Tier Pricing Increases On The Horizon?

Philip said this in his town hall in response to Cristiano's question:



There's a couple of interesting things here. Firstly, it looks like there will be changes to tiers and pricing in the near/mid future. Secondly, it looks like prices will rise as Philip says this: "Also I think the discount levels at the large sizes are too high." That suggests that the US$195 for the top tier would rise, and presumably if he's talking about a "flat" price per meter tier then all prices would be higher (maybe apart from all but the very lowest tiers).

These raise some further points:

(1). What sort of rise would be wearable by the community. They've upped the price of a private island by 25%, would a 25% increase in tier prices be wearable? We're yet to see what prices auctioned sims go for, but I suspect that be controlling availability they could in effect control the price.

(2). Would this not lead to the possible outcome that many people need to off-load their land because of new tier costs? Of course that depends on the magnitude of any such rise, but I don't think it would take much for many to want to off-load. Which could lead to a glut of cheap land on the market, making it difficult for those who are purchasing full sims for resale at auction to be able to make the L$/m they need to. But then a tier raise anyway might make the resale of auctioned sims more difficult.

(3). If a tier rise does happen it could also have an interesting knock-on effect for the whole shape of the environment. If there is no, or little demand, for land because of the tier prices we may start to see more empty spaces in-between builds. I for one would welcome that.

Of course this is all conjecture but I'd love to hear other people's thoughts on this. I guess I've missed what Philip was referring to in the last line above ("There has been lots of good discussion of that in forums, etc."), does anybody know where I can find any of those discussions?

Yeah, it could be just that they need to raise prices and this is the only way how.

The problem, really, is that they don't know how to cache properly on the client.

If they cached more on the client then they could lower bandwidth consumption and wouldn't have to do these price raises.

They'd also speed up performance for that matter.

I'd really like to know who was responsible for the lack of caching. I really do.

Blaze, I'm kinda confused by your answer. My post was about what the effects of any such tier price rise might be, not about why they need to raise prices. I'm also talking about a future tier rise that Philip alluded to, not the rise is private island costs or the auctioning of whole sims, which your response seems to be about to a certain extent.

The island price raise / mainland auction changes were all smokescreen and mostly irrelevant.

Everything is structured around the tier pricing, including both arbitrage and cost of doing land baroning business.

By eating into the tier profits, you eliminate the possibility for arbitrage and the cost of holding land to baron with increases and profits rapidly vanish.

So, don't worry, we're completely talking about the same thing.

The question is - why is he doing this? Is he doing this because he wants to reduce land baroning or is he fishing for a way to raise prices to increase revenue and therefore become cash flow positive?

What's your thoughts?

Also, check out my "Trust no one" thread .. Kath has a good analysis on the issue.

Well I'm not really interested in why at this point, after all that is Linden Lab's own decision based on their business position and business plan. If my web hosting companies decide to up their prices, there isn't much I can do about it, and I see this as being no different.

To be honest, yearly price rises are something you get used to, they're an accepted normal practice. Private Islands have been around for about a year or so now, haven't they? Tier pricing has stayed the same for around 18 months, so I'm suprised that nothing has been done about re-evaluating those prices before now, following the same "yearly price review" norm.

I'm more interested in the effect that something such as tier, which is a recurring monthly cost, rather than the initial purchase, which is a one off cost, would have on the panorama of Second Life.

Looking around I see that many people find it difficult to accept price rises, that Linden Lab are gouging etc. I think the majority of us would love to see Linden Lab be profitable sooner rather than later, it's in their interests and our interests. How people can pick apart the need for raising prices using such arguments is beyond me. If they can turn a buck, then we'll all benefit in the long run.

Although at first glance, this seems like a panic, consider:

1. Philip has promised to continue to increase prim limits as technology allows.
2. Residents probably own more space than they need, because they want higher prim limits.

So, if we're getting our prim needs met on less land, we're apt to not buy as much. Raising prices will probably be inevitable.

However, on the other hand, I think it's unwise to charge a private sim $195/month upkeep, but increase a full-sim tier above that amount. Reasons:

1. It's unfair.
2. It's in LL's interests to promote growth on the main grid. Should it be cheaper to buy whole sims worth of land on private islands, large landowners are likely to abandon the main grid for less expensive alternatives.

