Threat to abolish tier discount - possible implications

You know what, I have good news for you. You can buy "marked up" land cheaper than LL cost . Look at this link, and then I'm going to explain to you something this chart shows. https://secondlife.com/community/economy.php

That In-World Average is the average of all land sold by residents including sims bought for auctions. The Auction average is the average amount spent by residents on Sims bought from Linden Labs. They converted it to $L for ease of reading. You can see from the legend at the bottom that what I say is true. Now this means that land bought from Linden Labs is more expensive than land bought from residents.

Why is land cheaper from residents than from Linden labs? There is in essesnce an endless supply of sims, so sims are only bought by land barons when the land supply goes down and land land prices rise. Rising land prices are the only time it is worth while for a land baron to buy a sim.

You may say, "No, wait a minute. Original land costs $1L/m2." No, Linden gives you a US$7 peice of land for US$1.75 to encourage you to join SL. The actual original price of land is listed on the economy chart.

As another small-time landowner, I'd like to reiterate Ellie's point that "a flat-per-meter rate" for land does not equate to all land suddenly jumping in price to something outrageous like $600 per sim per month. In fact I can't imagine LL doing anything like that.

What could happen, and I'd be very in favor of, is a reduction from the lower end. It could be argued that buying in bulk is a good thing to encourage, but really a sim is a sim. Number of landowners has no real correlation with the amount of bandwidth a sim uses. Large landowners are probably close to paying LL's bandwidth costs, which means that they aren't getting a discount, it's actually that smalltimers are paying huge surcharges.

I'd love to see charges reduced on the small end, to be more in line with what the big guys pay. This would dramatically increase the numbers of small owners. This would not hurt theme owners or private island owners at all. It would wreck the current rental market, but tough shit. It is based on an exploit, not of the software but of an artifically created imbalance in the economy.

Bring on the tier reductions!

Bravo! Let the creators of creativity take SL back! Its desperately needed.

No, Ananda, I'd love to agree with you on such a rosy picture, but you just changed the whole ballpark.

If we go for tier reductions without balancing increases, then of course we all cheer all the way to the bank. But we just cut LL's major source of income, didn't we? They'd have to think of a new source, and get it from us by another route.

There is no way of avoiding it. LL needs the tier income it is getting. We have to assume that in any change they would at least want to keep it the same. So if one group of tierpayers is to pay less, some other group must pay more.

Somewhere back in prehistory LL decided that the smallest landowner would pay three times as much per meter as the largest. We can only guess at why. Maybe some implicit assumption that people below a certain absolute poverty level simply would not be here, because of the need for a computer and bandwidth.

It is hard to see any simple economic justification for splitting the tier unequally like this. Nothing to parallel the reasons for the very real "bulk is cheaper" effect in RL.

I have seen a Linden statement that it is cheaper to deal with one landowner than with many. I can see that there are fewer credit-card transactions and associated queries, and maybe less other queries in some categories. But in a sim full of small tenants I don't see the landlord dealing with responding to abuse reports, technical queries, bug reports, general complaints about the infrastructure or simple help.

There will be an effect, but my guess is it is small.

Actually, this does take up a fair chunk of my time. There are many things I can not help the residents with of course, only LL can, but all of the above is a daily thing for me.

I had a look at the "cheaper to deal with one landowner than with many" justification, to try and estimate how big the saving for LL might be.

Quick Summary:
Billing cost would have to be twice as big as all other support costs together to justify the tier discount on that basis. So it is obviously not the reason for it. The reason must be found elsewhere.

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I had a look at the "cheaper to deal with one landowner than with many" justification, to try and estimate how big the saving for LL might be, dealing with a bunch of tenants instead of landowners.

It seems to hinge on the average hours paid linden employees need to to spend on each resident, dealing with his concerns, queries and complaints.

How does supporting a tenant cost them less than supporting a landowner ? The only difference I can see is in billing their credit card for a higher sum, calculated from their land holding, and dealing with associated queries. I don't see the landlord taking anything else off their shoulders, except things to do with his own rules and theming, which without him would not arise.

Lets try to estimate. Assume billing activities (mostly just running a computer program of course) increase the total paid effort in supporting a resident by 5%. If a tenant costs 20 units, a landowner costs 21.

At the extreme, a sim can contain 128 tiny landowners.
They will cost 128x21 support units, including billing their tier.
If they are tenants instead , they will cost 128x20 plus 1 unit for billing the landlord's tier.

This is of course almost exactly 5% more expensive, which is 1.05 times as much.

Bit different from the 300% actual differential in practice (3x).

In fact, the 3x charge would only be fully justified if the extra tier billing support costs for a resident were about twice all the other support costs put together.

tenants 128x20+40 compared with landowners 128x60.
costs 20 without billing, 60 including it. 40 for billing alone.

