| Mail |
You might also like: WoW Insider, Joystiq, and more

Reader Comments (25)

Posted: Jun 12th 2010 1:06PM (Unverified) said

  • 2 hearts
  • Report
What I wonder, though, is why tier fees and regions don't seem to be sufficient to cover their ongoing costs and generate stable revenue. I mean, we're talking about more than 25.000 private estates, or almost 32.000 regions in general. Even with counting just 195 $ per month tier for a region, that's an income stream of 6.24 million $ per month, or 18.72 million $ per quarter. Supply Linden's lost revenue stream is just 10% of that. I simply don't understand why it's neccessary to cut 30% of your employees when your revenue is shrinking by 10%.

Posted: Jun 13th 2010 11:52AM (Unverified) said

  • 2 hearts
  • Report
Well, when you're running a company you have to react to what you think is coming rather than what is here now. It's also worth pointing out that 30% of staff cuts probably doesn't equal 30% reduction in payroll, given that the layoffs were heavy on community and QA, both of which are relatively low-paid jobs.
Reply

Posted: Jun 12th 2010 1:13PM (Unverified) said

  • 2 hearts
  • Report
Based on my limited understanding of Linden Dollars and the information in this article, what this amounts to is that they're laying off people in the real world, to insulate a virtual economy from the full spectrum of economy factors. SL is 'too big to fail.' We'll prop it up at the expense of RL. But, oops, SL's continued existence depends on RL.

You can't hook a game up to reality and expect the experience to be anything less but the full spectrum. But thank you for providing the MMO community timely irony.

Posted: Jun 12th 2010 2:11PM (Unverified) said

  • 2 hearts
  • Report
Thanks for walking us through the Supply Linden numbers. If I understand this correctly, since only Linden Lab creates new L$, growth in the money supply would come from people trading RL$ for L$. Is that right? But isn't the actual profit only the variance between the Selling margin and the redemption rate (whenever someone convert their $L back into $RL? If I'm not missing something (which I realize I could be) the growth in the money supply represent an increase in cash flow, not profit.

Set me straight, please!

Posted: Jun 12th 2010 2:24PM (Unverified) said

  • 2 hearts
  • Report
Actually increases in supply also come from stipends, but the cost of that is pretty close to the premium fees - enough to consider stipends to be largely negligible.

Remember also that Linden Lab never pays users USD for L$. The Lab never buys L$, only users do. The Lab sells new L$, but never redeems them.
Reply

Posted: Jun 12th 2010 6:58PM (Unverified) said

  • 2 hearts
  • Report
@Tateru "Actually increases in supply also come from stipends, but the cost of that is pretty close to the premium fees - enough to consider stipends to be largely negligible."

The same could be said of Supply Linden sales. The L$ sold to users on the exchange can be cashed out.

In fact, stipend works exactly the same as Supply Linden selling on the exchange. They collect hard currency (premium fees) and give Linden dollars. Think of it as a good exchange rate for oldbies and a crappy exchange rate for newbies, but as a source for the economy that nets LL hard currency in exchange for Linden dollars, Supply sales on the exchange and premium fees work pretty much the same.
Reply

Posted: Jun 12th 2010 7:16PM (Unverified) said

  • 2 hearts
  • Report
LL never buys Linden dollars; users do. So, once LL sells Linden dollars for real-world currency, they get to keep the money. It's profit, not just revenue.

Problem is, they can only do this while the money supply is growing. That's problem number one.

Problem number two is that if the money supply needs to contract, LL has no way to take money out of the economy except through raising Linden-denominated fees, or adding new fees. Residents "cashing out" don't remove Linden dollars from the system; those L$ go to another resident. Only LL could remove them buy buying them, but they don't do that. It'd cost real-world money to do so.

If the money supply can't shrink fast enough through fees (sinks), the Linden dollar will depreciate.
Reply

Posted: Jun 12th 2010 9:51PM (Unverified) said

  • 2 hearts
  • Report
Ah, thank you Anya! This was the missing data on LL's seemingly bizarre choice to start selling Voice Morphing now with the monthly fees - it's being sold for L$ rather that USD$, so that's a direct attempt to shrink the money supply.

And botgirl, the difference between regular redeeming and Supply Linden is that in customer-to-customer L$ sales none is being added or removed from the internal money supply. The L$ balance is always in someone's account. It's only Supply Linden that makes up new money when selling it.
Reply

Posted: Jun 12th 2010 10:52PM (Unverified) said

  • 2 hearts
  • Report
Hmm. That's a *very* good point. (Voice Morphing was announced after this was written). Yes, renting the voice-morphing sets for L$ is probably the clearest sign that the SL economy is shrinking in 2010.
Reply

Posted: Jun 15th 2010 7:47AM (Unverified) said

  • 2 hearts
  • Report
Charging voice morphing in L$ may also be a way to offset the loss of a sink as more and more people use temp uploads for testing. I've always counted that a pretty negligible difference, but it doesn't exactly look like the voice morph fee will drain a *lot* of L$ out of the economy either.
Reply

Posted: Jun 12th 2010 6:30PM Joystiq Login Bugs SUCK said

  • 2 hearts
  • Report
I will also be intersted to see the drop in occupancy on mainland Sims if another set of figures ever comes out of the Lab.

I am a little surprised they are cutting QA, if anything one could suggest that team is more important to any more developments than anyone, unless of course the Lab has decided to freeze simulator and client code until what is happening has passed.

Still, I hope that certain members of the Linden executive team are squirming hard. They deserve it. Grrrrrr.

