my prices means lost customers.

Well, I know several small estate owners, and the ones who are renting land have been getting rid of their full price regions because they can't afford them and they can't raise rent in this economy. I've had a couple say they'd abandon their estates if they lost their grandfathered regions. I haven't heard any actual landowners without grandfathered regions railing against them. Yes, it's anecdotal, but it makes sense... there just aren't that many grandfathered estates.

It's not about rewards, it's about picking up the tail of the demand curve by trading off price against convenience,

Well, yes, of course they're not going to commit to keeping them indefinitely. That doesn't mean they're not going to keep them as long as they see an advantage to doing so.

Desmond (if you are still reading this thread):

I've just read an earlier page or so, which included your reasoning why Caledon is finished if grandfathering ends, but it doesn't make sense to me. Here's why...

I remember you saying a long time ago that the best a person can do, when renting out land on sims, is $200/month/sim, and that's only if the sim is continually full. I don't know exactly how many sims you have now but I think it's more than 40, so let's say it's 40 - and let's say that there are continually tenants for 35 sims worth of them. That would add up to ~$7000/month profit.

If grandathering ends and you have to pay an extra $1300/month, it will reduce the profits significantly, but not so much that it would finish Caledon.

It's only academic as far as this thread is concerned, but is my thinking completely wrong?

I don't imagine Caledon being destroyed, I wouldn't be suprised if it halted expansion plans or caused the selloff of a few sims there for a year or 2. But in the end the strong will survive, many of the smalltime estate owners who depend on the cheaper tier will fail, but as I see it the grid has about way too many sims anyway so the bottom 10% shutting down isn't going to cause SL armegeddon.

Another passing observation before I jump back in-world to debug a cantankerous script:

If I'm right in my earlier post that Caledon is using its cost advantage to differentiate on a factor other than price, it wouldn't be hurt very much if the fees for all estate sims fell to the grandfathered price.

In contrast, estates that rely on the grandfathered fees strictly to offer more attractive prices than their "grandfatherless" competition would suffer equally whether the price of grandfathered sims rose to US$295 or if the price of non-grandfathered sims fell to US$195.

The falling fee would screw the commodity dealers because they'd lose their sole advantage over competitors. Caledon would lose it's cost advantage too, but it's already established a market for a higher priced, highly feature-differentiated product. In theory, it would be easier for a new competitor to enter that market with Caledon stripped of its cost advantage, but it's not nearly as easy for a competitor to break into that high end of the market as it is to just shift prices down for a commodity.

Here is why I think it is the opposite. When you have a line and modem installed, you are not purchasing a resellable commodity. When you buy a sim, you are. Unless you are a philanthropist or are buying for personal use, you bought with a business plan on paper as to how you were going to cover tier and how long your investment would take to turn a profit or at the very least, pay you back your initial cash outlay. At $100 USD profit a month (beyond tier), it takes approx 10 months to pay off the initial purchase price and begin earning a profit. If you bought in 2006 when the purchase price as $1600, you had a 16 month period before you entered profit territory. Most sim purchasers don't make it that far because they failed to plan and didn't have the cash reserves to cover tier during the ramp up period.

Buying a piece of land to play on is not an investment, even though lots of people erroneously think it is and then end up whining when land prices go down. When you purchase the hardware outright by buying a sim from LL, you are making an investment. You are putting at least $1000 USD on the line with the expectation of being paid that amount back plus profit. And, not only that, you are dropping $1000 USD on the hope/expectation that SL will continue to grow and thrive long enough for your investment to start to pay back. Someone buying for rentals has to keep their fingers crossed that resident numbers grow and SL stays stable enough over the payback period that they can get to full occupancy and payback -- that right there is an act of courage every time except during periods of sharp population upticks. Unless I miss my math, Desmond has purchased $40,000 USD in hardware from LL building Caledon -- that is an investment by a businessman, not a whim. You bet he's got a forecast schedule, just like I do and I don't even do rentals. When you've got thousands of dollars wrapped up in SL, you watch your numbers.

I'll add a final few things for thought before I move on....

The most likely reason that LL continues to allow transfer of grandfathered $195 tier sims is resale value.

Resale value on a $295 tier sim looks to be around $600 USD. Resale on a $195 tier sim is hovering around $1600 USD.

Of the estimated 2000 grandfathered sims on the grid, 3/4 are probably in the hands of large scale land barons. If I remember correctly, Anshe owned 500 of them by herself and has been picking them up at resale for the past couple of years, so let's estimate that she's in for 600 grandfathered sims. By eliminating the $195 transfer, those assets owned by major customer like Anshe go from a market value of $1600 USD each ($960,000 USD) to a market value of $600 USD ($360,000 USD). LL is likely very reluctant hit their major sim owners like that and if they did, you can bet those major owners would get advance word so they could dump assets at a higher price before the market was flooded.

My final point is that mainland sims are still at $195 monthly tier for full ownership and they are all on class 5 servers now, too.

