Why raising sink prices won't work.

I know this wasn't my opinion before, but I just realized something.

Raising sink prices will not neccisarily balance the economy. What balances sinks to sources is the amount of $L being destroyed verses the amount of $L being created. If you raise the price of sinks, and less $L is paid overall because everone thinks it is a rip off then you have done the reverse of what you intended. The problem isn't that sinks aren't priced high enough. The problem is that the sinks aren't worth enough in US$ to balance out the sources in US$.

L$ make people money in two places. They make money for Linden Labs when they sell you a premier account, they make money for residents when $L are bought on the market. Now the problem here is that Linden Labs is making money by offering the right to buy resident products without anyone having to pay the residents who made them through buying currency on the market. If no one ever paid anything to sellers of $L on the market, then no US$ are going to the residents for these new $L. It acts just like a tax.

Just like a tax, this supposedly gets us free services. Services that Linden Labs could charge US$ for and make a profit on, now are offered in exchange for $L. These $L have no value to Linden Labs, but they make residents money, by increasing the value of everyone's $L through the destruction of $L.

The problem is that the sinks are not making the residents as much money as the sources are making for Linden Labs. This means that the US$ given to Linden Labs is not being given back to residents through the destruction of the proper amount of $L.

It is true that Linden Labs should not have to speculate on the market. They should put the money they make off of stipends back on the market however. They can only do this properly if stipends are sold seperately from the right to own land. The right to own Land is a service Linden Labs provides. The stipends is the right to get resident made products that Linden Labs does not provide. The two should be seperate.

When they have their own market they can automatically place a buy order for $L for the exact price they recieved for the stipend product. This will not lose them money. If they got US$9.95 for L$2000 then they should offer to buy 2000L for US$9.95 on the market. They don't have to offer more L until someone else buys a stipend, and they don't have to ask for less or more than they already recieved. This offer sits on the market until someone decides they want to sell their L$2000 for US$9.95. This also makes it easier for them to offer some services for $L. As long as their services bring in less $L then they give out, which currently seems to be the case. Then they will be able to remove buy offers from the market one by one, and instantly keep some of the money they already made from stipends as their own. They provided a service at this point. They deserve to keep the money from it.

It will still let people have the illusion that they are getting something for nothing as they seem to believe. It will let the content creators get what they deserve, and it will let Linden Labs be able to continue to accept $L for services without losing the US$ these services are worth.

I can't seem to find her thread, but I saw the idea similar to this originally mentioned by Gabrielle Assia.

First off, the majority of L$ sold are not being sold by content creators. It's being sold by land owners, who are renting their properties out. They sell their L$ to pay for their land tier.

Most sell to pay tier, generate profit and consequently don't care about content. Profit is their motivation. While you could argue a symbiotic relationship of some sort it's obvious who is making the real money (why do you think Anshe is a land baron and not a content creator anymore?).

Why is the distinction important? A content creator is being re-reimbursed for hard work, they are giving something to the community. A land owner is being re-reimbursed for... renting space; if i rent space do i get anything tangible when the period is over? Nothing tangible and they want to make a profit for providing an almost non existent service; they are selling air.

So lets look at the situation, they don't buy products with their L$ as that would effect profits. They flood the L$ market places so they can convert it into said profits. Greed is the problem.

The land owners are bad actors.

What LL should do for a short period is let people pay for their tier at a reasonable price in L$; such a rate that it's better then paying for it in US$. This would have the effect of bleeding the extra L$ out of the bloated economy and out of the L$ market places; raising the value of the L$.

The current trouble is there isn't enough demand for L$, the supply in the exchanges over shadows the demand. If 50 million L$ could be bled from the system it would increase the value of the L$.

Radical Idea:
LL takes half of everybodies L$. The value of the L$ would likely double, it would take about 10 months for the L$ to drop down to current value at least. No other economic adjustments would be needed. Course the value of the L$ would crash before such an event. It would be very wise for all exchanges to close thier trading floors before hand.

Land renters are providing a service through letting you use land that they pay teir costs on, whether you think they are cheating people or not should only effect your willingness to rent from them. Land sellers are providing you with land that they are keeping for sale on the market by paying teir costs on it every month. If you think they are ripping people off, then buy a sim from auction and sell all the land you don't want. If land sellers are ripping you off, you should be able to make back all the extra money you spent on the sim easily. If they are really overpricing things, then all you have to do is sell for cheaper than them and you will sell all the extra land you did not want at no loss.

