Threat to abolish tier discount - possible implications

Philip announced some time back that LL were considering reducing or even abolishing the land tier discount. I have been thinking about the implications, and I think it would be good for us all to contemplate this possibility in case it really does come about.

It seems the significance of this tier discount is not widely understood.

A sim owner pays tier at approximately one third the rate of a smallest landowner. This "tier discount" is precisely what, in a themed or other sim being leased or even rented to its tenants at LL equivalent tier rates, funds all the landlord's running costs. And of course his margin.

Whether this is good or bad, fair or unfair, exploitation or good service, only you can decide.

But bear in mind that Philip has announced that this discount (on which most of the leasing/renting sector is built) is likely to be cut, or even (gee, really ?) eliminated.

This would mean that these sim landlords would either be out of business, or would have to convince their residents to actually pay them something extra for the nicer environments they enjoy, and the extra services they receive. You could argue that this is precisely what content creators have to do all the time.

It is a known principle that people care more about, and protect more carefully, things they don't get for free. Maybe the themed communities would come out stronger without this subsidy from LL, and therefore from the rest of us. But I wouldn't count on it.

On the other hand, a sim tier rate of US$600 would surely be crazy, no one but a really high powered landlord with hugely loyal tenants could possibly get past such a psychological barrier.

So I am confident that if LL did eliminate the discount, they would not just increase the top tier, but would decrease the bottom one till they met in the middle, thus giving LL the same total income. The new flat tier rate per m would be WAY DOWN on what the little man is now paying. The popularity of such a move would likely be absolutely mind-blowing.

Every smaller land owner would LOVE it.
Every landlord charging LL equivalent tier rates, and his leasing tenants would LOATHE it.

As would the poor owner of the genuine private estate who never tried to use the discount except to access a single larger chunk of land for her own personal use, or for special/public interest builds etc, at a personally affordable rate. Maybe she would be the real casualty.

I would want to resurrect my old, old proposal for a third category of genuinely private sim. Minimum cost, minumum trouble for LL, and no commercial exploitation by subdivision allowed. Just how the private sim was before someone spotted a software loophole, and turned everything upside down.

Its hard to calculate what the new rate should be to keep total LL tier income unchanged - it depends on the statistical mix of parcel sizes, which I do not know. And of course we don't know what the effect on land prices would be. Little people would be able to afford the tier on more, big people might want less.

I think I prefer not to express an opinion. Don't blame the messenger.

But you can see why they are considering it, with the majority of us they would be heroes. Depending on where the gain/lose tier boundary turned out to be.

How do you think the SL community would cope with such a change, which it seems is probably under serious consideration right now.

The GOM outcry would be dwarfed, and the "compensate me" cries would reach mars.

So the other question of the creation of a "compensation culture", which raises such disgreements, would really flare back into life. GOM would look like just a little dry run, as I previously predicted.

Ellie,

Question - did Philip ever say anything beyond his comment that he thought the tier discounts were too high on the upper end? Or is this all based on that single comment?

Absolutely, Hiro. I did not mean for a moment to give the impression that the landlord actually enjoys such a margin on every plot, even potentially. Of course the average figure depends on the actual mix of plot sizes, and the occupancy level has a huge effect on where the break-even point will be. If I gave a different impression, I welcome the opportunity to correct it.

I don't want to accidentally provide fodder for misinformed landlord bashing.

I have looked at the whole thing in a spreadsheet, and I'm not running to participate as a landlord. I am not one to share the view that this is all a rip off. Far from it, and if I can bite the bullet and get my last bit of land sold, it is in my mind to consider being your tenant, and letting you take all the risks for me.

The purpose of my posting on this topic is to get us all discussing it in advance, so we are prepared on how to react if it becomes imminent, consultation is invited, or it is actually sprung upon us.

Personally, my instinct is against this change, but the more I think about it, the more I see both sides.

Oh dear, Cristiano, you've frightened me now, that I might be guilty of scaremongering on inadequate evidence.

I was convinced it was much stronger than that, but I'd better go do a thorough search for the source postings. Or was it in a town hall ? It's so darn difficult to dig this stuff out once you let it out of your sight.