Ok a couple of things, there are class 5 grandfathered sims, grandfathering wasn't a technical issue, it was a date issue. Class 5 was the new sim and LL sold those and continue to honour the USD$195 tier rate for class 5 sims purchased before the cut off date.

The people who really lost out were those who upgraded their class 4 sims to class 5 because when you do that, you lose grandfathered status. This makes the whole honouring grandfathered tier on transfer even more absurd.

Ending grandfathering would be devastating for those who currently own them, a rise of one hundred bucks is too much to stomach, even for the large land barons. I don't know if Linden Lab will ever end grandfathering but if they do it should be a process over several years to reduce impact.

It happens, but not necessarily from protest. From estate owners who just can't compete anymore for whatever reason (and not necessarily their own failings).

For example, I have some grand ideas to build some neat fantasy sims for my wingbrethren (and the general public, too), and an idea for a game which would require a sim. The problem is that $1600 plus $300/mo EACH is far too steep for me to bother, so that diversity from my imagination will most likely never come to be in SL. The grandfathered prices MIGHT make it more probable, but we can pretty much expect that's never going to happen (unlike the real world, where mature technology and service prices go down, while the value and performance of the service goes up).

Yup me too, I have grand plans that will never come to fruition unless I can find a rather large package of money appearing out of thin air, multi sim setups would be great for creativity but the wallet rules. Even allowing for being able to purchase second hand sims a lot cheaper than you get them from the land store, the tier is still the barrier.

So it's not the grandfathered sims that make it impossible, it's the price of the non-grandfathered sims. You're in the tail of the demand curve, but not quite at the level where you're ready to take the time and effort to catch one of the grandfathered sims when they're up for sale. If you found out about one, would you jump at the chance?

I might, but I am not going to spend a lot of effort on design and development for SL, banking on the probability of getting a grandfathered sim at a realistic price; especially now that they've announced the end of grandfathered pricing transfer in a few months.

I find that most people that participate in auctions WAY overbid for stuff; it's called "auction fever". Now, if I knew someone who wanted to lighten his inventory of a grandfathered sim or two, and would consider giving me a decent deal, I would consider it.

When did they announce that?

Oh my. Lots to catch up

Phil ~ yeah there's some wrong assumptions.

Yes, in extreme cases one can make 200/mo out of region rental, but that's highly atypical. Some have done it. But I've got lots of infrastructure and steampunky stuff. I'm *nowhere near* 200 a month profits. If I was, sure, I could laugh off 1300 USD/month. But I'm not, and I'm nowhere near 7000/month in profits.

Second, remember the openspace debacle. I've got 28 standard regions, but not all of them make money. The other 21 are openspaces, where typically I risk 95 USD/month to make 5 a month. Yes, about 5 bucks after LindeX fees. My posted rates for incoming residents are higher, but everyone's on original rates ~ they all *stayed*. Talk about an actuarial minefield though!

And it's not like I can just drop homesteads out of the middle of Caledon if they go unrented. As you can see, I don't believe in jacking rates on people, any more than I think my rates should be jacked. Decent folk are known for holding to deals, to the best of their ability. It's just good business, for me *and* for Linden Research.



Tegg ~ the problem is this: Caledon consumes 20 to 30 hours a week of my time. Much of it offline as well as on. I have very real financial responsibilities to my family. When the market on the grid goes sour, my hours skyrocket to compensate. It literally comes down to: am I going to work 50 or 60 hours a week to hold onto a 30,000 USD income?

Incidentally, my real life skills are electrical engineering and management. I have people call me up from time to time asking me to run their engineering departments and stuff like that; the last time this happened they practically set up an office for me, and were gobsmacked when I turned it down (I like my freedom). So it's one thing to piddle along at 50,000 from SL plus my main corporation income, but quite another to work 50 hours a week for something like 30,000 USD annual. I make three to five times that if I do consulting or take a management job. With three kids about to enter college, 30,000 USD from SL for those hours is literally unsustainable.

Would someone else put up with those hours for 30k~ish returns? Well, maybe... but I'll put this out there (forgive my elitism for just one sentence please!) ~ if you put someone in charge of a Caledon~sized operation that doesn't have business sense (and thus worth some respectable income in the real world), they are gonna make the Herald when they inevitably 'oops' and implode their estate. We've seen this kinda thing happen, and recently. Too many people roleplay being a business exec when they in fact need to be a real one.

So essentially Tegg there's no "go slow" with an estate of Caledon's size ~ it has to be solidly viable, or it's in unsustainable territory with hours skyrocketing. I get about 50 notecards a day from people; some are frivolous but others have questions, want land, need tech help... a *lot* of work. It's about as feasible for me to scale back as it is for Chrysler to scale back to making golf carts for a while. Maybe if I was single, childless, independently wealthy and retired I could burn 20 or 30 hours a week, but... that's not me. If I put my spreadsheets, hours and daily task list out for everyone to see it would be a lot more obvious how infeasible scaling back would be (though I clearly shouldn't be doing that).

