Wrong Answer, Mr M Linden

For some time now we’ve been sort of expecting with anticipation what M Linden’s style of management would be. One thing was sure: the old Tao of Linden (where developers would be pretty much allowed to do what they wished) would slowly be replaced by a goal-oriented strategy (in this case: “more stability” and “a better ‘first hour’ experience for new residents”), and the focus would switch from “making residents happy” to “make companies happy”. We’ve seen both happening in the past few months. It’ll be the work of several years, though, not just a few months.

But how would M Linden react to crisis? We’ve finally figured it out. And, sadly for all of us, the answer to a crisis was nothing we expected.

The Case of the Overused Openspace Sims

Becoming detectivesque in my approach, I picked up my Sherlock Holmes magnifying glass and took a critical eye to the whole openspace sim fiasco. Openspace sims, once called void sims, was an experiment in the early days of SL.

As you can see in the map to the right, these were “filler” sims to allow people to sail across the “inner sea” of the old mainland continents. Linden Lab had just upgraded their infrastructure to a newer generation of servers (I don’t remember if they had just upgraded to Class 3 servers) but they had a lot of old servers lying around.

Why didn’t they simply throw the old, obsolete servers away? Well, very likely — but I’m just speculating — these servers were bought under a long-term agreement. Probably a 24-month or 36-month lease, computers and bandwidth included, and disconnecting the servers would not get LL a refund from their co-location providers. So it would be better to continue to use them, instead of disconnecting them and keep paying the monthly fees. A few of those migrated to the Beta Preview Grid (Aditi), some to the many internal grids, a few others became webservers for tests, but still… a few could be used for low-traffic sims.

At that time, sailing in SL was a huge boom (it is still fashionable; probably there are more people these days who are fans of sailing, but SL is so huge with so much variety that it “feels” the fad has gone. It has not), but you could only manage to sail by the coast, which — thanks to terraforming and huge over-the-ocean platforms and houses — became more and more complicated. “Void sims”, where there are no prims and just a handful of Linden trees, was an interesting solution. It could be used by a handful of sailing enthusiasts at the time (regattas seldom had a huge participation, and when spread across a large area of the “inner sea”, it would mean less than 20-30 ships in each of the “ocean sims”).

They had little practical use. Some very few allowed you to build on them (with an auto-return of several hours), very likely by mistake — I used to go there as an alternative to the Linden Sandboxes. Once I met with a group which was quite amusing. They landed on boats, sported uniforms and weapons, and their leader said something like: “Ok, now we split in two teams, Red Team remains here at this beach, the Blue Team will go to the other side. We’ll work towards the middle and see who captures it first.” For about an hour, I amused myself watching the tiny battle unfold, as the two teams had some fun shooting at each other, until finally a group won. It took less than an hour; they peacefully retreated to their boats and went away. I just smiled. It was one of those little experiences in SL that happen all the time and will be part of my memories.

Later, void sims were also used for Linden forests (not that there are so many), and were pretty much unused, except for romantic walks under the moonlight.

For Linden Lab this just meant a way to put those long-term leases of obsolete equipment to work.

Then at some stage the big landowners (the ones with their mini-continents) started to attract the sailing fans, and they came to LL to ask if they could use void sims too. Why not? After all, it couldn’t hurt anybody. Linden Lab cleverly demanded that they buy 4 sims at a time (thus using a full server) and that you could only get void sims if you already owned a “regular sim”. This worked well for LL to keep using those obsolete machines, and now earn a small income from them — they would in fact earn the same from those 4 sims, using old hardware, than from a full, regular sim on new hardware. It was good business.

Technology improved, and we moved into Class 4 sims, then Class 5 ones, and soon we’ll migrate to Class 6. Now I don’t have my tables around me, but at some stage, LL started to buy quad-core servers (I can’t remember when Class 4 servers were introduced). What this mostly means is that, at some point, the new servers could handle four regions at the same time, while the very old ones (Class 1 and 2) could only use one or two (Class 3).