And of course, you make me doubt it just as my online time tonight is growing short. I'll go look now. Anybody got such a reference to hand ?

Well, I can't speak for everyone of course, and it might be a good subject for a poll (if there isn't one already), but I'm tiered for 1/2 a sim at US$125 a month, and to me, that is quite a bit for my online entertainment.

If it goes up, I not only go down, I say goodbye and reinstate my Sony Station pass to head back to EQ, EQ2, SWG, or whatever.

I read enough topics in the forums about things to make my eyes bleed. Some I'm for, some I'm against. Such as I'm all for the complete elimination of rating-based stipends bonus, I'm against any reduction to dwell bonuses or weekly stipends.

But if they start digging in my pocket actually making me pay more per month for my land holdings because SL is a "business venture, not a game". Then I'd much rather invest that in the RL stock market or my savings account and just fork over $25 for an all-inclusive MMORPG pass to continue being entertained online.

SL is great, I love it. Otherwise I wouldn't be paying what I am for it. But if/when LL starts thinking of ways to charge me more for the experience, well, all the reds light will start flashing and it'll be time to move on and actually save over US$100 a month.

Just my $.02L but any Linden reading this will have no problem cashing it if they want to take that to the bank instead of what I'm currently, and will only pay for my current land tier.

If Cristiano is right, Charlton, and I am misremembering the seriousness of what was said, then this "danger" may be mere phantom.

On the other hand, are you exploiting your 1/2 sim commercially ? If not, if the worst came to the worst, how would you feel about paying a little more for a whole sim, if it was a new low-cost genuine single-owner category with commercial subdivision strictly prohibited ? Something a bit closer to how the private sim started out before all these changes ?

The email you got with such a private sim specifically forbade subdivision for land renting (** see below) or "selling", but that was ignored in the rush to take advantage of the software loophole that was discovered. Ignored and never enforced. Though I never understood why.

Much of the change which followed (growth of themed sims etc) was I think on balance probably positive, despite some mis-selling of tradeable leases as "land sales" which got me a bit indignant. But everything moves on, and maybe LL are beginning to think differently again.

Edit:
** Note: As Hiro points out below, it was only selling that was prohibited, not renting. I apologise for this mistake.

Ellie,

It is not an exploit. I was renting plots before the ability to deed plots was available. This new feature just gave my residents more control over their plot. The email states you cannot sell any plot of a private sim, not rent it out.

Thank you, Hiro, I was hesitating in my memory of straight renting.

Was it any attempt to "sell" parts of the land? Is that what was prohibited in the email? I thought it prohibited subdivision for the benefit of third parties. Its posted somewhere.

Am I right now then that it was the improvement of control, meant for the convenience of renters, that suddenly made it possible for the landlord to give increased power over a plot via a group belonging to the tenant, of which he was temporarily a member? Thus making it possible to simulate "ownership" by what is really still a tenant. As LL insist on describing it to this day.

This in turn made it possible for the landlord to persuade the tenant to refund him the full capital cost of the plot, and thus effectively the landlord had disinvested, and could move on to buy his next sim.

Even better, the tenants huge "non returnable deposit" (presented as a purchase price for something he could in fact never own) compelled him always to find a replacement tenant on leaving (presented as a resale by himself). Thus the illusion of land ownership is almost complete, except that the tenant can never actually transfer his (incidentally unenforceable ) rights to anyone else, but has to call upon the true owner of the land to do it for him. I assume this is still true.

I think I am remembering correctly now.

Mind you, lots of tenants loved the new "pseudo-ownership" (and still do) so who am I to argue. I bow to its genius.

Maybe if we do get a new category of truly private sim, all forms of land subdivision should be forbidden, so that it is even more "private" than the original. As the only way of justifying a special low price.

Phillip did say this about 3 townhalls ago...I was there...look tthrough townhall transcripts and you should find it.

6/29 townhall transcript: /3/e9/51984/1.html

I'm not sure exactly what he was implying by this. I could see him either meaning to get rid of the discount levels or meaning that he just wanted a charge to per meter fees without teirs. It is possible to have a charge per meter and still offer discounts to bulk buyers. The good news is that LL seems to give some warning before making changes, so if they ever do change things people will know about it in advance.

