Price Increase for Islands...Poor Timing?

By reading many of these responses I can only come to the conclusion that many of us are under the presumption that LL took this step without thorough planning, extensive consultation with the various professionals (Ie., Legal, Economical, etc.), and deep aforethought.

This I find hard to accept.

What we all fail to realize is that we, as citizens, are not the only ones that will be losing that $675. LL will also be realizing the immediate loss of $675 per island sold. Not only will they be taking the hit once this goes into effect, but their losses are occurring as we speak with the immediate cancellations of islands currently pending sale at the old price of $1675.

So that When evaluating the suddenness of this notice one can only come to one conclusion. And that is that it had to be done for the long term viability of the platform, and yes this means your "investment" as well. It's not unlike getting bit by a lethally venomous snake, and as a consequence, having to cut of your leg in order to save your life. Will it hurt? yes of course it will. But the chances of your survival in the long term have been enhanced considerably.

I understand the pain that many feel on the precipice of this notice. However, consider that perhaps there was no choice in this matter for LL. It had to be done. And given its abruptness, it is more than probable that research revealed that this could not wait. It had to be done now in order to remain competitive and preserve the long-term viability of the platform.

In short, as hard is it may be to do, all I can offer to all affected is adapt. Remember, those who are flexible enough to adapt to ongoing change, survive. Those who fail to do so ... perish.

Your evolutionary replacements are waiting...

QFT.

Yes, but for many of us land, like a car is just a tool, cars are very rarely good investments especially the ones you want to drive around a lot, your alternative of course is don't risk your money and just walk or get a bus
I own near half a sim, but it's just a tool to make an income if SL folded tommorow I wouldn't be happy of course, but I know that's a risk.
Really this is just the first wakeup call, Imagine if nothing happend to prices for 6 months then suddenly a competitor hits the market at $100 a sim and $100 per month tier. How well will land as investment do then I wonder in the days after LL is forced to match their price?
Tiers got to drop next , I rather see tier drop than land prices, and LL will then get an influx of people who spend money , which is good for the rest of us, of course we may have to kick 20k of bots off the grid to make room for more people.

Had to change my signature...

Ha! Nina triggered a little deja-vu there. I can still remember Anshe snapping up second-hand islands on (what turned out to be) the cheap at the end of Oct 2006, then asking for naming ideas in Dreamland group chat.

And then Zee dropped the bombshell.

To me, the timing thing is the killer.

I've accepted LL's sudden moves as cost of doing business.

What gets me is that it takes up to 2 weeks to get an island transfer, so for 2 weeks, any deals made can be broken. I think of my own mainland sales within the past week since I returned to SL, and I have to wonder whether or not I could continue working here if the buyers could return land they bought two weeks ago, if the market fell, or my sellers could demand I pay the difference when my the market went up. For me the cussedness is in the open ended nature of the transaction. If they would just AUTOMATE island sales, like they do mainland sales, it wouldn't be so bad.

There is an FIC after all,

Prok just got the members wrong.

only the *resale* value of our islands has gone down. i own 1/4 of an island, so i do have money invested in it. and this is not bad news to me. my island is still doing what it's supposed to do, it's as good as the day we bought it, and in general it works as advertised. i use it for my business, so it has a lot of value to me. changes in pricing don't change that at all.

when i buy a shiny new computer and the price cuts and the speed doubles in a month, yes i'd wish i waited, but the computer still does what i paid for it to do.

i'm not saying the changes won't affect anyone, but the sky is not falling.

Yup. I got a PM from Khamon two days before the 2006 announcement telling me that if I was going to buy and island I better do it ASAP because there was a rumor about a price increase. I don't know where he heard it from, but some people had been tipped off and word filtered out. I have zero doubts that the same thing happened this time.

Of course, if a competitor *cough*openlife*cough* delivers the promised land of stability, user created content, and cheap sims in the next few months and people leave SL in droves then nobody's sims or mainland will be worth diddly squat on resale anyway.....

Because it's their company and they can.

Just a small quibble:

This notion that we are fooled into thinking land is an investment because we falsely think it's land - when it's really only pixels and therefore can't possibly be an investment - is something of a red herring.

(Sorry for the somewhat pretentious caps and sections that follow, but it makes this easier to read quickly.)

INVESTMENTS:

An investment is: Something you can sell later.

Simple as that.

In addition, "investment" often implies something you can sell later for more money than you paid for it. It also implies that you expect to be able to at least sell it for what you paid for it, if all goes well. If not, you say your investment went sour.

It also implies that you don't think it is likely to suddenly lose a great deal of its value, or all its value. (Otherwise one wouldn't call it an investment; any more than one would call hot dogs an investment, after they are eaten.)

