Phantasies and Alternate Dimensions (feline_phantasy) wrote,
Phantasies and Alternate Dimensions

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Understanding Virtual World Economies

Virtual worlds are both interactive, and interdependent. They are a microcosm of the real world, which isn't surprising at all, considering real human beings populate them.

To really understand what's going on, you have to take a look at the broader picture. There are two basic extremes: Builders who generate original content, and consumers who consume it. As with all things, there are multiple shades of gray inbetween.

What I see happening with Second Life isn't all that different with what's happening in the concrete United States - you have the Haves, and the Have Nots. The Haves are growing, and so are the Have Nots, and more and more of the 'shades of grey' are vanishing.

The 'Haves' need a reminder that they wouldn't exist if the 'shades of grey' cannot afford to consume what they offer.

We're getting that reminder in Second Life, and it's hurting everyone concerned. Yes, tiers have been ridiculously high since the economic boom which ended in 2006 - but during the boom, most could afford it. We also had the 50% tier break for educational and non-profit organizations, which allowed them to offer content not otherwise available, since they were closer to the 'Have Nots' end of the scale.

The boom ended, but the tier break remained for a couple of years, which sustained the sims who were there to provide content without economically benefitting from it, which helped to sustain the balance, even as others abandoned or otherwise lost their land and their ability to provide content.

Linden Lab decided they'd economically benefit by (a) ending the tier break for these projects, and (b) attracting more and more from the consumer side of the equation. They neglected the shades of grey inbetween as well as the Have Not side of the equation in this line of thinking.

In my opinion, their thinking was highly short-sighted and has resulted in a widening polarity with vanishing shades of grey inbetween - and it was those "shades of grey" that sustained the virtual world as we've come to know it.

More and more, you're seeing those who provided original, wanted content in Second Life vanishing. They are vanishing because they depended on the tier break (most were non-profit) as well as donations from those who 'consumed' their content. There are plenty 'consuming', but the tier break is gone, and the 'consumers' are either too poor to donate, or are taking blatant advantage of the "free" content and "free" membership to access it.

I guess we shouldn't be surprised; ever since the "me me me" days of the 80s, things have gotten worse. Those who "want it all" ignore that they can't "have it all" if others aren't there to buy whatever it is they're selling, and those who can barely afford to survive with basic necessities can't afford the luxuries the "want it alls" tend to peddle. There isn't a person living in the United States that isn't aware of the widening economic gap and how those in the middle are being forced to the "barely afford" side, leaving the middle as a yawning abyss.

Now you'd think a company who hosts what many believe is an opportunity to "do better" would have more foresight and imagination than most corporations in the concrete universe, and yet, we see them following the same faulted logic. What makes it worse is their "product", if you will, is considered a "luxury". Is it no wonder that people who can barely afford an Internet connection are taking advantage of their "free" accounts and the content hosted within? Again, their logic fails. They apparently think that if people get a taste of what they have, they'll be encouraged to invest more of their very real dollars. That happens in only a small fraction of the cases, Linden Lab. Now, the question is - what is this fraction going to invest in if more of your five-star content goes the way of the Lost Gardens of Apollo?

While places like that make front-page news, what often doesn't make the front page are the scores of mom-and-pop businesses that are vanishing by the dozens (those "shades of grey" I've been talking about). The sims who were never given a tier break, who are now losing their bread and butter and therefore their ability to pay the tiers which have NOT been adjusted down to reflect the overall economy. Quite a few have left for greener pastures, namely, the grids who see the economic "light" for what it is, and have saner tier structures. Many of the paying consumers are following them, leaving more and more of the "surfers" enjoying whatever is left in Second Life.

Again, we're seeing a widening of the polarity - the Haves, who can afford to sustain the high tier of their properties out of their own pockets, and the Have Nots who can barely rub a pair of virtual dimes together, taking advantage of what the Haves are offering - without contributing.

Life is not a spectator sport, and virtual worlds cannot afford to be a spectator sport, if they hope to survive. Those with vision have seen this, and have made plans appropriately. Linden Lab's awareness of such things seems blind and short-sighted. They act as though they're not even aware of what their consumer base is doing - and yet it is the consumer base which pays their expenses and allows them to declare a profit.

It's no wonder so many are wondering what's going on in their noggins. The general consensus is that Linden Lab, as an entity, has lost its vision, and is going down the generally destructive path so many have taken before them.

The only reason they continue to survive is things have not reached that tipping-point yet, where there are more consumers and far less content to consume. It's coming, however, with every Lost Garden that shuts down, every AM Radio that is forced into a smaller space, and every Greenie that is forced off-world into a much more affordable format. It's coming with every smart merchant that sets up shop on every other grid they can afford to, then finds they're making a better profit there than they are in Second Life (and therefore trim their presence there, because it makes economic sense). It's coming with every thing that Linden Lab sets up in direct competition with the very merchants and providers which foster the economy on Second Life (Linden Homes and Themed Sims come to mind). Even those in the Feted Inner Circle should take notice, since that "list" is as mercurial as Linden Labs' decisions seem to be.

Adding mesh to a grid that barely functions is not the answer. This weekend I was harshly reminded of why I have less stress logging into any other grid but Second Life - I couldn't even sustain a decent connection on their much-touted Viewer 2. I crashed constantly. My inventory items weren't readily available as they should be (they were listed but either refused to attach or refused to detach) indicating an overload on the asset servers, which is getting worse instead of better. People weren't fully resolving around me as they should; they remained people-shaped blobs of grey - again, the asset servers handle things like textures, which tells me they were overloaded. All this on an Internet connection most people wished they had with equipment that's more than adequate to handle the load. All this with just over 60,000 people on a grid that used to sustain nearly 80,000 or more on a typical weekend. Being a hardware/software geek with more than a basic understanding of how grids work leaves me with the impression that they have severely undercut their hardware base and/or replaced some of it with inferior hardware. They can continue to blame the person logging in, but in reality, it's their own hardware and faulty software that is mostly to blame. Again - if they're trying to attract the typical consumer, then why have they failed to make their service stable for that person, considering that most people cannot afford l33t gaming hardware?

If they want to increase their user base, then why would they undercut the hardware infrastructure? If they want an increased user base, then why would they concentrate so hard on attracting consumers while they cut off content providers virtually at the knees? We are left to conclude that their business model is hopelessly out of balance and that things will get considerably worse as time goes by. Linden Lab is doing nothing to shed light on why they think such a lopsided model will work when it's obvious it doesn't work for their customers.

Obvious conclusion: Linden Lab has lost its vision in a very broad-spectrum way. If they want to unload Second Life, they should be stabilizing it, and restoring the balance between the providers and the consumers. No business with its two cents is going to buy something that most people have a hard time using and that doesn't have content anyone wishes to consume. If they aren't planning to sell, then it appears they are trying to kill it off with their series of decisions over the past two years or so. The only reason the decline is slow is there is still a core community that gives a damn and is hanging on by their fingernails. Even some of those are being forced to leave because it is not economically feasable to stay. As has been stated before - you can lease a luxury car for the price of a basic sim on Second Life. Who in their right minds would continue to pay that price unless they can afford to without blinking an eye?
Tags: economy, second life, virtual worlds

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