I don't think Linden Labs should get rid of discounts at bulk for their own good. Bulk discounts simply encourage people to buy larger amounts from them. If they got rid of discounts completely they would lose the revenue bulk discounts encourage.

They seem to just be thinking they are giving too big a discount though. That is a much tougher problem to tackle. It is hard to say whether they are right or wrong without actually having numbers to look at. You don't want all the little guys paying too much more than the big guy, or overall growth may not be what it could be.

I think there might be some secret deal making going on here, because the land barons are not blinking an eye. Or maybe they just think Philip is all talk. Or maybe they're playing some wild game of chicken with Philip.

Or maybe they're just crazy risk takers.


I really have no clue.

What do you think Land Barons should do? From the townhall quote I posted above, it does not sound like Linden Labs has made a decision to get rid of cheaper land for large land holders. It doesn't matter to a land baron or renter if a per meter fee is charged either, it just matters if that per meter fee doesn't get cheaper as you approach a sim in size.

I for one am also more concerned about the success of SL as a whole than I am for one possible way of making money. If the fee is made a little bigger at the top and made a litte less on the little guy there could be possible growth in SL as well. I don't think the discount would be abolished, because I think it existing in some fashion helps Linden Labs profit. In the end I don't see anything horribly scary.

Thanks, Dark, thats exactly the quote I remembered.
"Philip Linden: maybe just a flat price per meter"

A flat price per meter is exactly and precisely the total abolition of all tier discount.

Isn't it ? What else could it possibly mean ?

I think that justifies my creation of this thread, and our careful exploration of the possible implications. Though I say again, my instincts are against such a drastic step.

Although I find it difficult to argue against those who claim that if a themed tenant, for example, enjoys something extra, he should pay for it. If he wont pay for it, is it worth having ? Does he really want it ? Why should everyone else subsidize him (I'm not saying I see it like that, but some people do)?

I simply can't choose, I see both sides.

I feel much the same puzzlement, Blaze.

The only other alternative is that the landlords are actually confident in the value of what they provide. That if it came to the crunch their clients would find that, however reluctantly, they would rather pay an economic price for their advantages than actually lose them. In fact, I think it likely, because some of the benefits seem very real.

Oh yes - I suppose the efforts a few of them made to establish a "compensation culture", with GOM and the telehub issue as test cases, might have worked. Big objective for MJW, was it ? But that looks like a lost cause. We have escaped the "compensation culture", thank goodness.

Certainly many tenants of themed sims are always willing to praise the value of these benefits, which they are currently receiving for nothing. Paid for, on one viewpoint , by the high tier rate of the small landowner.

Be lots of screaming first, though, wouldn't there ?
Though the smaller landowner, when he saw the resulting substantial cut in his tier costs, would be both incredulous and triumphant.

But I HATE the end result of pricing a genuinely private sim further out of the reach of the ordinary citizen.

Well, I own Chatelaine in-game. It's pretty much a hybrid. I originally bought it as just our private homestead; two houses, a rec center, and nature park. From there it has grown into a larger rec area both for us and visitors, one of us opened up an art gallery with a double-feature movie theater (free to watch) and we added a bowling alley (free to play), oriental pavilion with a mahjong table, money tree for new player visitors, mini-casino game room (not free LOL), and are in progress of creating a large park and putting in secret areas, such as the dragon's lair we're working on now.

So it's hard to say exactly what we created with Chatelaine. Basically what we wanted, and still want is mainly just a place to call home, low lag, with entertainment areas, all set in a natural, serene, friendly setting that keeps in theme with the snow-bound surroundings. No big casino's, no fancy clubs, no big malls. Just a simple alpine village kind of atmosphere and living.

I pay more per month US$ then it could ever bring in, but that was never the thought or intention with Chatelaine. It is, first and foremost, our home, our retreat, or beautiful little piece of SL that we call home.