When you recieve L$500 from Linden Labs, they are giving you the immediate ability to rent L$500 from a land renter, or buy L$500 worth of land from a land owner. You could also buy L$500 worth of content from a content creator. Linden Labs collected the real life money spent on the $L, no matter what you are paying for, the resident is giving you something for $L that are immediately worth less in value. When these residents go to the currency market to get US$ for their work or service, they find that $L has gone down in value. The L$ has gone down in value, because Linden Labs sold currency without giving any of the money made from this currency to sellers of the $L. The other option is to create sinks, but the trend of the market shows that sinks are not helping enough. Linden labs is making money from currency they print for free. The people who lose out are all residents. The $L constantly goes down in value as more $L exist in circulation. The demand for products is not what drives prices down. If more people buy products or services, then more people will sell these $L as well. More demand for products has nothing to do with the creation or destruction of the $L. If Linden Labs is right in earning money from currency they print, then they are right in all residents losing US$ on what they do for $L in order for Linden Labs to make money.

Linden Labs offering land teirs for $L is offering land for free. They make absolutely no money from $L paid in fees. They only make money from $L if you pay them $US and they give you $L in exchange. Charging teir in L$ is them not taking US$ from you and giving you land in exchange. You see the difference?

I bet people spent more on ratings before the cost was risen.

As for the land dealers....I'm wondering if there is some logic in only allowing land dealing for renting purposes rather than mass sales? Strife has a point that other than renting land to basic users, land dealers really do not contribute content to SL Buying tons of land and re-selling is really not a useful thing for SL. That land would still be bought from LL, but rather by the end-user of the land. How you'd regulate something like that I have no idea. (no flaming necessary just an idea)

Dark, I respect the way you think so want to understand your post a little better. Ccan you elaborate on what you mean here? raise the price of sinks and less L$ is paid by whom?




I guess you can consider the premium account to be a bundle of land rights and stipend, and so in that regard LL is making money from people paying for L$, but there is no ability to segregrate what is being paid for SL software/service and what is paying to the 500 stipend.




that is perceptive of you. I never thought of it that way,

you know, LL faces a consumer mindset issue when it comes to buying currency from an exchange. I don't know how prevalent it is i.e. what percentage of the whole feels that way, and the forums will never give us the answer, but that mentality isn't going to change overnight. LL may have to bend with the wind here and sell stipend packages. But they will need to buy the currency for those stipends on the secondary market, or they'll just exacerbate the inflationary problems.

re: sinks, while you have to have enough float and circulation activity to keep an economy healthy, I still think there is room right now for some of the outstanding float to be reabsorbed into LL without causing problems. The only question is who pays for that lol. Naturally neither side (LL or SLians) wants to pay, so LL might wait until it's really necessary to take a step like increasing the cost/types of sinks.

Every service $L sells is worth a US$ value to residents. The reason why a person will pay approximately 3-4 cents to upload a texture is that to them having that texture in SL is worth that US$ cost to them. If you raise the price of that same sink to US$1-US$10 in price for each texture, you may find that suddenly you aren't able to make the same money as you did at 3-4 cents. If the (amount of people paying fees) * (the cost of the fees) does not raise then you do not take more money out of the economy. You will find that many times when you raise the price of something that the money gained from it go down. It is all based on how correctly you set the price the first time. I'm not the first to point out this trend. Raising the price in $L for a service does not make a person willing to pay more US$ for that item. It make a different amount of people willing to pay that US$ value. All $L values correspond with a US$ value. This does not always work in your favor.

Now that means that we may see $L only leaving circulation at the rate that people are willing to pay for these services. Linden Labs is giving these services at no gain to themselves. They give these services in this way in order that the stipends they use to make money do not hurt the economy. My point is that this is not the simplest way to go about this task.

My opinion is that Linden Labs should try to make money off of the services they provide. They should look at stipends as a marketing scheme to help content creators get US$ for their products. They want these people to get money, because the more money they get, the more money they will be willing to spend on teir fees and other services that help them make and sell goods.

Linden Labs already seems to want this form of money flow. They already have expressed their desire to get money into content creator's hands. I don't think they are intentionally trying to cheat people. I think they have simply chosen the more complicated way of balancing things out. Is it easier to guess if services you provied will be worth enough to balance the economy, or is it easier just to give the money earned from stipends to the health of the economy, and only take revenue from this pool of money when people pay for the Linden Labs services charged in $L.