This is very important to understand. LL managed to increase the density of their servers: this means that they could support the whole grid with less servers. Granted, bandwidth costs very likely outweight the cost of individual servers, but the difference will still be a cost reduction to maintain the infrastructure (if the Class 6 servers, as I suspect, have 16 cores, LL will even cut more costs that way, as a single Class 6 server would be able to run 16 regular regions or 256 openspace sims!).

So what happened next is that the “old” single-core or dual-core servers suddenly became twice more obsolete: not only would they be old hardware, but they would only run one or two sims at the time — or, obviously, four or eight void sims. But LL would still have to keep them until their lease (or long-term agreement) expired.

What to do?

Clearly, even for someone with little business sense, the option was to start selling those old servers aggressively, but making sure that these are “low quality” products, not fit for regular use. The “openspace sims” were born. And the strategy was such a huge success that in March 2008 allowed them to be bought in isolation, increased the number of prims to 3750 (what a regular quarter-sim is supposed to have), and allowed parcels to be sold and announced on the available parcel list (i.e. on the map).

The conditions for a stratospheric growth were set.

Pricing issues

Squeezing money out of the poor residents was always hard enough. The problem, as almost always, is mostly psychological. Most virtual worlds and MMORPGs out there manage to charge between US$10-30 per month for subscription services. In fact, if you look around at what the social websites charge for “premium” or “pro” service, you’ll see this price range popping up everywhere. It’s also the usual price range for services like electricity, water, Internet access, TV cable, or mobile phone monthly subscription fees. Somehow, the market settled in that price range, and this means that this is what people are willing to pay to have a service they consider both “important” and “cheap enough” for them.

LL tried that route with Premium accounts. In 2008, however, the Premium account is not “worth” those US$9.99. You get little in return — L$1200/month in ‘subsidies’, free tier on a 512 m2 plot, and access to customer support. Except for the latter, you’re better off by exchanging US$ for L$ on the LindeX, or paying tier to private island owners (or renting space). Customer support is tricky: the older users will not really need it, and the new ones are very likely unwilling to pay just for support — while they’re starting out and not sure if they’ll stay. So, in essence, the Premium account, as a money-making service, is not a success, and no wonder that LL is planning to get rid of it altogether.

But what comes next…? Wholesale land ownership, for either US$195 on the mainland, or US$295 for a private island outside the mainland. The difference is staggering. It would be like trying to sell a “special” access to World of Warcraft for US$250/mo. — Blizzard would never make any money that way. SL residents, of course, have an advantage: they can parcel out their islands and manage a land rental service. Alas, that is a business, and like all businesses, it has risks — and not everybody is willing to take them.

On the other hand, another psychological factor plays against the cost of a whole island. You can rent cheap servers on hosting providers for around US$100/month, sometimes even less. People always complained about LL’s overpricing; but then again, these same people are comparing apples with oranges. LL actually co-locates at a high-quality provider — as a comparison, companies like Verio or Rackspace, first-rate co-location and hosting providers, charge from US$500 to 1000 per month on top-of-the-line hardware with plenty of bandwidth. And on top of that you have to add maintenance costs (meaning: paying system administrators to run the infrastructure smoothly). Split that by the number of sims you can run on a quad-core server, and you’ll start to see that LL’s prices are actually not that high.

Granted, anyone who has tried out OpenSim knows that it can run on a poor, underpowered server (with plenty of memory, which is cheap these days!). It’s also “alpha” software — and it definitely doesn’t work like LL’s own servers, although the differences cannot be that huge — so most OpenSim enthusiasts will forfeit the “high quality” of LL’s own grid for a low-cost alternative. That includes yours truly, who, when trying to move a 3,000-prim building into her own OpenSim mini-grid, had to reboot the whole grid three times. This is the kind of behaviour that was reported by very early adopters of SL in 2002 or so — since then, we’re used to reliability, and nobody wants to go back in time, even if the costs are much lower.