Well, Moopf if you have no intentions of significantly investing in SL then yah, who cares why they might do something.

However, if you need to plan for the future it's a good idea to have a bead on what's coming down the pipe.

For example, I was this close to pulling the trigger on something similar to what Anshe was doing. Fortunately, my spidey sense kept telling me that Philip was going to pull what he just pulled, even though Ben Linden said differently.

No, it depends on how you want to invest. Time is an investment in the same way that money is. I'm not quite sure what you think Philip just "pulled" to be honest. He raised prices. Erm, that's pretty much what all businesses do once a year or so, isn't it. He stopped sims being cut up for auction, to instead let the purchasers do that. Erm, that's probably because in the long term LL pre-cutting the land isn't cost effective for them to do. Thinking about it, that also gives people the opportunity to get exactly the size they want from the people selling, which I view as positive to be honest.

I don't see this as a panic at all personally. I see it as a normal evolution of pricing that any company makes. I agree with raised prim limits possibly meaning less land being purchased, but in the back of my head I wonder whether people won't just expand to fill that extra - that seems to be human nature

I would fully suspect private island tier prices to increase in accordance with normal tier prices when a change happens. That makes sense. I can also see a convergence in the way private sims are treated - allowing parcel resale for instance - as this would remove the "false" rule currently governing them. This would then allow the community to build their own land masses as they see fit, rather than it being controlled as it is now in effect. If anybody is going to make LL stand up and take note on this, and think about a policy change, it's Anshe with her land mass. I'd love to see more of that going on, rather than one contiguous lump. There is strength in diversity.

Philip just sent out a trial balloon about raising tier prices.

I was going to buy several dozen islands and rent out to users on the mainland, creating zoned communities. I had ideas for

- a venice sim
- a space sim
- a jewish chat sim
- a christian chat sim
- etc

The idea was that my profit would be arbitrage between the tier and what people would have to pay when they are at a lower tier.

Anshe and Hiro are both doing this (and others) and making slim profits based on this tier arbitrage. Trust me - not a lot. However, I had a lot of ideas on how to automate this based on scripting the client which would make it worth my while.

However! Something warned me against doing this. Two things:

1. SL isn't cash flow positive yet, so they may go belly up
2. LL might get rid of of the tier arbitraging because it's canabalizing their revenue

A third option, I hadn't thought of, was that they are merely looking for a way to squeeze more revenue in a dash for cash flow positive, and they're doing this on the backs of land barons / rental barons.

If you were aware of these possibilities you would stay away from the type of investments that Anshe and Hiro have made. I have mostly, I generally just generate content as I know that LL would never hurt those folk as they form the basis of their business.

So, this is why you should care what LL is thinking of doing and why they're doing it - to help guide into the right type of business models and investments.

No, this is why you care, not me blaze. I do what I enjoy here. I build and script because I enjoy building and scripting. I enjoy creating things. This isn't a "business model" I decided on to turn a buck or particularly an "investment" (although obviously I invest a lot of time, but that's because I enjoy it and for no other reason) I consciously made. I'm here for totally different reasons than you, which is why you care about this and seem to see it as a threat, and I just see it as an accepted normal practice and part of ten a penny company pricing reviews.

If tier prices rise, I'll decide whether I want to keep my island, or my other land at that point, not on whether I can make a profit, but on whether I can afford, or want to afford, those higher prices.

Sorry, I keep doing that.

I wasn't referring to you (Moopf Murray) but rather the royal you.

I really need to stop doing that.

To rephrase:

So, this is why one should care what LL is thinking of doing and why they're doing it - to help guide into the right type of business models and investments.

I kind of thought it was a "you" to the crowd, but obviously responded from my point of view, to help put my views into context for you No need to apologise.

You must be referring to some other Hiro. I've made profit on land exactly once, about a year ago, and it was because I happened to see some very very underpriced land legitimately for sale.

Unfortunately, unlike you or Anshe, you'll have to refer to Hiros in SL by last name, unless it's the only Hiro in context. (which, in this thread, is just me.)

