INTERVIEW: Anshe Chung Studios’ Guni Greenstein
By Adam Reuters
SECOND LIFE, Nov 8 (Reuters) - Anshe Chung Studios, founded by Anshe Chung and her husband Guni Greenstein, is the 800 lb. gorilla of the Second Life real estate market, owning some 300 islands as well as properties on the mainland.
Since an appearance by Anshe — real name Ailin Graef — on the cover of BusinessWeek earlier this year, her company has also become the real world’s poster child for the possibilities that Second Life makes available to virtual entrepreneurs. The company, now based in China, has now branched out beyond real estate, offering a range of services from currency exchange to project management.
Reuters sat down last week in the Reuters Atrium with Guni Greenstein (real name Guni Graef) to discuss Linden Lab’s controversial island price hike, the company’s budding development team in China, and its strategy in the swiftly changing Second Life business sector.
The following is an edited transcript of that conversation.
Adam Reuters: How many people are working for you in China, and in what capacity?
Guni Greenstein: At the moment we are 23 fulltime, plus of course people who work via Second Life with us on a freelance basis.
Adam Reuters: 23 just in China, or globally?
Guni Greenstein: In China. Our target size is 50 fully trained and productive by March.
Adam Reuters: And are they building, scripting, everything?
Guni Greenstein: Maybe you have heard that Anshe has a background as a teacher. Now she applies this here, hiring and training people in metaverse skills.
We have a support team here providing 24/7 service, a world building team, Second Life content creation team, a team for IMVU/There projects and are currently training a team for programming and scripting. The support team is organized into subteams for financial services, realtor services and general support.
Adam Reuters: Can we talk about the price hike a bit? As probably the biggest landholder, how will this affect your business?
Guni Greenstein: We are still waiting for some additional information. But a couple of consequences seem to become unavoidable from the change in pricing. As Philip clearly indicated as one of his motivations, the competitive balance between the Linden mainland and the resident - run estates will significantly change
It will not be economically viable to provide land for the mass market in newly purchased estate sims. But the land development projects that create most value we have done on islands because of the ability to actually develop terrain and control the environment.
Adam Reuters: So will your island developments become more high-end?
Guni Greenstein: Our island communities will definitely become more exclusive, especially new developments in newly priced sims. Even in existing island communities the lack of supply and continuing demand will drive purchase prices of land up.
Adam Reuters: Is there any way that this is a positive development for the company? After all, you own a large block of islands that have been grandfathered in at the lower-tier cost.
Guni Greenstein: This largely depends on how long the old tier will be grandfathered. It would certainly increase the asset value of our sims. At the same time we will have to cancel or downsize major projects that we have invested in, because of the change in supply.
Adam Reuters: How many sims do you own?
Guni Greenstein: We own about 300 sims, some are low prim simulators though. If you count CPUs the total comes to about 250 CPUs, not counting our mainland holdings.
Adam Reuters: There’s been a lot of controversy about the developers that were briefed ahead of time. Were you among them?
Guni Greenstein: Yes, I received an email Saturday morning our local time, which was Friday night SL time. I immediately logged into SL, even before talking to Anshe, and asked around if there are any “interesting news.” The news already had widely spread because a customer called the support hotline at Linden Lab and tried to buy an island sim. He was told on the phone about the price increase.
After I found out that the secret is no longer a secret I discussed with Anshe and other members of our team. We then sent a notice to our customers that there may be changes in land values.
Adam Reuters: Philip Rosedale indicated that Linden Lab was unlikely to brief people ahead of time in the future because it is in effect insider information which could be quite valuable.
Guni Greenstein: When the news had spread to the Second Life Herald we began to increase our buying prices for second-hand sims and advertised that we buy sims. Interested sellers we made aware of the situation.
Adam Reuters: Did you make any real estate deals before the announcement was made official on Sunday evening SL time?
Guni Greenstein: No. We have not made any real estate deals involving private islands since the announcement. We entered into several agreements that are still pending since the transfer of sims is a slow process. We have five or so estate purchases that we agreed on with sellers but that have not been fully completed.
Adam Reuters: Changing gears a bit, I’m curious about the impact of the rapid growth of Second Life registered users has had on your business. Has it translated directly to more rentals and revenues?
Guni Greenstein: The introduction of free basic accounts and the increase of the number of accounts to more than a million are not growth figures that have a strong meaning for our business. 250 percent growth of the economy and active residents has been very beneficial though.
Adam Reuters: So you’re more concerned with high-value customers that have spent much more time in SL?
Guni Greenstein: We are concerned with real people and real economic growth. We are less concerned about the media situation and accounts. Our customers are residents who stay in Second Life and become part of this virtual world, not casual visitors.
Adam Reuters: How concerned are you about the stability of the Linden dollar? Do you keep most of your assets in-world, or do you convert to real life currency?
Guni Greenstein: Since the inflation hike in spring we don’t keep much SL currency. The Linden dollar has become very stable recently since Philip did some important and very beneficial changes in monetary policy.
Adam Reuters: Are you worried about the tax implications of cashing out?
Guni Greenstein: No, we are not worried about tax implications since we fully report our revenues to the local tax authorities. We would welcome more transparency and equal, world-wide application of taxation and employment laws if they are properly tailored to the medium.
Adam Reuters: Right. So when you’re talking about paying taxes, that would be in China?
Guni Greenstein: Yes, our business is based in China. We went to a developing area and invest heavily in training. We are also lucky to find an administration that is more experienced with virtual-world economies than in Germany.
Adam Reuters: Your company’s fact sheet says your projected 2006 revenues are L$670 million (US$2.5 million), 94 percent of which come from Second Life. Most reports I’ve seen have put the studio’s profits at about $250,000 a year. Is that accurate?
Guni Greenstein: It is difficult to comment on this. I believe we are still the economic leader among Second Life companies who do not burn outside venture capital. In 2007 some of the consulting companies may outgrow us if their claimed revenue figures are not unrealistically hyped.
One factor that makes it difficult to give clear income figures is that a large part of our profits has been reinvested into infrastructure. That means that while the company grows fast and has been profitable we are not rich and driving Porsches with a lot of cash on our bank accounts.
Adam Reuters: Well maybe a Second Life Porsche…
Guni Greenstein: Hahaha. You know, in real life we are both quite down to the earth. Anshe still tends to save every penny and it’s quite a contrast to her virtual celebrity image.