So the dilemma for Linden Lab was how to address the pricing structure. On one hand, the low-end Premium residents weren’t really getting anything worth their money. On the other hand, providing a high-quality service for sims was way too expensive for the average user. There was no middle ground.

Enter the openspace sims. Yes, they’re a “low quality” product: less prims and less ability to cram dozens of avatars into it. However, they’re still stable enough — as stable as the rest of the grid. And Class 4 servers are not that bad — remember, the grid used to be full of Class 4 servers only two years ago, and while it didn’t run as smoothly as today, it wasn’t the catastrophic failure that residents tend to report (people have bad memories 🙂 ). And you’d get openspace sims for US$75/month — so, about the same price range for a low-end server that you could install OpenSim on it and run on your own, but you’d get far higher reliability on LL’s own grid, and, of course, you’d be connected to a grid with 2.2 billion items and 15 million avatars. The trade-off — less prims, less traffic, but for a much lower price — was more than adequate.

Granted, it wasn’t still a “desirable” product in the US$10-30 price range, but close. Very close. So close that some people report that from the 32,000 or so sims on the grid, 13,000 are openspace sims. If that’s true — and in just 8 months! — this was by far the most successful service ever introduced by Linden Lab. And it earns them about a million US$ per month, or 20% of their income. Not bad for a “low-end” product!

Times change, prices fluctuate

Things, however, were “too good to be true”. Armed with a new technological solution that allowed private island owners to sell cheap plots, openspace sim owners could now effectively undercut mainland (and specially private island) prices, and attract new customers that way. Sure, they wouldn’t be able to have the same level of “density” as on a full sim — but, these days, people favour larger plots with less residents. The times of the densely-packed hundred or so 512 m2 plots in the same sim are over, except for very clueless newbies that became Premium, probably by mistake — a trend that is going away in any case.

During the summer, the first signs that things were going terribly bad was when LL stopped the expansion of the mainland. Land prices continued to fall, as the number of residents willing to pay a monthly fee for owning land remained pretty much the same since early 2008, but new openspace sims were constantly added, at an ever-increasing rate. For LL, the trend was clear: instead of earning US$195 from mainland tier (or US$295 from full private islands), their Concierge team had now to maintain an increasing number of customers — all those brand new, happy openspace sim owners. And the setup cost for LL, even if most of it is automatic, is pretty much the same for an openspace sim or a regular sim. Put into other words: the openspace sim, as a product, was undermining LL’s own income, and, at the same time, dropping land prices so fast without LL’s ability to prevent it. This lead to lots of land owners and real estate speculators to drop away from the market, and they are, after all, LL’s wholesale clients — which LL couldn’t ignore.

What to do?

“Oh no, they’re selling plots there!”

Jack Linden’s cry of despair on October 28th looks like a rupture point. I truly cannot believe that Jack had no clue that people were using openspace sims for their regular land business. He holds office hours and talks to the landowners. He reads blogs, and the many land rental websites. So the following paragraph is absurd:

Unfortunately most of the Openspaces are being used for much more than light use.  Based on analysis performed in August and September, Openspaces are being used about twice as much as we expected, in other words being loaded with double the content/avatar load than we’d expect for a region that is supposed to be light use.

Nobody truly believes that no one at Linden Lab wasn’t aware of what was going on. I mean, just before that “analysis”, Linden Lab had already decided not to introduce more mainland sims, because they were aware of the reduction of land prices. I’m sure they knew why — after all, openspace sims are not a “secret”, and everybody knows the prices there. Granted, many unethical landowners tried to “pass” their openspace sims for regular sims and cheat that way — and yes, I can fully believe that the situation has gotten worse in the recent past, and that meant lots of complaints to LL by phone, email, or any other means of communication.

Since Basic account owners are not entitled to customer support any more, this meant that their technical support infrastructure (specially the human resources) started to get flooded by complaints that simply shouldn’t exist. And the reason was just one: openspace sims were a victim of their own success.