I want to take this opportunity to gloat and say "I predicted it". I've been saying for months that sales moving toward whole sims was inevitable as a pre-amble toward making the Metaverse like the Internet - so that anyone can host.

Yes, he is referring to a different Hiro. It's a popular name in SL, I wonder why that is!

If the tier structure was changed in the way suggested, it would not just be the likes of Anshe, myself, schwan, and others offering private estate plots for rent that would be affected. It would destroy the rental business at all levels across SL. The rental business is only viable via tier arbitrage.

Could you post that comment on an applicable thread please - it's way off-topic from my original post which was about changing tier prices, not the auctioning of whole sims. It would be kind of nice to keep this thread on the original course, there are a couple of others about the immediate changes.

Ithankyou

I would welcome flat per meter tier pricing. The way it is now, forgetting about the 512 you get with a premium membership, you have these numbers.

512 meter tier = US 9.76 / 1000 meters
4096 meter tier = US $6.10 / 1000 meters
65536 meter tier = US $2.97 / 1000 meters

That just seems ridiculous to me letting the largest land owners keep their land for less than a 1/3 of the price of the smallest. Sure I can see the sense in offering some discount for volume but that is way too much. So I vote for lowering tier on the low end and raising it on the high end.

[edited to add]
Particularly because this kind of price difference encourages an unhealthy sort of land speculation I think. If the tier price per meter was flat and the minimum auction quantity is a sim there will still be land speculation but it will be of a different healthier nature I think.

If that was to happen, you could wave goodbye to the likes of dreamland.

When it's spelt out like that I can see what Philip meant about the discounts being too great. I agree that some sort of discount for volume is warranted, but in order to do this without making everybody run for the hills (y'all know who you are ), you'd probably need to find a rate that, for small land owners was lower than it currently is and for high land owners was higher than it currently is.

Example: A flat rate per 1000m. At the current 512m tier a full sim would cost US$639 a month in US for tier charges. Which means that that 512m tier would need to be considerably less otherwise the hills will be full of running avatars, no doubt in tiny rat avatars fleeing a sinking ship

I think it's going to be extremely difficult for LL to find a single price per m, or a tier with substantially less discounts for higher land owners that would not either (a) cause them to make less money on the lower land owning levels (so much so that it may not get offset by those with higher land ownings paying higher), or (b) be so costly as to make owning a full sim totally unfeasible. Either way, I guess there could be a lot of disgruntled people if what Philip suggested actually happens.

However, having said that, if the lower tiers are much lower than they are today (which may have to happen) all of a sudden you could be creating a significant demand for land

I think any move away from the current set up would make it completely unviable for private estate continents for example. Even at 100% occupancy, it currently takes the best part of a year to recover outlay before you even start to get compensated for the masses of time spent setting up, enforcing zoning etc.

I am not too sure on the later point. Most of those that rent do so not because they can't afford to buy land or pay land fees. After all, in most cases, rent is equivalent to the land fees. I think most who rent have a different mentality (both with rent vs own, and zoned vs main grid) and an alteration in tier prices will not change that.

I don't have a good answer to this. Maybe if there was some sort of arrangement where if whole sims were purchased with the agreement that no money could transfer on the sim they could get a super low tier fee to encourage creativity.

OK, let's say that we get an approximately 25% increase on a full sim, that would equal around US$250 a month (that's about US$3.81 per 1000m).

OK, the discount from top to bottom is currently around 70%, so let's say that discounts are slashed to give a 30% discount, the bottom tier would then be US$5.44 per 1000m which is a big drop.

So, what does this prove? Well without knowing the spread of land ownership, i.e. what % of land owners own different volumes of land, it's difficult to say (is this info available at all?). But, I would suspect that the vast majority of land owners fall below 4096m2 currently, in which case would there be enough of an increase on the top end to offset the decrease at the bottom end in view of the fact you have a smaller number of higher payers and a higher number of lower payers?

Edit: BTW, I took my 25% increase on the top tier from the price rise on private island purchases, which is around 25% as well.

That's interesting Hiro. So if the costs are comparable, why would you rent land rather than buy it? I can't quite understand why people rent now in that case But then I'm no landlord and that probably explains my lack of understanding!