Last week Linden Lab raised the prices of its popular low-performance “Openspaces” areas in Second Life by 67%, leading, of course, to the kind of histrionics Second Lifers do best: angry protest rants, sulky threats to quit the game, and avatars setting themselves on fire (an act we note involves no actual pain or sacrifice). But this time Linden Lab backed down: Today the company announced it would either restore prices to their original levels or reduce the price increases significantly.
The old new prices: low-performance Openspace areas in Second Life go from $75 to $125 a month. The new new prices: Openspaces stay at $75 a month for customers who really use the Openspace product very lightly, “as intended.” For heavier use, there’s a new midrange product priced at $95/mo through July 2009, and $125 thereafter. That’s consistent with Linden Lab’s spin that the price increases were originally imposed because Second Life’s greedy avatars were overusing the Openspace product and taking advantage of Linden Lab’s selfless nature, not because Linden Lab is a for-profit company whose other revenue streams have stalled (which is our analysis).
So why did Linden Lab back down? First off, since the price hikes were announced there’s been the beginnings of a mass exodus to OpenSim, an open source Second Life clone that’s rapidly coming up to speed as a fully featured alternative anyone can run for free. Secondly, a surprising number of Second Life users aim for a revenue-neutral existence, and pay their usage fees to Linden with profits generated running micro-businesses selling virtual goods. But with an expensive item in Second Life going for 250 Linden Dollars (a little less than a buck), a $50 a month rent increase is enough to price people out of the game altogether. And of course, there’s a real-world recession going on that’s forcing people to rethink their entertainment budgets.
None of this is good for Linden Lab, which will be hard pressed to find revenue if current customers would rather leave than pay more. Yesterday Valleywag reported a rumour Linden may lay off 10 people in its business development team — we contacted Linden’s usually prompt spokesmen about it and haven’t yet heard back.
UPDATE: Linden Lab in a statement confirmed four layoffs but is still hiring:
We’ve had to make some hard decisions about resources and as a result we eliminated four positions out of our headcount of nearly 300.
The company also says it’s seen no evidence of an exodus from Second Life, and insists it’s overall business is profitable.
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Image: Katiya Rhode
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