But that is pretty much the limit of my disposable income ($US125 a month), so if LL actually raises the tier prices then I think we all agree that it would be much better to let Chatelaine fade into a beautiful memory then tier down and lose a large portion of what we have created and given life to.

By no means is Chatelaine great or fancy like with Parrot Island or Silk Waters Mountain themed sims, but we love it and it's home and it's how we uniquely expressed our love of what Chatelaine and SL itself means to us.

Sounds like you might actually be in the market for a new category of strictly no-commerce private sim at special reduced price, Charlton. Or at least, restricted to no-renting, no-leasing.

If tier discount is indeed abolished, we would certainly need such a new category to prevent the destruction of huge numbers of valuable projects.

More I think about it, more I see it as the probably the biggest problem with Philip's idea.

Yes a flat fee would be abolishing the discount, but he is very back and forth in the way he talks in the town hall meeting. First he says "flat", then he says "flatter", then he mentions that the discount is too big. Saying the discount is too big suggests that you want it to lessen without dissappearing.

I agree that abolishing the discount would be a bad thing for residents, the reason I think Linden Labs will never abolish it is because it helps Linden Labs a great deal as well. They will lose alot of demand for larger peices of land the more they lower the discount. A person that might of bought a larger peice of land for $125 fee, might stop somewhere earlier because of the lack of encouragement a discount gives them to buy more.

The thing is that this sounds like something that won't happen soon. He states that it is alot of hard work. I am guessing by the time it comes up again, perhaps in a year, that they will realize that they still need some form of discount even if they do try to make the billing "simpler". If they don't, then I'll be debating it, but until then it seems like something not to be in announcements in the near future.

Removing or seriously reducing tier discounts would completely break my business model, and that of many others, and destroy many months of hard work. Most people would naturally move back to lower tier Linden sims and places like Dreamland may shrink to one handful of sims. I would still take care of loyal customers willing to continue paying the current rate - but that would be in my spare time as there would not be many left and I would only do it to honor my responsibilities. For my main income I would have to go look for another job, maybe joining some other company to help with their online world.

I can't imagine LL really messing with tier discount though. It is simply not in their interest to destroy one whole active service industry in Second Life. I also believe it is part of their business ethics to not pull the rug from below the feet of their own customers/investors.

I agree with Anshe-san that Lindens would be most foolish to do this thing and it would seem a completely destructive thing to do and a final blow to ruining this on line world as a growing enterprise.

I am on the 2 sim tier. I own the majority of two mainland sims and a lot of other projects, and I am not a land trader nor renting for profit either land or housing.

My lands, and their purpose are but small compared to Dreamland and such holdings of' ' land barons' and land re-renters. I am one of many who create sim based content. create landscapes, provide one key essence of what SL is in a quiet yet steady way. My 2 sim tier is intended to ncrease to 3 or 4 within a year, creating new themed areas not for profit but for enjoyment, with some free/cheap residential, some free markets and new areas purely for exploring and for the theme itself.

If Lindens upped tier now, (and ..$600...??) then even with my resolve and will which has seen me grow from 128m with a japanese hut and a tree to creating some of the most complete japanese themed sims in world, would fade and I would have to abandon my holdings.

Ellie Edo says:
As would the poor owner of the genuine private estate who never tried to use the discount except to access a single larger chunk of land for her own personal use, or for special/public interest builds etc, at a personally affordable rate. Maybe she would be the real casualty.

THAT's ME !!

This would mean the end of beautiful Tehama, with its FREE asian markets, my Neo Japan store and FREE housing for new players. Again, the end of Orelle, and Silk Waters village and its FREE markets, which now has expanded to cover almost the entire sim. I would have to painfully destroy these beautiful places which so many visit and get pleasure from. I also support a host of projects with free loaned land and prim allocations and would have to pull away from all of them.

I would go from being a person who WANTS to grow and SUPPORT this world and LL, and who has willing invested MORE and MORE money each month to a dissatisfied person whose work and money has been destroyed, abused, and wasted, and it would be the end of Second Life for me> I doubt I can ' hang around' as social player. resenting the destruction of my hard won and expensive invested land and still believe all the ' its your own virtual universe; marketing .. what will it all have been for that money and time?

