Blog Archive

March 2010

Land is a Many Splendored Thing

Posted by Kitsune Soderstrom on Monday, March 1, 2010 Under: Enquiries

Buying, selling and even maintaining land in Second Life has always been a daunting task for Linden travelers new and old alike. This is partly due to the inherent problem that you are dealing with a sort of land that exists on the same terms as algebra, "it's there but, it isn't." Without having a physical product to manage, it's hard to associate physical terms on it for some. The other issue is that there has never been an adequate method of introducing someone to land ownership well enough for people to jump on the bandwagon. This began to change as of February 17th, 2010 as Linden Labs rolled out a program that they had in beta for only a few months. The idea was simple, to provide a person who has upgraded to a premium account, the ability to own a plot of land and even a house already prefabed and ready to go, with no hassle and no extra costs. "We’ve learned from extensive estate feedback that helping people take their first step on the land ownership ladder is something we need to work hard on to grow the community and grow in-world businesses. The sooner we can help new users become literate about land ownership in-world, the sooner they can participate in the extensive and varied land offerings available." says Linden Labs. How well this program will do in introducing the Land market to residents is too early to tell, but one thing is assured, it WILL affect the market on the commercial standpoint.

Most residents feel that this program is a good start compared to earlier methods such as "First Land", but there are enough people, either too confused by the process of obtaining land under their own steam, or too satisfied to use the allocated 512 square meters of land provided by the program as the only land they will ever need. This attitude of being the residents only endeavor, though understandable, defeats the entire purpose of the program as detailed by Linden Labs, "We want to create an on-ramp so new Residents can learn how valuable and simple owning land can be, but then move naturally on to larger parcels elsewhere." This program also seems to have an almost “stimulus package” feel about it as it is rolled out in the wake of many economy breaking events that have forced Linden Labs to take drastic actions that needed to be taken before, but that as of current, really don’t take care of the problems. They do affect private land owners who are wishing to resell or rent their land back out which seems to be as much as half the land market all together! Also, most people seem to wonder why, when you are introduced to SL, you are dropped on Help Island which is a wealth of step by step information given to you in a very user-friendly environment, but it touches very briefly on land ownership. The "land" part of help island only seems to cover the auction/buying process for the mainland which is owned by Linden Labs, and says close to nothing about all of the options available to others about buying or even renting bigger parcels, or even huge estates from commercial companies and private owners. “I think understanding how the land is sold and what it involves, who actually owns the land, etc, is very hard for people to understand.” said Tigress Ziplon of Ocean View Apartments and Palima Holdings. “I had to go online to figure it out, talked to someone for half an hour asking all kinds of questions..”

Only one thing seems for sure, Linden Labs’ mainland auctions are for land that you do not and will never "own". They are good about not revoking your rights as the lease holder, as rarely do they repossess the land that you have "purchased" and do believe that if you are following the rules on respecting others around you, it's your land and you can do what you want on it, which is why most land is set with mature settings in place. But, this situation on the mainland should always be viewed as becoming a "lease holder" and that you will never actually own that land. However, the confusions around all the other topics out there are great. What are the differences between Estate, Region, Sim, and Sim Process? What is a covenant? Do I have to buy land from Linden? Do I have to change my account type and on top of paying for that, also pay these "Land Use Fees" to own Land? The List goes on but within the endeavor of making the process more intuitive, the health of the market undoubtedly changes. For now the market seems to change more and more towards regulation, something that though needed, also makes the process of buying and selling land more and more like you need to be a certified realtor.

How was the market a few years ago compared to now, and where do we think it will be a few years from now? These are all good questions that have semi-translucent answers. Realistically, the changes that have affected SL, breeds what acted like a virtual "land-stock market" giving buyers the ability to wait for a bottom out. It was truly a "Virtual Buyers Market”, which was never so apparent until August of 2007. Land sales had dropped considerably due to a Ponzi scheme by an in-world company called Ginko Financial, which really affected all of the in-world economy. During the initial "impact" period of 2007/2008, land prices dropped by half and the sheer amount of land available to purchase rose by 4 times, indicating that everyone was wanting to "cut sling load". This was triggered by several bans that have taken place during those times such as a ban on in-world gambling (Linden was quoted to have shut it down as no compromises could be made on regulations that spanned across all of the world’s governments), interest rates provided by and inevitably the existence of banks all together, and even the new imposed age verification system put in place. Many of these changes are good, and are natural staples of progression due to the quick and sometimes unstable rate of growth of the "grid". However, sometimes they can be a double-edged sword. All in all, nothing bad should ever be said about Linden Labs, primarily because it is possible that they themselves could never have imagined ten years ago that this would become anything more then a game, and as they forge on, the have the benefit of Hindsight to press them forward. Fortunately, when things go down, they must come up, and for a while the economy as well as prices to buy/sell land rose with what looked like a healthy bottom line. Due to rapid growth, Linden races to catch up, continually looking for ways to make residents happier while still addressing issues of all sorts. However that isn’t always enough. Loretta Lurra of ImaginationMEC was able to take some time to talk to me, “In general, if you were in the land business, you would say that the return on investment is significantly below what it used to be. That the game is anything but stabilized for the land business and that no one can be confident in continued investment here going forward. We haven’t added an island in over a year, but without an understanding of Linden's intentions, we just feel it makes no sense at this time for us. It would be more helpful if they actually had a business plan they could release and business owners could get some sense of their long term intentions, as it is now, you hesitate to invest any more in the game because you have no idea what they might do next.”