Now, we all know that LL is very reluctant about regulating unethical business in Second Life; but Jack actually suggested a pretty good idea:

[…] we will be making changes to the viewer that enable residents to know precisely what type of land or region they are on so that the land market remains as fair and easy to understand as possible.

This is actually the best idea (perhaps the only positive one!) on that article, and one wonders why LL hasn’t done it before. After all, we got used to the yellow box saying “The simulator you’ve teleported into is running a different version of the server software”, so that means that the viewer gets this information and can display it. The “viewer changes” are very likely not so dramatic — and could have been done as early as March 2008, since what LL calls the Heterogeneous Grid (a grid running different types of server software) was in place by then.

Instead, however, Jack Linden presents a completely different answer: let’s get rid of those 13,000 openspace sims. Now. They’re hurting our business; they’re hurting other landowners’ business by undercutting prices and/or giving land management a bad name due to unethical sales; and they’re flooding our support lines with complaints.

This. Has. To. Stop. Now.

And stopping it did. By raising the prices to ridiculous amounts, the message that Linden Lab was conveying is that they’re plain and simply dropping that product from their portfolio.

The residents’ reaction

Not surprisingly, the 13,000 openspace sim owners, and the (estimated) 50,000 or more residents owning land on those openspace sims were anything but happy. I’m sure that not even LL was naive to the point of believing that they’d be praised to get rid of the openspace sims. If the much-ignored JIRA is any indication, this petition has gotten more than 4,000 votes — an unheard-of number (even “popular” JIRA features usually just get a few hundreds). So one in twelve of the affected residents complained in the only way that LL allows them — through the vote. It’s not trivial to vote on the JIRA, specially if you don’t speak English, so the number of voters is awesome.

In-world protests and website articles condemning LL’s completely outrageous policies have reached a level even beyond the old days of the telehub fiasco (granted, many more people are affected today). This was absolutely unavoidable, specially when even the Times Online reported the news. More, proeminent residents like Sarah Nerd got banned because they dared to speak against LL’s new policy (granted, not exactly using the politest terms).

In a few days, almost all bloggers and e-Zines and in-world groups discussed LL’s decision, and a bold claim was made: Linden Lab used to back up in the past, so they might do the same thing again, if the protest is strong enough — and, quoting Prokofy Neva, if the protesting crowd knows what they’re going to demand, of course.

The anticipation built up nicely. In fact, sharp analysts with a cue to the history of Bad News Announcements could see a hint: the announcement was made by Jack Linden, a usually friendly, helpful, experienced, and highly efficient former-Concierge-now-turned-Head-of-Concierges. Jack, however, is not at the management level of LL — so he could always be overruled by The Boss, if the protests were high enough. Jack did the “right thing” — he launched the discussion on the forums (3,000 replies and counting), he did several in-world meetings (quite well attended; and some were invite-only); he probably got a million emails and two million IMs, most of them of the “f**k you” variety, but very likely a few constructive ones as well.

A few issues were, after all, a bit over the top. One thing is the price change, which, as we all know, is always a huge drama — no matter if the prices go up or down, of course (land prices, either going up or down, will cut deeply into real estate managers’ profitability, so they’re the first to complain). The other issues were the “no grandfathering” and “no refund” policies, which border on unethical business behaviour. Even more dramatic was the exclusion of openspace sims from the usual discount for non-profits and universities. And even the whole tone of the article was slightly rude — as if residents, the good paying customers of Linden Lab, were suddenly a gang of mobsters that needed a spanking. He seems pretty furious that residents are having fun on openspace sims and “disturbing the grid”. Jack’s handling of the situation was anything but a masterpiece in public relations.

Cue to November 5th, and The Boss, M Linden, steps in. Facing his first serious crisis in resident diplomacy, he decides to call his article “A Letter to Second Life Residents”. Notice the style: he’s the boss, we’re the residents (more on that later!). He starts patiently to explain that the openspace sims were a “premature” product (my word, not his) — LL was aware that it would/could be misused by most, but they felt the pressure for a low-cost alternative to a full sim, so they launched the openspaces sim instead. M Linden also recognises that a few people really just want some water or forest for a cheap price (one wonders how many openspace sims are, in fact, being used like that. A hundred? Two hundred? Definitely not much more).