They already have things like Developer's Incentive. They have an intital amount of $L that could be raised if need be. There are sources besides the stipend that could be used to keep the price of the $L from rising too fast if this in fact become needed. When this time comes, the stipend need not be the source of changes in the opposite direction.

There is two ways of implementing the destruction of land barons that I can think of. One is to have Linden Labs give you land based on what you pay in teir costs (would be very hard to implement as it would be harder to keep a geographical set up when your neighbors plot size keeps changing). The other way is to take away the ability of people to sell their land.

Only by doing this can you make Linden Labs alone responsible for selling land to people. You could make the only way to buy land be from auctions from Linden Labs. If people find this to be more fair, then I myself would be happy to go into other ways of making money. I'm already working on something different. If you want people to sell land to regain what they pay for it, I'm afraid that there is no way to keep people from buying and selling land at a profit when there is profit to be had. If Linden Labs sells land in auction, chances are they aren't going to be willing to pay you back what you ask for when you don't want it.

It is all up to what is more attractive to people overall. What do you think is most fair?

?? I have no idea. I just know that 1 person buying up all the land cheap and then selliing it for a profit and making ALOT of RL $$ off it without providing anything more than a way to buy land more expensively is not attractive. Is it fair, I suppose so, but SL policy decisions should not be made to appease this type of player because they don't really contribute content to SL other than the rental of land to basic players, which if land rental wasn't avaliable, perhaps they would buy a premium acct. If policies were made that caused this type of player to leave SL, then SL would survive, but if policies are made that cause the content creators and consumers to leave SL, then SL will fail.

I agree that policies for Land Barons is not what Second Life needs to survive. I agree that policy should be based on what helps content creators and the buyers of this content.

The land baron issue is a seperate issue. Many more people other than Land Barons are effected with the constant devaluation of $L through the increase of $L in circulation without an equal increase in the number of new residents. As far as Land Barons are concerned, they pay Linden Labs in order to run their business in the first place. If a land baron owns 30 sims, they are paying Linden Labs around US$6000 a month for the right to run a land baron business. If they own 1 sim, they are paying around US$200 per month to Linden Labs for the right to be a land baron. If you get rid of land barons, don't be suprised if your teir costs go up to make up for the lack of land barons paying Linden Labs for empty land.

If your teir costs go up, and land does not go down in price, because now you have to compete in an auction to get land, then you may find land barons beneficial. If you really think people will pay less in auctions when they aren't buying from land barons, then there is nothing I can do to convince you that Land Barons don't cheat you on price.

I tell you what Strife, you run my communities for a week, and then come back to me and say no hard work is involved. You would have a very rude awakening.

btw, you are way off on where the L$ are. Most of my residents pay in US$.

very few malls or store takes US$ for renting space (i haven't seen any). Lets say for arguments sake there are 300 rental malls/stores, with an average size of 16km^2. To pay for the tier for that ($75 US) they would need to make about L$22k a month (US$75 * L$1000 / US$3.40). An average spot will cost about $L200 a week or $L800 a month, at that rate a property would have upwords of 28 renting spots. That comes out to be about 6.6 Million a month going into the exchanges and likely not exiting.

#1
It is important to know that content creators need no reimbursement.

Linden Labs provides all end-users with various interfaces. Included are interfaces that allow the end-users to design/create/sell etc.

Various users use the interface to create all kinds of content in every variety.
The uses can then sell or give away their content for all to enjoy.

What do they get?
They do not or deserve anything more than what everybody else gets. A user name and password that allows them to access to SL.
They pay monthly fees to LL for this ability. (Unless they are basic players.) In return, Linden Labs provides the Second Life platoform for their use.

That is the agreement. Should we be thankful to them? Sure we all should be thankful for whatever we get, but to expect any return for whatever you do in SL as if it is your right is not realistic. There are alot of people that put alot of time and effort into their designs and creations. If they can sell the creations, great. If they cannot, it is nobody's fault. Either way, what they are doing is using Linden Lab's platform (whether they pay the monthly fee or not). Everything a user does is to the user's sole descretion. Linden Labs or the SL community never owes anything to any end-user above any other end-user.

All end-users that are playing, and not abusing others are equal members of the SL community.

Stop treating businesses and content creators as if they are special. They are not special. They are players just like everybody else. They are playing SL just like everybody else. They are not our prividers. They are not necessarily doing anything out of the goodness of their heart. If they are fine. Does not make anyoboy special.


#2
We discussed the L values at a meeting yesterday. I'm not sure what came out of it. We all agreed on something very important. Far more Ls are being created than destroyed.
1. Whenever a new player joins, Ls are created.
2. Whenver players receive bonuses (namely dwell), Ls are created.