Posted: Jun 12th 2010 6:35PM (Unverified) said

  • 2 hearts
  • Report
I said a month ago that the loss of Supply Linden sales amounts to 40 real-world jobs:

www.sluniverse.com/php/vb/virtual-business/44762-conspiracynomics-fueling-dark-fires-speculation.html#post940168

www.sluniverse.com/php/vb/general-sl-discussion/45427-linden-lab-anticipates-staff-reductions-2.html#post950895

Posted: Jun 13th 2010 12:58AM (Unverified) said

  • 2 hearts
  • Report
When is the last time Linden Lab asked it's customers what they wanted and then acted on it instead of laughing at what was said and throwing it in the bit bucket? This has been how LL is since before Kingdon. Maybe the layoffs will help by wiping out the fiefdom that has been controlling all customer interaction with LL for years.

Posted: Jun 13th 2010 4:10AM (Unverified) said

  • 2 hearts
  • Report
Indeed the rent-a-voice thing seems to be justified by this, well, unless the hit in their pockets from selling L$ isn't significant enough; but i'm still against that approach either way, they need to work on helping the economy grow, not just try to make people give them more money directly. But of course, increasing the desirability of existing services, like sim renting and the stuff associated with premium accounts, would also be a good idea.

Posted: Jun 13th 2010 1:22PM (Unverified) said

  • 2 hearts
  • Report
There's only one button in the current Alpha release of Viewer 2.1 that is highlighted by default (at least in the top bar) and it's "BUY L$".

Posted: Jun 13th 2010 1:44PM (Unverified) said

  • 2 hearts
  • Report
Hmm. Does that count as a consumer focus, do you think?
Reply

Posted: Jun 13th 2010 1:55PM (Unverified) said

  • 2 hearts
  • Report
It is perhaps good to note a potential real reason for this situation: people are getting tired of Second Life.

I know that's likely to be an unpopular statement, but many will likely recognize the truth in it. For six years Linden Lab has ignore the prime requisite of conducting business: give customers more than they can eat-- at a reasonable or even low price.

Instead of following that time-honored (and profit generating) credo... Linden Lab has instead put profit push ahead of customer interest and as a result-- have lost customers (and potential customers) by the millions. The company sports a measly 30k or so sims when they could have had 300,000 or more.

Several years ago we noted-- instead of lowering private sim prices to encourage a larger influx in customers-- Linden Lab increasing prices by 50% (from $195 to $295). At least they had the wisdom to grandfather in existing sims... preventing SL from losing thousands of existing customers. Nevertheless, the moment they initiated that policy they guaranteed that growth would only be via "wealthy" clients who could afford such fees-- and effectively cut out the everyday user completely. In short, they crippled the growth of Second Life. Any growth they did experience was completely dwarfed by what they could have potentially achieved had they conducted smarter business.

That mistake was followed up by the pure bonehead fiasco of the OpenSpace / Homestead debacle... in which they announced in crease of prices of OpenSpace sims by 67%. They added to that a heaping helping of propaganda, not only falsely blaming customers for that move (alienating customers is never a good idea)... but also presenting "Homestead" sims as an "improvement"... when it was clearly obvious they were exactly the same as OpenSpace sims... but with reduced functionality.

Add to all this one of the worst coding teams I have ever seen-- and we see plenty that has served to drag Linden Lab to an almost two-year zero-growth level. Group chat constantly fails and times out. Group notices do not get sent to all members of a group. Textures load redundantly, overloading their own asset servers. Sims drag to a standstill every time someone ports in and out. These problems are widely known and have gone on for years without correction. This is truly one of the worst corporate coding teams I have ever come across... both in terms of management and basic competence. Such incompetence cannot help but impact the bottom line as customers grow tired and move on to other things.

In short, Linden Lab management has conducted business like blockheads. Though profitable, the company has failed to achieve anywhere near the popularity it could have attained had management simply conducted business in a wise and sensible manner. User levels have not grown in some two years. Concurrency remains at around 54k average and in recent months has even appeared (from login figures) to drop.

Bottom line, after six years of customer abuse, self-serving policies and narcissistic attitude... people are just getting tired of the platform. They're moving on, either to real life, or other online activities, or indeed... OpenSim (which despite infancy stage is starting to grow like wildfire). In short, Linden Lab is reaping the consequences I and others have long warned them about: abuse your customers... lose your customers.


Posted: Jun 13th 2010 2:01PM (Unverified) said

  • 2 hearts
  • Report
How much revenue does Linden Lab get from XStreet SL (the web-based store)?

Prok wrote a similar article about how revenue from Supply Linden has diminished lately. You'll have to look back a few weeks.

Gwyn's interpretation of the recent LL changes as a refocusing on the "consumer" market (rather than educators or big enterprises) makes a lot of sense. Educators and big enterprises certainly use SL, but their contribution to Linden Lab's bottom line is a fraction of what the consumer market contributes.

Posted: Jun 13th 2010 3:15PM (Unverified) said

  • 2 hearts
  • Report
I will be quite interested to see if Linden Lab makes it out to this year's SLCC in Boston and if so, what the message will be. Then again, maybe the best message would be if they spoke little and listened attentively.

It's difficult to be an advocate when the company on whose behalf you are working seems for all the world to be working against you.

Did (does), the company need to restructure? You bet. Did friends lose their livelihoods in the layoff? Sadly, yes. Is LL's window to get a strong message out to the user community about priorities and following though with them closing? It is. Ladies and gentlemen of LL, y'all better pull it together and quickly.

(Or is this the part when Philip comes in on a flying dragon to muster the community and world to save itself from the evil corporate nemesis?) ;-)



Posted: Jun 13th 2010 11:58PM (Unverified) said

  • 2 hearts
  • Report
Saxon,
I hope your last comment is right, at this point we need to have the dreamer back in the dream.

Featured Stories

Engadget

Engadget

Joystiq

Joystiq

WoW Insider

WoW

TUAW

TUAW