Costs of Expansion Just Went Down

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Justice Soothsayer
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Costs of Expansion Just Went Down

Post by Justice Soothsayer »

Linden Labs has announced in its "Quarterly Land Supply and Island Pricing Update":

Jack Linden wrote:

we will shortly be dropping the opening auction price for new whole regions to USD$750 from the current start price of USD$1250... [and] For Q2 our Island pricing is changing. New islands will be USD$1000 and this change will go live upon the new Land Store being launched, so before the end of April. Orders placed before the launch will be at the current USD$1675 pricing. Monthly fees will remain the same for Q2.

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Re: Costs of Expansion Just Went Down

Post by Beathan »

Yeah!!! --

Or does this mean that the End is Near?

Where is an SL Eschatologist when you need one?

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Justice Soothsayer
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Re: Costs of Expansion Just Went Down

Post by Justice Soothsayer »

Hard to believe, but the announcement drew a number of complaints from people unhappy :x that the price has gone down, and I suppose I would be unhappy if we shelled out $1625 last week for Alpine Meadows only to be told if we had waited a bit we could have got it for a lot less. But overall, darn good news for CDS.

Dnate Mars
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Re: Costs of Expansion Just Went Down

Post by Dnate Mars »

Overall, it is good news. The way they did it was poorly planned.

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Sonja Strom
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Re: Costs of Expansion Just Went Down

Post by Sonja Strom »

Personally I would rather have them keep the costs stable and use the difference to make the land and grid stable, at least more so than how it is at present. However, I would imagine they put a fair amount of assessment into their decision.

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Sudane Erato
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Re: Costs of Expansion Just Went Down

Post by Sudane Erato »

Yes, its hard to complain about prices going down. But this isolated action... isolated in the sense that none of its many corollary issues (such as the price of voids) have been "revealed"... is both extremely disruptive to land values in SL, and is also typical of the scattershot and haphazard way that LL imposes significant policy in SL. And there is little policy that is as significant as the underlying price of land.

Consider not only the people who have recently bought full sims for US$1675. More extensive is the impact on parcel owners who have paid significant amounts of money for their share of that sim. If the underlying price of the sim (to the Estate Owner) goes down, it will be harder to sustain the elevated prices that parcel owners have paid when it comes time for them to resell.

But... what else is new? SL has always been an unreservedly chaotic project. This quality goes on.

Sudane.................

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Re: Costs of Expansion Just Went Down

Post by Beathan »

Sudane --

True, this kind of haphazard price setting will disrupt the land-based economy of SL and cause real financial pain to some folks. However, I expect that it will continue and speed the process of "islandizing" SL. I expect the final price on mainland auctions to fall -- but only slightly -- leading to a relative price advantage for islands. In fact, the average price for and island might be less than the average price for a mainland sim for (as I think) the first time. This should tend to expand the amount of island land relative to mainland land. This shift may well be the goal -- as LL's regulation of the mainland is needlessly controversial. LL is condemned by burdened landowners if they regulate and condemned by everyone else if they let the landowners do as they please. It's a lot like life.

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Re: Costs of Expansion Just Went Down

Post by Justice Soothsayer »

Let's talk about the practical implications for CDS. How does the reduced price for islands impact our expansion plans? Should we charge less for land? With islands now more affordable, will it change the market for folks considering joining us?

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Sudane Erato
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Re: Costs of Expansion Just Went Down

Post by Sudane Erato »

Justice Soothsayer wrote:

Let's talk about the practical implications for CDS. How does the reduced price for islands impact our expansion plans? Should we charge less for land? With islands now more affordable, will it change the market for folks considering joining us?

Good questions.

The most important note is that in the history of the CDS we have never given much thought to the price of land in other "comparable" areas of SL. There ARE no other comparable areas of SL.

Rather, as we have acquired each sim, we have calculated the price we must charge for each square meter of land based on the number of available square meters that we have allocated for private ownership. Using this number (divided into the total number of square meters on a sim: 65,536), we have arrived at a parcel sale price which will provide us with enough money to cover the purchase of the sim, plus a small margin (about 15% - 20%) which enables us to cover any shortfall we might experience because tier becomes due before all the land is sold, or, heaven forbid, some owner doesn't pay their tier.

In Jack Linden's post ( http://blog.secondlife.com/2008/04/07/q ... ng-update/ ) he indicates that mainland land averages about L$11/sqm and island land about L$3.6 (seems like an awfully big difference!). The original sale price, which is also the price that we sell abandoned land, in Neufreistadt was about L$8.3/sqm. Remember that Neufreistadt was bought before the sim price went up to US$1675... we paid US$995 for it.

I think our policy has worked well for us, and I think that means that if we end up paying US$1000 for a sim, our initial offerring price will reflect that. Most people here will end up buying from other residents anyway... and hopefully the market will set the rates, rather than the LL price tag. But as I said in my earlier post, their move does make the owners' assurance of a good resale price a bit more shaky... at least for awhile. Pray to god they do not make many more such drastic changes.

Bottom line is that as far as the factors for new residents, its probably important to have policies which try to minimize the issue of high land cost. If the marketplace pushes the resale price of land too high (i.e. if we are considered an extremely desireable and chic place to live, and our land prices skyrocket as a result), we can always add new land, or else subsidize the prices so that the seller gets what they want, and the buyer doesn't have too high a price to pay.

So yes, I would say that if we buy a new full sim for US$1000, our initial offerring price should be lower than if we had to pay 1675. The CDS adds to its coffers nicely through the resale of abandoned land, but in the long run thats not our business. I would say that fairness dictates that we look for a simple one time return on our investment in land, and look for the growth in the underlying financial stability of cash reserves in the tier that the citizenry decide to tax themselves (over and above the tier due to LL).

Sudane..................

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Re: Costs of Expansion Just Went Down

Post by Justice Soothsayer »

Gwyn has a longish essay on this topic on her blog, "Economics 101 for Technology Investors".

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