Incidentally, this is why Caledon went through such a rapid growth phase even *after* the early 2007 land boom subsided, and it didn't seem to make a lot of sense to people why I was doing it. It was to get to the sweet spot of income and sustainability.

Master Quatro put it very well back in 2005 ~ he basically told people outright on forums that unless you had dozens of regions, you weren't gonna have anything worth doing incomewise ~ maybe a hobby. He was dead right about this.



Qie ~ yes and no... "kinda"

It's not that I'm using a cost advantage ~ realise that most of my older regions are booked solid with oldbies, who have stayed for years and years. These regions are *barely* part of the market at all. I might as well be selling peanuts at a baseball game, for the amount of crossover to the general SL land market there is for the older areas. People generally don't jump to other estates, and people generally can't get in even if they want to.

Once in a while I get someone saying: "Des! I hear you rent 1024 meters for 375 a week, is that possible? How can I get one!?!?!?!?" ...and my response is the same: when you can pry it from the cold, dead fingers of the oldbies renting it since 2006.

Realise I've got dozens of regions full of intelligent, wickedly knowledgeable and sometimes bitter oldbies who all too often "did it all in beta." Their tolerance for nonsense is about zero. Crystalshard Foo has a parcel; Aldo Stern; Ordinal, Jackal Ennui, Hypatia... people like that.

If you look at the map, this is mostly Caledon's ancient central lowlands south of the Firth. Not the high end waterfront, not the double prim wildlands or forest I can charge a premium for.


Isablan ~ exactly right, especially concerning forecasting.

Your guess with regards to region cost is wickedly accurate too ~ I actually spent about 5000 USD more than your estimate, due to, in part, having to negociate for some nearby gridspace from past neighbouring (now extinct) estates. Turned out that me spending a few thousand once was cheaper than the net damage that would be caused by moving Caledon off somewhere. When you've got literally hundreds of businesses on the estate and people used to the maps and functional landmarks (remember they didn't always properly update) it was a real risk.

One thing I'd have to mention though in all fairness, is that even though I have always invested in my own regions, I did charge up front fees for the vast majority of it. That 45,000 USD was largely from several hundred people betting on Caledon's success, and across the years I have done my very best to deliver.


Ciaran ~ fully agreed, especially about the part about those who paid heavily for the upgrade. But the upgrade wasn't forced. You could opt to wait. So I think as painful the upgrades and their monthly consequences were... it's a done deal.


Talarus ~ it's hard to say, pricing may come down a bit someday. Virtual worlds have their hype time, and then sanity starts to prevail. If M saw the growth curve kickstarting and sustaining across years by downshifting to a 195/mo price point, I think he'd do it in a New York minute. As of now, it seems (to me, at least) that the high pricing shows a substantial lack of confidence in future high volume sales. The implications of this are a whole different topic; I'm already tl;dr but I have little doubt you would draw the same conclusions as I do from this.

* * * * *

Anyway, for good or ill I've already laid in my bets for 2010 back about last April or so, and am working furiously on what I think will be the right move. But this is an entirely inappropriate venue to talk about that, even if the announcement were ready (it's not quite). Caledon's not going anywhere, but I suspect a few people will be thoroughly surprised. Just remember I'm a huge fan of Warren Buffet's strategics, and through that lens things may start to make sense

======================================


I would tentatively call this class 4 upgrade thing Linden Research's November Surprise.


Sound about right?


As for myself, I'm pleased ~ it's a hugely positive step meaning that my actuarial risk is stable, not climbing.

For others though, with whom I might disagree but see our 100 USD/month cheaper regions remaining ~ it may not be a pleasant surprise. But I would offer this: the silver lining is that they have treated longstanding residents well, and that is a very welcome thing these days, after past years.

For everyone who bothered to read all this ~ time to go get a snack, you must be hungry by now

When did they do that? The blog says this change has no effect on pricing.

I thought I read a quote of the blog where Jack announced the end of grandfathered region pricing on region transfers in February.

I think that quote was from 2006

Desmond:
That's just another reason for me not to trust my own reasoning

There are almost always grandfathered $195 sims for sale, there are 3 sitting down there in the Land Classifieds right now. Average cost is about $1600 USD. The cost can vary substantially depending on market demand. During major land or social upheavals, those $195 sims can be bought at resale for as low as $1000 USD - it all depends on how many owners are divesting assets at any given time. During the Homestead/Open Space debacle a whole bunch of baronets bailed and you could grab a grandfathered sim for $1000. As the market settled, fewer barons panicked and sold off and price went back up to match demand.

Just like with stocks, the time to buy is when there is blood in the streets. You just have to be ready when it happens and have the intestinal fortitude to buy when everyone else is heading for the exits.

Talarus, there are always resale $295 sims in the $600 range, even during a panic that price doesn't swing by much. If you can carry the tier, you can pick up the sim for much less than buying from the Land Store.