He also sort of waggles his accusing finger to the residents that are not using openspace sims “as LL intended”, but acknowledges that having a low-cost alternative is not a bad idea. And then, instead of reverting Jack Linden’s earlier statements, in a show of brave comradeship towards a fellow colleague, he just rolls out a new product.

So, the good news: if you’re a proud owner of an unused bit of ocean or forest, be happy! Linden Lab will continue to allow you to pay the usual fee of US$75 to keep your bit of unused space on the grid. Fair’s fair, and the Good Boys and Girls will continue to enjoy a fair price.

If you have been a Bad Boy or Girl, and actually did put your openspace sim to good use, instead of laying it waste — bad news. You’ll have to pay more for the privilege of actually using a service that LL provided — the same service, but with a severe cut in the number of prims and simultaneous avatars that can be in your land (and soon scripting limits too). The price change will not go up immediately, but be phased in two steps.

Residents did some quick calculations and it means that the cost-per-prim in the new “Homestead” sims will be about 500% more expensive than on regular sims. Now that’s a wonderful inversion of economics: give people less service, restrict it way more than before, and increase the prices.

For some, this borders on unethical business behaviour. The SL Bar Association even discussed if it’s worth filing a lawsuit against Linden Lab (they’re still discussing it, though):

Legal Writer: Does anyone feel that LL’s conduct rises to the level of an unfair and deceptive trade practice?

Let’s see about the motivations later, but for now, one thing is pretty obvious. While unused openspace sims are not an issue (as said, I can’t believe there are really more than a hundred or two hundred of those around), Linden Lab does not want residents on openspace (or “homestead”) sims any more. They’re to go away. Now.

Quo vadis, Secundus Vita?

Obviously throwing sand in the residents’ eyes is not going to work; even M Linden should know that by now. It’s ludicrous to use a “technical argument” as the reason for the change, when the audience knows better. However, technological startups are fond of using that argument. It worked well in the dot-com bubble days: most users have no clue about the technology, so they might accept the argument: “Oh, ok, if openspace sims really hurt the stability of the grid, well, then it’s all right to drop them”.

But this is 2008, not 2000. Residents in Second Life know about technology — most of them know it quite well (some techies who left LL or tried to apply for a job there are these days happily running their own OpenSim-based grids). Older residents also remember the days of Class 1, 2, 3 or 4 servers — the grid worked back then, and worked quite well too, so there is absolutely no real reason behind the “technical argument”. It’s just a convenient excuse to remove a product that LL doesn’t wish to offer any more. 

Faced with the change, what are residents planning to do?

Major communities who depended on openspace sims are simply quitting. Many have tried the Open Sim grids for the first time, with mixed experiences. According to some, registration with the many OpenSim grids have reached a record, as residents jumped over there to look for a cheap alternative. I’m sure many stayed there. But honestly — I also run an 8-sim mini-grid with OpenSim software, and my own asset server, login server, inventory server, etc. — OpenSim is “not there yet”. Granted, some things are simply awesome — like the modularity of using “compiler plugins” (run scripts written in JavaScript or C#!) and “physics engine plugins” (there are many to choose from!), or the simple and straightforward way that you can use external “messaging servers” (like, for instance, good old-and-reliable IRC) or “economy servers”. But that doesn’t turn it into an “usable alternative” — not yet. It will, in two or three years, but not in 2008.

And, of course, you’ll have to forfeit the 2.2 billion items on LL’s grid. Full inventory integration with LL’s own grid will not happen before 2010, and probably only much later.

So there is really not a “valid” alternative — we could say there is a “wannabe” alternative which is not ready yet — and Linden Lab knows that pretty well.