Most all players use their Ls, and spend them into the economy. Every month, players leave SL. What happens to their Ls when they leave? Well whatever Ls they have in their balance, I would assume get destroyed. Whatever Ls they made in stipends, and they put into the economy, will remain in the economy.

We have vast amounts of Ls floating around in the economy. Ls are being poured into the economy in vast amounts. Especially on Tuesdays (payday). So the amount of Ls are increasing into the economy rapidly. How much are being destroyed? The amount of Ls being destroyed are negligible compared to the amounts being created.

If someone sells L$1000 in a balanced economy there is also someone buying L$1000 in that economy. There will be variations through the time delay of when orders are placed and filled on the currency exchange, but the average will be balanced on both sides. If the economy is unbalanced, it is because of the people printing the money. Do you really think any resident (land baron or not) can magically produce some new currency to sell on the market without first getting it from Linden Labs. Residents aren't the point. The point is the policies of those printing the money.

What I'm trying to point out is the outcome of the current Linden Labs approach to balancing the economy. Linden Labs profits off of user made products through stipends and residents profit off of Linden Lab's provided services called sinks. I have already explained why it works like this above. This doesn't seem like a backwards way of balancing the economy to you? Shouldn't the Linden Labs profit come from their services, and the profits earned from resident provided things go to the residents that provide them? The point is that there is a simpler way to balance the economy. What you consider to be useless or "air" is a completely seperate issue.

If you read what I wrote, the sources and sinks are what I'm trying to balance. Stipend is a big source that could work as a cash reserve funded completely by residents, and not at all by Linden Labs. To make it worth while to Linden Labs to loose revenue on this cash reserve, you let them take out $US from this reserve as fees are paid to them in $L. You don't see how that would instantly lessen the number of sources and sinks. If the $L is backed with a $US value, it is not counted the same as $L just dumped freely on the market. Now the other sources you mention can be changed to balance the other sinks you mentioned to continue to control the economy. The other sources you mentioned like initial $L for new members do not anger people as much as changes to their stipends.

I'm not trying to say that residents are entitiled to anything more than what is paid to them. If a $L buys their products, why does someone else deserve the US$ for that $L? I am NOT saying that residents are entitled to be paid by Linden Labs to produce.

Sinks are not the answer, price decreases and increased expenditures in-world by content creators are closer to the truth.

Average incomes in-world are not high enough to support prices, either land, content, or scripted items. Stipends are not the answer - as any increase in these amounts will simply raise all incomes by the same average amount.

Popular content creators have benefitted from trends and monopolistic pricing - this includes skins, animations, casinos games, hair, and sex. Prices are too high for the average resident without significant investment above and beyond LL levels.

You can argue about who is most to blame by trying to figure out who makes the highest margin in-world - land barons, etc. but everyone is equally to blame who does not create a business model based on falling prices.

The Lindens should start to charge for storage, land, and real-time prim usage. For instance, why shouldn't a content creator be surcharged tier for any rezzed no-mod, no-copy, no-trans object in-world, regardless of owner?

Popularity, which creates windfall profits, could and should be treated differently.

Ok, anyone who is worried about the sources being so much greater than the sinks thinks that the residents deserve something. If we deserve nothing, then let Linden labs throw as much money on to the market as they want. If content cretors are entitled to nothing, then what does it matter that their $L bring them less US$.

If you read what I wrote, I'm trying to find a more straight forward way of balancing sources and sinks. The other sources than the stipend can you mentioned can be changed with much less chance of Linden Labs loosing customers than if the stipend is constantly changed. These changable sources should change the non-service sinks. Assuming Linden Labs can balance these other sources and sinks, lets just look at the stipend verses the services charged in $L fee.

Right now a resident benefits every time a Linden Labs service destroys $L. Their $L is suddenly worth a few fractions of a cent more. Right now everytime a resident makes another resident want to buy a stipend, Linden Labs profits. They get the US$ for a premium account being bought. When the stipend sources balance the service sinks, Linden Labs will only make as much revenue off of the stipend as they would of if they charged US$ for all their services. When the $L falls, then Linden Labs makes more money off of the stipend then they would of if they charged US$ for all their services. If the $L rises then Linden Labs makes less money off of the stipend then they would of if they charged US$ for all their services. You see a trend here. Why not take the backwardness out of the system?