Such a move by LL would not only break business model of large scale players but would mean that most people with 1 island sim, or individuals like me, or groups like Luskwood who hold mainland sims in themes would all have to down tier and lose them. It would destroy all enthusiasm for most people to want to continue at this level. Without those who own a sim or two, theming and zoning vanish and what lands remain become random builds. Think of all the wonderful beautiful places and builds in SL you have enjoyed seeing involving almost a sim or a large area and then imagine them all gone

Also suppose I wish to sell it all.. who is going to buy my near two sims? who will have any money or inclination to pay for them?

This idea is the worst idea I have ever heard. I totally agree with the fact that SL has lost its way for small players and become dominated by business and money. But this move wont just hit the huge business players. I would rather see a return to ' public land ' sims where land trading/renting and development (as a business) isn't permitted as a way to allow smaller players to grow. or some idea...

If they increase the price of EXISTING sim tiers well that will just kill off near or partial sim ownership as we know it for anyone who isn't doing it for profit, like me. So yes you will have maybe one or two majors who will stay and then increase prices and new people coming in who may get better small deals , but no one who can afford to be in the middle and grow and expand other than by renting or selling land. I am not a trader or a seller of land and have kept every bit of land I have bought for communal SL use and enjoyment and I see no reason why I should be priced out of the game as a clumsy means of dealing with the situation right now (which I do not like either)

Why is it assumed that all multi-sim owners are landlords?

Why is it assumed that all large landholders even have tenants?

Luskwood does not lease; we do not make money off of our land. An increase to L$600/sim would simply make us have to pack it up and go home.

We're not a mall, we don't rent spots, we don't collect any money from the land we hold. We're simply able to have the area we have, because we've been successful at selling avatars.

"Popular for the little man, but the land barons would loathe it."

You know, there are some people around who are inbetween. And I really resent the assumption that the only reason anyone holds land is to profit from it. Some of us just .. god forbid ... use it.

We don't want to get into the land business. That's not what we're about. But this pricing schema *assumes* that anyone with this much land is doing it for a profit.

This wouldn't just "break our business model", as land isn't our business. It'd blow us out of the water. We aren't a megacorp. This'd be like an old mom & pop shop, being successful in an old city's downtown for many years, and then the rent goes up and they have to sell out to Starbucks and Wal-Mart. (This actually happened this year to the local drug store where I live. Rent got too high, and the family run store is now a Walgreens.)

I know people have told us, "Why do you have all this land if you don't rent it out? What's the point? You could be making money off of it. It's such a waste." -- well... you define your idea of a "waste", and I'll define mine, thanks.

Quoted for truth.

Absolutely. The last three posters underline the point. In the event of these tier changes actually happening, not only would there be huge difficulties for commercial landlords, who would have to charge a full economic rate for the first time to their doubtless outraged and reluctant tenants. But also non-commercial operations of many desirable sorts would be simply wiped out.

IMHO opinion it could not even be considered without creating a new category of cheap (or rather "no-increase" non-commercial private sim. with the option to migrate existing sims into it.

The precise nature of the commercial crippling would need to be determined, but it should probably be more restrictive than the islands were before their own "sub-plot resale" crippling was effectively bypassed by the "tradeable-lease" concept, and they exploded so unexpectedly into the land market, rapidly knocking the bottom out of the price.

It's hard to know just how seriously LL are considering significant tier flattening. Dark is right. Careful reading of what is public reveals confusing little ambiguities.

One thing further. I am not pushing any particular viewpoint here, but why are none of you taking up the point that flattening (provided LL accepted the same overall return) could very significantly reduce the tier charges of every small landowner?

Has no-one noticed this ? Or considered the popular acclaim which would result? Or realised that the small landowners could well argue that they are subsidising the tenants and landlords, particularly in themed sims, where the undoubted benefits usually come at no cost to the tenants at all?

Perhaps the only reason we have not had sustained outcry from this group of residents is that they simply do not understand what is happening.