EXAMPLE:

Consider popular no-copy statues from a wonderful SL artist creator. These would be valuable because they are limited - you couldn't endlessly duplicate them. And they could become more valuable if the artist stopped creating and selling them, and they became rare.

So - imagine you had such a statue. You might well consider this statue an "investment," as you likely could sell it later, probably for at least what you paid for it, and possibly for more.

Now imagine that LL decided to create many more copies of this particular statue, and released them for sale.

And if LLreleased them for half the sale price the artist did, your statue would have even less value. (Not that LL would ever do such a thing with anyone else's work, of course.)

Your statue would no longer be valuable, and your "investment" in the artwork - your expectations that you could sell it for roughly the same as you paid, and hopefully more - would be dashed.

Not because the statue is pixels and therefore inherently valueless, and you were a fool to ever think it had value; but because someone had deliberately made it much more commonplace and/or drastically reduced the price of it.

LAND:

In the case of land, LL, of course, owns the land in the first place, and they can manipulate its value. And they do - they intentionally release more of it, and intentionally change its price up and down, valuing and devaluing those investments as they so choose.

So the problem isn't that the concept of "investment" in land is naive - it is not, as long as the economy remains relatively stable.

We are not naive to suppose our land might have value, simply because it is pixels. We are only naive if we suppose that LL won't devalue it whenever they like. (The ultimate devaluation, of course, would be LL giving away all land in SL for free!)

EFFECT ON THE ECONOMY:

We also have the problem that huge and sudden changes in the value of goods people own have a startling effect on the economy, and can easily damage people who hold land, and damage the perception of the economy as a stable one, worth investing in at all.

(An enormous resident landowner could have the same effect, though to a lesser degree, by suddenly dumping all of their holdings at a much lower price.)

CONCLUSION:

So I think it is not reasonable to say that we are silly for thinking land we have in SL had inherent value. (Obviously it does, as does anything we can sell, whether it is real estate, a gadget, a texture, or anything else).

It would be more accurate to say that although land has value, LL releases that land and sets the price, so they have the power to increase, decrease, or even eliminate that value as they so desire.

Which, if they do too willy-nilly, decreases trust in the whole economy.

LL probably believes that damage to that trust factor, and to the residents this adversely affects, will be outweighed by the benefit of selling many more islands. And - I would say they are probably right.

coco

Call me crazy, but I thought land was something you bought because you intended to use it, either to develop an attraction or to facilitate providing a service, not something you buy simply because you intend to sell it off to someone else for the same or more than what you paid. If you're trying to make money doing the latter, put your money in RL treasury bills or something sensible. SL is NOT the place for investments. If your intent was the former, and when you purchased the land you decided it was worth the price you paid for it, then a price drop now doesn't change the math when you made your decision, unless you expect yourself to be psychic, or expect LL to do something as foolish as telegraph a future price drop. If people didn't move ahead with their plans because they thought they might possibly get the same thing for less money later on, no one would ever do anything.

T-bills and virtual land speculation? Those are at two ends of the spectrum, if you even allow them to be on the same spectrum! T-bills don't pay squat: under 2% for the 2 year and under 4.5% for the 30 year! Much higher returns are possible in SL, with higher risk. It is all a question of risk tolerance.

How many people do you think would have purchased land if resale wasn't allowed?

Absolutely, Rockwell, and people forget that all investments have risk. There is always the risk that the bank/investment will go belly up and cannot pay back what they owe you, much less the interest.

Deciding to forego 675/island is a huge decision and cannot have been made lightly; it must be done for the long term good of the system. Would you rather be out the entire value of your investment or only 1/3?

My guess would be most of the people who bought it because they wanted to use it and who intended to try to profit by what they did on it rather than by filpping it.

not entirely correct. that's how antiques and art work, but not the only way to recoup investment money. i bought some land for my business. it cost money so i considered it an investment. i wouldn't have had much of a business without it. since then i have way more than made the sale price back. if the island is worth US$1 when i'm done with it, i still got my value out of it and then some.

i think you're talking about intrinsic value of pixel land. if you bank on this it's a risk; we can agree that the price can vary greatly and unexpectedly. but as chip said, not everyone treats land like a commodity. it actually *does* have a use between buying it and selling it.

Bleh maybe it's because first land was done by the time I got here but I don't see why people would want to purchase land and write off its value when they could rent for less.

Well, that's one way of looking at it.

But people who buy homes in real-life expect that they will be able to sell that land later on, too, and this in no way diminishes the fact that they are buying it to live on and use, not to sell tomorrow.

Also, people who buy and sell land as real estate agents in SL provide the same valuable services to us their real-life counterparts do.

As for me personally, I never had any particular intention of selling my land (either the land I "own" in Azure, or my shop land in Rosieri - both for close to three years now).