What will happen next? There are still two months left where people can enjoy their cheap, overcrowded openspace sims, and this means that for a while, people will try to get rid of them as fast as possible. Facing no refund from Linden Lab, anything goes to dump the hot potato and try to recover the losses. But communities will shrink in size, which is inevitable. Universities, not allowed to overstep their close budget, will drop their openspace sims and probably give up on SL altogether (or move to OpenSim, since they have the human resources to do maintenance cheaply). SL businesses, either based on land rentals or shops on openspace sims, will close down — and so will clubs, live event areas, and other similar things.

How big will be the cut?

Well, ultimately, I see no reason for the 13,000 openspace sims to be around any more — at least definitely not by July 2009. A few, of course, will be able to survive under the harsher restrictions of the “homestead” sims — but what’s the point? You can get more than a full sim on the mainland for the price of two “homestead” sims, and without any limitations. For slightly more than that, you will be able to buy your own private island. So, for the residents willing to spend more money in SL (in fact, four times as much as before!), the option will be to migrate to a full, private island — not to a crippled “homestead” sim.

Obviously, for anyone in the land rental business this doesn’t work like that. Rentees used to have a large sim of their own, even if with limited resources and slightly slower performance, will not pay the same to have just a quarter of what they had before — without access to Estate Tools. It’s preposterous to think otherwise. The same, of course, will apply to the ones having built clubs and shops on their openspace sims — they need the Estate Tools to have full control over their region. They won’t be going back and “share” a sim with some strangers — again. They have escaped “shared sims” and willing to pay for that privilege — but just while the prices were fair.

So I believe that almost all of those 13,000 openspace sims will be dropped at some point — at least, 90% of them — and people there will not upgrade. Not to Homestead sims (which is a completely, utterly useless product); and not to full private islands (nor mainland sims, where there are no Estate Tools available). Effectively, Linden Lab has shut down that product line and given a clear message: Second Life is for the ones willing to pay a lot for being on their own private region.

Now consider the numbers. 13,000 out of 32,000 islands will be dropped. At US$75/month, this means that LL is effectively cutting their income by a million dollars, or around 20% of the income in tier (they get a few extras from setup fees, premium accounts, and LindeX fees, but, unlike what I wrote on an earlier article, their US$ 5 million/month income comes mostly from tier fees.

Wow. Think about it. With two blog articles, Linden Lab is effectively cutting down a million dollars from their monthly income!

Sitting down after the shock, I tried to figure out why. Obviously the answer can’t be that LL makes so much money that they need to reduce their income for some silly reason — that hardly makes any sense, since they could spend that money instead, say, by hiring more developers (and Linden Lab is hiring like crazy!). M Linden is also a professional CEO, and he wouldn’t take such a huge step without reason. Some residents claimed (as they always do) that LL needed to show some big income in the last quarter of 2008 “for some reason” (usually that means that they’re going to suggest LL’s coming IPO or merger or selling out.. once again…), but that’s silly: pushing 13,000 sims out of Second Life will reduce income, not increase it. And obviously nobody really thinks that M Linden and his accountants are so naive as to truly, really, believe that all those 13,000 sims will pay an increased price. They hardly expect that. They’re not that naive. They have years of solid business experience.

So… why?

Knowing even less about LL these days than usually, it’s hard to figure out the reason for the massive change, and so, only speculation can help us here. One possible reason is that the outstanding leases on Class 4 equipment are finishing, and, since LL may be starting to use Class 6 servers with 16 cores very soon, they might get a huge reduction in hardware costs. So it doesn’t make any financial sense for them to keep supporting a low density of regions per server. After all, they might manage to hold all the 13,000 openspace sims in… just 50 super-servers. Right now, I can imagine that they run 16 openspace sims per Class 4 server, at most, which will mean… a bit over 800 servers? Bandwidth-wise, the cost is the same as before (and bandwidth will always outnumber server costs). But… perhaps the cost of maintenance of those 800 servers is a million US$ per month?…

It’s not very impossible — but it requires stretching a point. The servers, by themselves, will cost as little as, say, US$100-150 per month, probably less with a good lease. But then you have to hire Concierges to give technical support to all those openspace owners. And deal with complains from clueless residents that had no idea what kind of land they’d bought. Get rid of the openspace sims, and those complains will go away — so, overall technical support costs will go down. Now, I certainly don’t have any idea on how much all of that really, really costs, but one million dollars per month certainly manages to pay the salaries of a lot of people.

