Second Life Accounting Holes
A recent post on the Second Life forums opened my eyes to what is perhaps a main reason why Linden Labs is not yet profiting. Let me show you a few of the ways that Linden Labs appears to actually be leaking money.
First of all, you can start your Second Life for free. You don't need to spend a dime to exist in this world, ever. I believe that this "world" is rich enough to sustain a large community without a permanent free handout. Why not make Second Life free for 30 or even 60 days? This is way more liberal than the average MMO experience available today, where the norm allows only a 7 or 14 day free trial. By giving a permanently free experience away Second Life seems to be attracting freeloaders which in my opinion is an unneeded load on the system and throwing money away.
Second point. If you want to own land in Second Life, you must have an account. The price on a Premium Account starts at $9.95 per month and comes with the ability to hold 512m2 of land, and a free L$2000 monthly stipend. At the current L$/USD conversion rate, that is equal to about $6 of free money per month. This means that Linden Labs is still making about $4 per month on the monthly paid Premium Account. This is good.
The next step up is the quarterly paid Premium Account. For the equivalent of about $7.50 per month, this includes the same land and stipend allowance ($6 per month). This means that Linden Labs ends up making about $1.50 per month. A slim profit, but a profit nonetheless. This is good.
Here's where it gets weird. If you pay for a year in advance, you get your Premium Account for the equivalent of $6 per month. The same land and stipend allowance are in effect so this means that you actually get your $6 back. This means that you pay the same as a Basic subscriber (nothing) but with the ability to own 512m2 of land!
Lots of companies offer better and better deals to entice their subscribers to outlay the most possible money. It's just smart business. But I don't believe it's good fiscal responsibility to allow players to not pay you anything. In my opinion, the Annual Account should be the one priced out at $7.50/month ($90 as opposed to $72) to allow for a small profit. Make the Quarterly Account $8.50/month ($25.50 as opposed to $22.50) for a little better profit and keep the monthly account at $9.95. Over the long haul this should bring in more money bringing Linden Labs closer to profit.
I believe that Second Life should indeed have a free trial, but not indefinitely. When I joined the Second Life community, I was hooked the first week. A 7-day trial was all I would have needed to become a paying customer, and even if I would have prepaid an Annual Account for my suggested $7.50/month, Linden Labs would still be profiting from me.
Contrast this with what is happening now. I could have never become a paying customer. I could have freeloaded forever. As long as I didn't want to own land, I could have been a member of Second Life, taking up resources just like any paying member. Except for free. I could have built my items in the sandboxes and sold them through vendor rentals. All while taking resources and L$ from the system and never paying Linden Labs. Oh, and I could have also upgraded to an Annual Account, and played for free as well as own land, taking even more resources!
And it's all happening right now. People are playing for free with basic accounts, and people are playing for free with Annual Premium Accounts. The only customers Linden Labs is collecting money from every month is the Monthly and Quarterly Accounts. When 50% of the ways you offer your customers to play winds up in you not making any money, it can't be a good thing.
My theory is that Linden Labs has a very strong addictive environment that would still attract and retain customers (especially with the media frenzy they are enjoying right now) as well as bring them in a profit from each of their customers every month. It's not a crime for Linden Labs to profit for providing us with an environment that we enjoy every day that we log in.
First of all, you can start your Second Life for free. You don't need to spend a dime to exist in this world, ever. I believe that this "world" is rich enough to sustain a large community without a permanent free handout. Why not make Second Life free for 30 or even 60 days? This is way more liberal than the average MMO experience available today, where the norm allows only a 7 or 14 day free trial. By giving a permanently free experience away Second Life seems to be attracting freeloaders which in my opinion is an unneeded load on the system and throwing money away.
Second point. If you want to own land in Second Life, you must have an account. The price on a Premium Account starts at $9.95 per month and comes with the ability to hold 512m2 of land, and a free L$2000 monthly stipend. At the current L$/USD conversion rate, that is equal to about $6 of free money per month. This means that Linden Labs is still making about $4 per month on the monthly paid Premium Account. This is good.
The next step up is the quarterly paid Premium Account. For the equivalent of about $7.50 per month, this includes the same land and stipend allowance ($6 per month). This means that Linden Labs ends up making about $1.50 per month. A slim profit, but a profit nonetheless. This is good.
Here's where it gets weird. If you pay for a year in advance, you get your Premium Account for the equivalent of $6 per month. The same land and stipend allowance are in effect so this means that you actually get your $6 back. This means that you pay the same as a Basic subscriber (nothing) but with the ability to own 512m2 of land!
Lots of companies offer better and better deals to entice their subscribers to outlay the most possible money. It's just smart business. But I don't believe it's good fiscal responsibility to allow players to not pay you anything. In my opinion, the Annual Account should be the one priced out at $7.50/month ($90 as opposed to $72) to allow for a small profit. Make the Quarterly Account $8.50/month ($25.50 as opposed to $22.50) for a little better profit and keep the monthly account at $9.95. Over the long haul this should bring in more money bringing Linden Labs closer to profit.
I believe that Second Life should indeed have a free trial, but not indefinitely. When I joined the Second Life community, I was hooked the first week. A 7-day trial was all I would have needed to become a paying customer, and even if I would have prepaid an Annual Account for my suggested $7.50/month, Linden Labs would still be profiting from me.
Contrast this with what is happening now. I could have never become a paying customer. I could have freeloaded forever. As long as I didn't want to own land, I could have been a member of Second Life, taking up resources just like any paying member. Except for free. I could have built my items in the sandboxes and sold them through vendor rentals. All while taking resources and L$ from the system and never paying Linden Labs. Oh, and I could have also upgraded to an Annual Account, and played for free as well as own land, taking even more resources!
And it's all happening right now. People are playing for free with basic accounts, and people are playing for free with Annual Premium Accounts. The only customers Linden Labs is collecting money from every month is the Monthly and Quarterly Accounts. When 50% of the ways you offer your customers to play winds up in you not making any money, it can't be a good thing.
My theory is that Linden Labs has a very strong addictive environment that would still attract and retain customers (especially with the media frenzy they are enjoying right now) as well as bring them in a profit from each of their customers every month. It's not a crime for Linden Labs to profit for providing us with an environment that we enjoy every day that we log in.
Labels: Economy, Second Life, Virtual Worlds
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posted by Delzo Delacroix | 7:49 PM
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