lemonade to business: SL economy to scale [reposted]

OK, Fizik and I sat down and reworked this post, the same questions are here - just not as contentious

My background is in virtual world development and the growing economic influence VW have - my papers have been mainly focused on WoW and EQ.

My comment and opener for disucssion is really a series of questions:

1) How long before all Euro players have to pay their regions taxes and VAT? Far fetched you may think, well it happened to SOE when they had to fez up and add VAT to all European EQ players. This will make a huge difference to the Euro players who rely on the SL economy as it stands now!

[ monthly fees are calculated at base plus a % tax. In the case of the UK that would mean you paying an extra 17.5% per month. Across Euro, that could mean between 10% to 22% extra to your monthly bill. An island is now 17.5% more for a European player.]

2) When will Linden Lab allow external companies/organisations to create their own access? This will mean when will they allow external partners to bypass the 'second life front end' and create their own front end. At the moment, its a barrier in establishing a business/community for external promotion.

3) No legal dept. in any company will allow their products/services/brand to be used by another company. At present, LL can at will, market and repurpose any content they want, in any form, within the boundaries of 'marketing purposes'. That means, to you and I, that they can pretty much do what they like. You've agreed to that under the t&c's of our contract with LL. It has nothing to do with your IP rights.

4) Creative Commons (CC), although on its merits is admirable, it has little to do with the real world of 'commerce' and what is now seen as the 'standard' in business. Will it change, heck I hope it does! But, don't hold your breath waiting, it could take years.

If LL are serious about CC, it be should be established as the in-world 'permission system', mirroring the CC categories of usage etc. That way, a unified and transparent permission system will also work externally and in-world.

5) How long before someone is taken to task for repurposing an established IP? i.e. star wars rip off in-world etc. This will effect us all, as a common carrier, LL are not responsible for the content you upload. IP rights are not just about you 'owning it', it also means you take responsibility for what you have created.

6) IF someone does steal your IP rights in-world, how are you going to track down and bring to task '<avatar name> fidgety flip' in a 'court of law' for loss of earning? Will LL give you that person's details and home address?

These questions are serious. I am really interested in how SL will develop, the next stage of its economic life, these questions (and many more!) need to be asked now.

If not, we could find ourselves in trouble.



River Dusk

As I said on the other thread:

"TSO also charges VAT to EU players. It's the law afaik.

However I think the way it was done in TSO was that you paid it when you paid in a European currency. The US has sales taxes too - don't online games and things qualify for it?

Why is it crazy? It's just a sales tax."

Agreed. Khamon Fate will tell you -- leterally, I can hear him typing a reply right now on the other side of the office -- this has been one of the big hang ups where we work. Second Life would be great for E-Learning, but having to make students pay for a game/MMORPG account doesn't sit well with the faculty. If we could run our own servers, handle account creation, or something similar, it would be a whole different story.


I've brought this up before, and it amazes me that people in-world (as well as famous IP rights defenders) don't crap bricks over this. You're right. No company in the world would hand over any rights so readily to a hosting company.

And 'marketing purposes' is a rather broad term. If I invented a version of NeoPets in-world, with a system for handling the animals, etc., Linden Lab could take my work start their own version, advertise this as a "feature of Second Life," and I'd have no recourse. It's crazy.


You mean like codifying the Creative Commons system directly into a new version of the permission system? Check the rights you want people to have, and it sets those permissions?


This is something else I've been curious about. City of Heroes was recently sued by Marvel for copyright infringement, because players could create similar characters with the avatar builder. I know for a fact in Second Life you can copy/make costumes and characters with even more detail. I've seen DC characters, Tranformers, Disney characters, and more. LL may not be responsible for what we upload, but given the way the recent Grokster vs. Brand X court decision came down, if they don't move to stop such infringements, they could be held liable as an inducer.

1) This does seem like a sales tax plain and simple. It's a much higher rate than I'm used to in Alabama, or the US in general; but it's still just a simple tax. The question is how will a country such as the UK enforce it? They can't very well prevent subjects from accessing SL just because LL doesn't forward a tax check to the Exchequer every quarter. The only real power to be wielded is preventing LL from establishing a physical presence such as a local colo in Great Britain.

2) At the risk of sounding utterly defeated, the answer is "never." The whole idea flies in the face of LL maintaining a single, growing organism. Here's a recent, relatively short discussion. There's never really been a whole lot of interest in it. Here is the official policy. And for your viewing pleasure, this is my final resolution on the subject.