I’m at a loss to explain it, then. As I’m at a loss to explain why LL charges more when the density of sims-per-server increases, when logic would dictate otherwise, even if it were only a marginal decrease (as said, bandwidth costs are calculated per region, not per server). But then again, the question has almost two years and I’ve still not figured it out:

Ian Linden wrote:

[…] In effect LL charges a premium for hosting as a means of charging for our software, our central resources, and rights to the SL “namespace” (ie grid spots). So, the more you use our software, the more you end up paying. This is pretty different from most software sales models, but I think software-as-a-service is fairly well-understood at this point. Understand that development is our largest department, while operations is comparatively tiny; the more sims we sell, the more developers we can hire to improve SL.

Granted, this was in late 2006, when Ian sort of hinted that human resources for maintaining SL are negligible compared to development costs. But in that case, there is no hope that getting rid of 13,000 openspace sims will reduce operations costs by more than a million dollars per month, so to justify pushing all those residents out of SL!

Why a company would like to get rid of their customers and lose 20% of their income that way is beyond my humble abilities to explain. I can only hope that the forthcoming announcements will make some more sense.

The fear of different products

Another thing that always made me wonder was the reluctance of Linden Lab to offer differentiated products. It’s a well-known fact that more tailor-made products require more (human) work to deal with different types of clients — and complicate the invoicing — but somehow with computers doing the hard work, the point becomes moot.

Consider SL in 2005, or the OpenSim-based grids today. You’d place an order for a new sim. After billing approves your payment, an order is sent to an available technician, who would run to the co-location facilities, look for an available server, install the software, and, with luck, get it running in a short time, so that you can enjoy your new sim. LL used to deliver sims in “batches” (usually twice a week) since those were the days the operations teams would be physically at the co-location facility screwing servers to racks.

In those days, the quicker you could deliver a sim to the client, the faster you could invoice them again (for more tier), so, the less options the client had, the better. Hardware was standardised; and so was software: one sim has 256×256 m and 15,000 prims (less in 2005, but you get the point). There were no choices.

Now fast-forward to 2008. You have a fully-automated model that charges the customer after they pick a spot on the map, automatically locates the first available sim in the first available server, loads the proper server image (all automatically from a central repository), boots the sim, and delivers to the client. That can ultimately take just a few seconds — as easy as, say, installing WordPress from a hosting provider like Dreamhost. Sims boot very quickly  — if OpenSim servers are a valid comparison (even if they’re totally differently designed), you can boot a dozen sims in a bit less under a minute, and that on old hardware.

When providing a service does not require human intervention (except when something goes wrong!), the first thing that a service provider does is differentiation — basically, allowing you, the customer, more choices. So long as these choices are handled by computers and software, it doesn’t make any difference in the cost of providing a differentiated service.

Now, LL has basically three choices: mainland sim, private island, openspace (and now homestead) sim. Why so little?

It’s not a limitation of the server software. Things like the maximum number of avatars per sim, or the number of prims, are simple variables that are set when the sim boots (some things like the sim’s size, ie. 65536 m2 on a square 256×256, seem to be hard-coded on the client too, so they’re far harder to change).

On the other hand, and assuming that LL’s sim software is multi-threaded and works on multiple CPUs, you can start doing nifty things. Imagine having a whole server just for you! Now you could use those 4 cores on just a single 256×256 m sim — and get 60,000 prims and 400 avatars on it! Or, alternatively, configure it to give you 16 low-traffic sims, and spread the number of total prims among them. In fact, depending on how good LL’s code is, you could even fine-tune things more, ie. buying a sim with 50% of a CPU and get 7,500 prims on it. And the pricing, of course, would be flexible to adapt to all those variations.