Maybe soon they will catch on, and we will have a "Small Landowners" lobby group up in arms about what they would see as "tier discrimination". Do they even realise it goes as high as a factor of three ?

Why the deafening silence from this group, in failing to put their interests forward as a counterbalance to the well-represented interests of landlord and tenant ?

Because very small tier owners do not frequent the forums.

I'm a very small tier owner, and if this change benefits me great!! I understand why there is a discount and it doesn't bother me. Generally when you buy things in bulk it costs less, hence the popularity of costco and sams club. It'd be a shame to see that basic economic principal go out the window at LL.

However...I'm seeing tons of sims being bought through auction, chopped up, and set for re-sale within hours...is land really that high in demand? I'm thinking that when us older members want to sell to go move to a newer area (for beauty, less congestion, less eyesore builds around us) that we won't be able to find anyone to buy our land. Perhaps LL needs to stop selling sims for a while and let people move around a bit.

Seems to me though that any tier changes should not be grandfather claused, but only apply for people who tier up. People entered into their current tier with an agreed upon tier cost, that should not change on a whim. The cost of a sim and the tier associated with it should be an ammount that the buyer knows and can count on.

As for this change destroying business models...personally, and flame me if you want, I'd like to see a little less business and a little more fun in SL. Lay off buying sims for a while and let people get the land first hand through LL rather than second hand and marked up through landbarons.

If this is going to happen I'm sure LL will allow plenty of time for the business people affected to remove their investment from SL. Maybe they want to put an end to land barony? Maybe they have heard the complaints about land barons long enough...doen't really affect me, yet but as my once empty neighborhood is getting more and more developed and overrun with large buildings and stores I am considering moving to a newer location and do not want to purchase from a land baron. I want to purchase land at the origional LL costs, but I believe it's my understanding that one can only puchase whole sims from LL now?

That's what we've been doing for two years in Luskwood. Have you ever visited? Yes, we sell our avatars there, but it's symbiotic. The very point of Luskwood is to have a noncommercial refuge. And a tiny little 1024x1024 plot isn't much of a refuge. Or a park. Or a place to hang out; whatever you want to call it.

As I said, this wouldn't "ruin our business model" - our "business" wouldn't change. It (Luskwood Creatures) simply wouldn't make enough to support the land (Luskwood, the place.)

We're not a for profit endeavour. Sometimes profit happens on good months, but it isn't even tertiary. Producing good avatars, and providing a place for people to feel at home at, are our primary directives. I know. Many people think that's some sort of marketing line. They say then, "Why do you charge (so much) for your avatars?"

My answer to that is: We will give our avatars away for free just as soon as Linden stops charging us tier. Until then, we have to meet a goal of subsistence and survival: Breaking even. All we care about right now, is breaking even.

So understand, that these changes would not "threaten our margins", they would threaten our viability: The four of us who run Luskwood cannot afford a equivalency to a second RL rent payment.

Maybe there are a silent screaming majority in SL who would like to see our area turn into a grid of 512x512 malls and kiosks; I don't know. Judging by our popularity (A PG area, without any 'free money balls' or giveaways -- and we make it into the list WITH the adult areas included, OFTEN) I'd say that we've hit upon something good that benefits others, and not only ourselves.

Similar projects like the Aerodrome - a place that's just plain fun to go to - wouldn't survive such a change either. I know very well that Cubey and Chage do not make very much money over there, but they're a couple of guys who are into planes. That's it. But isn't that what it's supposed to be about?

Theres "business", and then there's doing what you love and being successful enough at it to keep doing it, while providing something to other people. Luskwood does this, the Aerodrome does this, and you know, SL is so big now that there are probably other mainland projects that I don't even know about, that do this.

Moreover, how do we know how many such projects that "could have been" will be stopped by such an increase?

Listen, I have an unknown alt account that I log on as every once in a while to experience what it's like to be a newbie. It's tough. And things need to be done. I agree whole-heartedly. But it isn't an all-or-nothing proposition. You don't HAVE to destroy the thriving builds to provide a better experience for the smalltime landowners.

Sometimes it requires more of a creative solution than "Well lets just make it a flat tier!"

And I hope that LL realizes that.