Price hike seen hurting landlords
By Adam Reuters
SECOND LIFE, Oct 30 (Reuters) - Linden Lab has raised the price of setting up a private island by 34 percent to US$1,675, and increased monthly island maintenance fees by 51 percent to US$295, putting pressure on real estate profit margins.The company said in a blog post on Sunday evening that the price hike was “due to ongoing investments in developing and maintaining the underlying technology of Second Life.” Under Linden Lab’s business model, the purchase price of a new island helps to pay for a new computer server to run that part of the virtual world.
“Of course costs will go up, and that always tightens the profit margin,” designer Aimee Weber told Reuters in an interview within Second Life. “This will hurt the land renters the most because they make their profit on large numbers of users renting lots of land at a small markup.”
Notably, the new prices will only apply to newly created islands. Existing islands will be charged under the old maintenance fee of US$195 per month, giving existing real estate owners a price advantage over new entrants. Monthly fees for mainland sims will remain at US$195.
Linden Lab plans to release its remaining inventory of islands that carry the old fee structure at 1300 SL Time (2100 GMT) on Nov. 1.
Weber predicted that the new fee set-up would change the way that many Second Life businesses are run.
“Maybe one to two years ago, most stores would hook up with a nice sales location, like Midnight City or Aqua or other malls. In the last 6 months to a year…all the bigger designers started to buy their own sim because the profits were strong enough to support that,” Weber said.
“I think this price increase may set smaller business back to opening stores in malls until the economic environment grows enough where the new sim price no longer seems prohibitive,” she said.
Resident Lilly Margetts is co-founder of the Cascades Communities Project, which owns three sims and typically rents each one out for about $325 a month. Margetts said in a Second Life interview that the new fee structure would make it nearly impossible for Cascades to continue with its current business strategy.
“Well, we will have to rethink the whole thing with our business partner. Still, (it’s) hard to see what we could work out ,” Margetts said, adding that passing the increase on to renters was probably not feasible, since it would make the islands uncompetitive compared to mainland properties.