OpenSim can do that at a pinch, and, as often repeated, it’s below-alpha software. So why doesn’t LL offer a similar service? Both the high-end users — getting 400 avatars in a densely-packed event would simply be awesome, and you could buy four servers and do a 1,600-avatar event on sim corners! — and the very low-end users would be happy with more variety on pricing. In fact, giving a constant — a Class 5 server can run up to 400 avatars, up to a 512×512 tile on the map, up to 60,000 prims, all on 1 GB Ethernet, for US$1,200 — that gives quite a lot of variety to pick from!

But there is more! For a short while in the history of SL, class 4 sims used to be cheaper in tier than Class 5 sims — you were allowed to pick the server of your choice and pay accordingly. Although I believe that Class 4 sims are only used to run openspace sims these days, LL pretty much gave up on the price differentiation (they’ve grandfathered the tier costs of sims running on Class 4 servers, however). With Class 6 servers on the horizon, people could have a further choice!

In fact, this is what hosting providers do. You have a choice of software, hardware, and features. It’s pretty much standard with every hosting provider — you, the client, pick the hardware you can afford, run the software you’d like to do, and select the features you wish. The combination depends on the performance you need and the money you’re willing to spend on it!

However, LL never went the route of “flexibility”, relying instead on one-size-fits-all, absolutely standard solutions. Why?

While a lot of human intervention was needed, I can understand the problem about setup costs. But now that it’s all fully automated…?

Instead, we get the following speech from M Linden:

“Because we have complexity everywhere else, we’re loath to add a highly complex pricing structure.”

There is still hope, since M Linden goes on and says:

“Nevertheless, it’s clear we have to build a product mix and pricing structure that offers more flexibility.”

… and then announces that for a more limited set of features you’ll have to pay more, which is completely and utterly insane!

So the message seems to be: “if you want more flexibility, you pay more than for a standard solution, and get a worse service”. Well, one can understand the theory that a “personalised” solution ought to be a bit more expensive than a standard one — not that you ought to get worse service! But, again, this makes sense only if there is manual labour involved. If the cost of setting up a sim is the same, no matter what its ultimate characteristics are, why should it be more expensive to provide a more limited feature set?

I’ve tried to think this over and over, and I really cannot understand, from the little input we get from Linden Lab, how they figure out their pricing. From an outsider it looks like they throw a random number out of their pockets and use it as their price, and then see how well it financially works. But that’s hardly what can be the case, given M Linden’s background and expertise. No, Internet hosting providers are mostly cost-based operations, so there is something missing here in the whole equation.

Ultimately, there is a very complex formula that has shown, on M Linden’s spreadsheets, that continuing to provide a “limited set of features” for a fair price will lead Linden Lab to ruin and bankrupcy. Where exactly that happens on the formula is impossible for us mere mortals to understand. But it has to be a very strong point indeed: one that makes LL decide to cut their income in 20% instead of continuing to offer that service. And I’m at a loss to explain such a decision.

Perhaps LL should try to use some OpenSim-based servers on their own grid 🙂 They’d be able to run a hundred sims on a Class 6 server pretty easily, provided they’d have enough memory and bandwidth, and sell these for the “magic” price of US$10-30 per month. They’d be fully integrated with LL’s asset servers, so you’d still have access to those billions of objects. But they’d have lousy performance and crash a lot. The point is, they would be ultra-cheap and compete aggressively.

Being a Premium account resident, and having the choice between a 512 m2 plot on the stable mainland with 117 prims, or a totally unstable and unreliable private island on an underpowered server for the same price, I’d very likely go for the latter! And I’m pretty sure that most of the 90,000 Premium account residents would think the same way. So, instead of losing a million US$ and 13,000 sims from the grid, LL would, with this option, earn the same amount of money and run seven times as many sims (but use the same number of servers!) — while at the same time making everybody very happy!

It would make sense to me, if I lived in a sane world.

Instead, Second Life has become Surreal Life, and I cannot figure it out any more.

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