Stability does struggle to take a foothold on the grid until the next drastic movement, probably by some other means in which SL ethics are questioned alongside Real Life, which seems to be the often occurrence. However even RL economy analysts and experts all agree that SL is more then a game, it's a market and economy model that simulates all things including poor investment strategies, unregulated markets, and the swift legal actions needed to bring everything back into check. "I don't view 'Second Life' as a game," said Robert Bloomfield, an accounting researcher at Cornell University in Ithaca, New York. "I view it as a market space." On the plus side, past history on SL has shown that through those swift actions, the economy has stood fairly strong and survived a good amount better then the dwindling US economy as of current, yet settling things in a time of amazing growth is not necessarily a good thing. “From our standpoint the game is stagnant and possibly shrinking, “says Loretta, “the linden price points are much too high to stimulate growth.” This being said, it seems as though there have been some hard lessons learned and many SL residents are weary of purchasing land from Linden all together when they can buy/rent the land from other land owners which stays on the same pay scale or cheaper as owning it and you don’t have to change your account type. You still pay tier fees directly to the original owner of the land who maintains all dealings with Linden who will always be the forefront of server maintenance which runs your virtual space to begin with, but the land is often times given away free or at a very reasonable rate. This is surfacing as the preferred choice to go, especially if you simply want some personal sprawling ground, or want to put up a small shop. Private owners such as ImaginationMEC and Palima Holdings are quickly making the need to have a "premium" account a moot point as these options grow and really make a resident face the question, "Well, if I want land, what am I gonna use it for?" Given the initial investment upfront, it seems that the best option for a person who simply wants a big plot to drive his/her car around on and have a nice bought prefab home should just go about renting land. This gives them almost the same rights as owning the land except for terraforming (changing the actual shape of the land such as hills and water), but this is something that most landlords, who have a little time on their hands, seem to be more then willing to help you with. However if you have your heart set on being the landlord yourself so that you can break it up into smaller parcels and sell/rent those out, then you have several options as well. Ultimately, if you want to purchase land direct from Linden, think of it as if you are purchasing a computer from Linden, one you will never see, and you will be paying them to have their tech support defrag and maintain it daily so that you can slice up and resell to your hearts content, all requiring account and tier fees.

All in all, there are places to go if you just want to rent an apartment. “When I first came to SL I had a horrible time finding an apartment in SL that was affordable and offered enough prims to actually be able to have a place to call my own... A tiny place for 50 L with 25 prims you couldn’t do anything. Plus, no support for the residents. I got together with CapeCobra Ixtar and Tigercub Longfall and we are trying to give large places with reasonable rent price and enough prims to make the place comfortable for the renter... therefore we created Ocean View Apartments and the mall below it.. to try to offer a place to buy things and reasonable rates for people...” says Tigress Ziplon. And there are places to buy from private companies such as ImaginationMEC who definitely look out for there clients says Loretta Lurra, “Just yesterday, one of our land owners IMed me, she had 18k of land with us, and then moved this month to another estate. The guy who owned the estate had a one paragraph covenant. He took her tier and booted her off the sim after 3 days. There are a lot of amateurs out there and we get a lot of people that come to us. We get a lot of referrals and are very appreciative of that. When it becomes necessary to "cheat" SL citizens to make a profit, then we will simply go out of business.” But who knows how long SL will continue to make good situations for others wanting to invest in land. The best analysis for the future can only reflect on the situations of the past, and looking into the crystal ball, Linden Homes may be biting off more then it can chew. Regardless, things don’t look so good.