But that doesn't mean that I considered it valueless. I considered it part of my net worth in SL. Something I can sell part of all of if I have to or want to, and recoup some of that money (I always thought I could recoup at least most of it) to put elsewhere, like in advertising.

Nothing wrong with that.

And just as in real-life, I would be disconcerted if suddenly I found I would have to take a considerable loss on it if I did want to sell.

If we are going to say that land should not have resale value, or people shouldn't expect any, then just make it so. Make it so people can't resell land in the first place, if it's to be considered valueless.

But if you set up a whole system precisely for the buying and selling of land, then naturally people are going to consider their land to have a value beyond that of simply living on it or providing services from it.

And if that is so, then of course it becomes, by definition, an investment - in the purest meaning of the word: As something you have invested part of your funds in, with the expectation that you can convert those funds later, in part, in whole, or even with profit.

To say that SL is not the place for investments, and doesn't consist of a whole framework of many, many investments and trades, would be innacurate.

To say that land is a RISKY investment would be extremely accurate, particularly in light of manipulations by LL which are out of one's control.


I agree. Land has value above and beyond its monetary value, and that is exactly how I look at it for myself, personally.

But it does have monetary value as well.

And the fact is, that land now has less monetary value, in the short-term, anyhow.

In practical terms, it means I now have less money - less resources - than I had yesterday. Less real money in my real pocket to use in other ways in SL. This always happens when prices go down on land I live on.

coco

My analogy was to illustrate the value of goods and how they fluctuate with availability and/or price cuts. It's really such a simple concept, it doesn't even need explanation with an analogy. I never meant or implied that a piece of sculpture in SL was the same in all respects as a piece of land in SL.

I agree with you (and Chip) totally that the entire value of land is in no way limited to its resale value, and this is true in so many ways they can't be listed - including at the most basic level the simple enjoyment of having a spot to call your own.

But - that's true of real-life homes as well.

Obviously, I'm not one of those likely to treat land as a "commodity" very often. I know quite well about the value (monetary and otherwise) of its use between buying and selling it. As I said, I have used it that way for three years now - without every having moved from either parcel even once!

I would consider its purchase a totally worthwhile experience and a totally worthwhile investment (for the myriad reasons alluded to above) if the whole SL ball game disappeared off the face of the earth tomorrow.

I'm the poster child for someone who isn't in the land business, doesn't want to be in the land business, and wants to stay put on her own little pieces forevermore. So, you know, coals to Newcastle.

But neither am I stupid. I know land can be sold, and I know that its devaluation at LL hands is possible. Yet at the same time, I hope to recoup some of my investment in it at one point, and there's really nothing unusual in that.

Nor do I believe that people who directly deal in land as a "commodity" are doing anything unsavory in the slightest (absent those who basically scam people, that is; or scoop it all up before anyone else has a chance to).

coco

My guess is that class 6 servers (using two quad-core processors and running 8 sims) are about to be introduced. That means a substantial drop in LL's cost per sim, and they're passing along some of the savings to stimulate demand. With the right choice of CPU and a boost to 8GB RAM (1GB per sim just like class 5) they should perform about as well as the existing class 5 sims.

Tier isn't likely to change, though. The costs of colocation space, internet bandwidth, and gridmonkey salaries (the operating costs of a sim, as opposed to the capital costs) haven't changed dramatically like the cost of server hardware has.

True, LL said two months ago that there was no new hardware class on the way. But two months is a long time in the computer hardware business! They would also want to downplay news about a new hardware generation, because this time (unlike the upgrade from class 4 to class 5) this one will be about cost savings for LL, not improved performance for residents.

I think there's nothing wrong with that at all, Coco. I just think that profit by sale is about the last reason people should ever buy land in SL, not just because it's such a risky proposition, but because it causes people who buy land they actually want to use to have to pay a markup to a middleman who in most cases has done nothing to add value. Perhaps I'm in the minority, but I'll always believe it was a mistake for LL to turn land into a commodity. Had it been my call to make I'd have simply made land a fixed price per meter, whether purchasing directly from LL or from another resident. It would be more akin to the security deposit on a rented apartment that you get back when you move away.

Depending on whether or not you have dogs, cats, or too many dinner parties with red wine on the menu...

I hear that property prices in RL are taking a bit of a hammering, so maybe the same is true in SL now.

Surely cheaper islands is good news for residents, not a reason for anyone to complain. I accept that some people who'd just bought islands at the current price might be a bit miffed but they paid the going rate at the time.

It depends upon how you value your assets. I consider my island an asset, I have no intention of selling but if I fell on hard times I would and now it's worth a lot less than it was at the weekend.

Others see it merely as a service, in which case then yes, this move is sound if that's how you value land.

However considering the price of land varies greatly from region to region then I'd say many people value land as more than a service, otherwise waterfront wouldn't be worth so much, nor would land in places like Shermerville.