4) LL are not any more serious about CC or IP rights than they are about facilitating group projects. If they were serious, overhauling the permissions and group systems would've been paramount during the past several months. They talk a good round of related buzz words; but that started wearing thin a little over a year ago.

It's amazing how little interest there is in these topics. Maybe I should insult River's hair or something. Then Roberta could call me a stupid liar and make suggestions about where I could put my own hair. I bet people would start posting then. But then we'd be so far off the topic that it wouldn't matter that they did.

It would be ridiculous if SL is held liable for inducing copyright infingement. What would be next? Should photoshop be held liable for allowing people to create images that look like copyrighted images? Then again, I am still trying to figure out why Napster was bothered. No one went after yahoo. I could just as easily e-mail music to my friend. He was providing a well used means to pirate music, but so do CD burners technically. Sometimes the legal system makes no sense to me.

Hey River, good to see some more savvy around here. Stick around, we need the bar raised.

For inworld purchases? That would be wild. However, I guess the idea is that GOM will have to start charging VAT on currency sales. For tier fees, well, I don't see this as a big deal.




This, of course, is number one. Personally, I think a huge benefit to this will be getting away from that god awful name, SecondLife.. (j/k Philip!).

Maybe a baby step will be to simply let people into the contigous world under a different front end.



Ahah, good catch! This needs to get fixed .. but how?



Cory has a proposal for this. Feature Feedback forum and search on Cory Linden.



Yeah, it'll attract unwanted attention but I don't think it'll be a big deal.



Isn't this just naming them in a supoena? IANAL.

Before I start this rant, IANAL and this is not legal advice. Duh...



It makes a little more sense if you get closer to the source, rather than relying on (bloody braindead) reporters to relay information. Did not pay much attention to Napster, but from recent Grokster decision: "The record is replete with evidence that when [Grokster] began to distribute their free software, [they] clearly voiced the objective that recipients use the software to download copyrighted works and took active steps to encourage infringement." The court's opinion seems mostly predicated on Grokster advertising themselves as a Napster replacement without making an effort to differentate the intended legality. The best bet, of course, is always to read it for yourself.

LL will be very cooperative about enforcing TOS restrictions and helping to deal with infringements. Why would I make statements like that? Otherwise their legal team would have had kittens over the "What is Second Life?" page



I'm sorry, that is complete fiction. Everywhere I have ever seen marketing defined in a legal context it was close to "a communication about a product or service that encourages recipients of the communication to purchase or use the product or service." This is also the layman's definition, so without further clarification in the contact (there isn't) is the law. If you care, ask a lawyer and they will laugh at your fear of "no recourse".

[Geekmode] VAT (sales tax) within the EEC follows the same common rules for each member country, so what applies to UK also applies to France, Germany, etc.

The rules are remarkably simple, though there are some very complicated exceptions.

For NON registered entities, ie, the average person, you pay VAT on every purchase within the EEC at the local rate, where local refers to the sellers location. So a German on a shopping trip in Paris will pay the French VAT on purchases, and a Frenchman buying mail order from Germany will pay German VAT.

ALL trades outside of the EC are outside the scope of VAT regulations. As long as LindenLab continues to trade exclusively from outside EC there will be no VAT chargeable.

However, if LL were to set up a co-lo facility anywhere within the EC a thing called triangulation would come into effect. Even though the invoice is payable to a US company, the product/service is being provided, and retained, within the EC. Much the same as GMC opening a car sales business in England and selling cars to the British public, even if all the profits are shipped direct to an American bank account. The point of sale, for VAT calculation, being determind as the location the product/service is provided from, not where the money is sent to.
[/Geekmode]

I know about this as it is part of my job setting up accounting systems for businesses.
This is the reason why so many "service" companies have their computer systems in tiny countries that noone has heard of in the middle of nowhere. Not so they can hide, but so they don't have to pay VAT to the local government as all their sales will be international by default. Selling that service to a UK customer, at the same or similar price as competing UK business, gives an instant 17.5% increase in profit...

Interesting. By coincidence, I just posted my view on these aspects in another thread. Rather than repost I'll just quote :Maybe my last sentence is less appropriate in this thread, where such developments are the main topic. But I'm not sure any discussion here is likely to have much influence if delay is the objective. The main forces and actors will be far larger than just this one virtual world.