Maybe there are other support activities which make landowners more expensive than a tenant, but I dont see them. And they could never get him to anywhere near to three times as expensive to support, surely.
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Conclusions:

My conclusion is that this cost saving is small, and could never in itself justify the tier discount being this big.

The reason for it lies elsewhere. Since it presumably predates organised landlording (confirmation anyone ?) it probably wasn't designed on purpose to make this possible. Maybe it was simply that a flat tier would have made big areas so expensive for personal non-commercial use that no-one could have afforded them.

Still true today, and the reason drastic increases should not be considered without a new category of truly private sim.

Personally I dont think any of this will actually come to pass, except perhaps in a small leveling. But you never know with LL. Their eye is on the distant prize, and if they really think it has long term benefits, they'll do it regardless.

If they can just get LL growing fast enough, it doesn't really matter if they antagonise quite a lot of us, provided enough are pleased or indifferent. New people wouldn't even know.

When we started building our area and gathering land, which eventually ended up being two sims, there was no such thing as renting or landlording.

Interesting. I wonder what a realistic estimate of the support cost saving to LL really is then? Though of course we can't include in these savings any time the landlord may have to spend dealing with queries arising from the landlords own rules or activities, or his own collecting of rents, or arranging/starting/ending tenancies.

20% saving ? Surely not 30% ?
It's all such guesswork. Useful nevertheless, to get a broad feel what a reasonable tier discount might actually be if social engineering considerations were excluded.

If this is the case then how do the Landbarons (I realy hate using that term but I havn't seen a different one) make a profit?? If they are buying the land for more then they are selling it how do they profit?

It's a mystery m-R.

Could it be that people like new clear land, with little or nothing yet built on it, so very much that they will pay a big premium to get it, even though in their hearts they know it won't stay that way for very long ?

A sort of irrational, glowy, pioneer feeling ? I think I remember feeling something a bit like that on my own first auction purchase ( of maybe 6000m or so ). And a sort of naive hope the incompatible neighbour thing wouldn't happen to me.

Its impossible to even guess. The best judge would be LL of course, they must have an idea of where they get the most requests for their time, owned land v rented land, weighted to area or perhaps per av.

Let me also point out that altho (with the exception of a cple of sims) zoning is an additional resident run thing, the mere presence of it does prevent other problems that must be time consuming to some extent for LL. Also, many residents on rented land often consider the landlord the first point of contact when it comes to basic help. Mainly land related for sure, but not exclusively.

Gee, Hiro, and the rest of you, I do so like exploring things together calmly and rationally. Without emotions and biases being dragged in. Thanks.

Even the points above are not as important as ones I have mentioned before in analysing this. I do not have even rent out ONE plot at the smallest size in over 20 sims. The calculations need to be based on observation, not theory. And the other question would be, how many tenants would own land, if they were only able to own? And if they did own, would they go for the same size plot?

I bet its a nightmare to a mathemician, having so many variables and unknowns

Does anyone have a current listing of all the landowners and how much land they own? Maybe not names, but this would give a better idea of what might be expected in any tier leveling.

Ellie, I realise my first post painted a rather rosy picture. If LL were to level the tiers all at once, I'm sure they would not be eager to cut it all down to the point of just pro rata on $200 a sim. But I wouldn't be too pessimistic either. I don't have the data, but I'd suspect the balance point is a lot less than halfway. Perhaps something like $250.

Secondly, if land on the low end became more affordable, I'd bet that a lot more people would choose to become landowners. Then getting a taste for building and the inevitable desire for more prims, those starter plots would grow on their own, without the need for such huge tier discounts

Yeh you are right, some would. Some wouldn't tho. As a landlord, I don't claim to know all the answers, but I do get some incite into what drives some people to rent instead of own - I listed them earlier in this thread I think.

I also think that simply offering *more* tiers would increase land ownership. Someone on an 8192m2 tier who sees that beautiful 10000m2 plot they would love to have know they will have to go onto a 16384m2 tier to have it. I guess you could argue the opposite, that the current tier system is more profitable, as it pushes some to a tier they would have not otherwise been on. Tough one.

Pure agony

Did I post that one time ? Yep - thats what I am, originally.
Not just a mathematician, but a damn Pure Mathematician. Postgrad topologist.
Before I became an entrepreneur, and interacted with harsh reality.
It shows, huh ?

Lol- no wonder you're confused! I must have quoted the wrong passage. It made sense at the time (honest guv), but looking back I really can't find where my train of thought was. Oh well *shrugs*

And yes, you have mentioned that you are/were a mathematician

It was pointed out to me that the numbers were off on the economy chart, because of the inclusion of $1 sales and first land sales on the In-World side of things. It was a mistake of mine I shouldn't have made. I was trying to figure out why the gap was negative myself. Anyway, forget my mistaken argument, and I'm going to bury my blushing face back in my numbers.