Ignore the entitlement, the point is getting the economy balanced. Like I said before, it doesn't matter that Linden Labs throws money in at a profit if they balance it out with sinks. If they balance it out with sinks then their profit is the same as it would be if they charged US$ for those sinks. If a balanced economy means that they don't make extra money on the currency they print, then what is the problem with switching things around a bit. Why not let Linden Labs have a means of getting instant cash for their $L fees, and let the resident not face the problems of a constantly failing economy.

The thing I suggest can actually make both Linden Labs more US$ and the residents more US$. If Linden Labs offered more stipend options, they would sell more stipend options. The mindset of gamers means that this is revenue that wouldn't have even existed on the currency exchange. The system I suggested would let Linden Labs take from this revenue as Linden Labs finds more ways of charging people $L fees. They would have the potential to take in profits that they can't make in the current system without destroying the economy.

In the meantime I have suggested that the US$ paid for stipends actually back the $L value. I am only suggesting these US$ back it until Linden Labs gets L$ they would normally destroy. This obviously makes all residents more money, since a non-falling $L buys more products in world, and the $L pays more to sellers.

Ignore the entitlement, the point is getting the economy balanced. Like I said before, it doesn't matter that Linden Labs throws money in at a profit if they balance it out with sinks. If they balance it out with sinks then their profit is the same as it would be if they charged US$ for those sinks. If a balanced economy means that they don't make extra money on the currency they print, then what is the problem with switching things around a bit. If possible, what is the problem with letting Linden Labs have the means of getting instant cash for $L pre-paid for by the resident, and letting the resident not face the problems of a constantly failing economy. The thing I suggest can actually make both Linden Labs more US$ and the residents more US$.

All Linden Labs has to do to make more money off of stipends, is offer more stipend options at higher prices and payouts. The mindset of gamers means that any revenue gained from this wouldn't have even existed on the currency exchange in the first place. Some people think they should get their $L only from Linden Labs. The system I suggested would let Linden Labs take from this revenue as much as the sinks allowed. They would have the potential to take in profits that they can't make in the current system without destroying the economy.

In the meantime I have suggested that the US$ paid for stipends actually back the $L value. I am only suggesting these US$ back it until Linden Labs gets L$ they would normally destroy. This obviously makes all residents more money, since it will keep the money supply from growing faster than the US$ demand on the market. Residents with non-falling $L can buy more products in world, and sellers don't have to plan on taking an automatic loss on every $L they get.

Saddly LL will take the path that has the least direct effect on their profits, that is to remove as many sources of L$ from the economy as possible. Buying back L$ or selling land for L$ won't happen. LL will probably cut the stypend in half again. Taxes will not happen again, LL learned that lesson the first time.

LL's user base is about 4/5th's basic 1/5 premium. If LL cuts the stypend basic users will be hit the hardest. LL will likely loose users, course they will mostly be basic users. I'm guessing they would loose something like 5% -> 10%; droping the retention rate to about 1/5. My gut says loosing users is bad, but intelectualy triming the fat is perfectly reasonable and not a bad idea..

First of all, LL have not even hinted they will cut the stipend. The stipend is the main thing that differentiates premium from basic, if they cut it, no one will pay for SL. I am sure LL are fully aware of that. Secondly, if LL had intentions of 'trimming the fat', they would hardly be offering basic accounts for free. Thier actions suggest quite the opposite, that they want more users.

What do you mean?
What exactly are you proposing would be the most profitable thing for Linden Labs to do regarding the economy?
What do you mean by removing as many sources of Ls as possible? Why would it be profitable for LL to do whatever that is?

You proposed that LL would probably cut the stipend in half? Why would LL do something to lose money? Cutting the stipends will increase the value of the $L.

I'm not sure what you are talking about. Are you coming from the perspective that it is profitable for LL to increase the value of the L? If so, how?

LL has a professional userbaser that need the economy stable. They do pander to the professional userbase. If LL started selling land again that could be payed for in L$ they wouldn't be making money of these transaction (this was a sink in the past). If LL started buying L$ (instead of minting new ones) to keep the economy balanced it would cost then about 1.5 Million US$ a year; I think LL's yearly income is about 6 Million, so we know right away this isn't going to happen.

LL only wants basic accounts because 1/5 go premium.

LL is in the process of removing the ratings bonus. What can they cut? Traffic, Stypends.

Traffic maybe, I really can't see them cutting stipends. If they did, it would be a seriously bad move. Where do you get the 1 in 5 figure btw?

How so? What exactly did they do, and what was the effect?
You have not answred any of the questions.