The End of Freebies?
What is the value of content in Second Life®? This might be the most stupid question to ask, but… did you ever ask yourself why things cost what they do?
We have to turn back the clock a few years, to the time Linden Lab introduced the stipends. Every Basic Account used to get L$50 every week they’ve logged in; Premium Accounts got L$500 every week, no matter if they logged in or not.
This set the reference for the price of things in Second Life: content creators targeting newbies (who would start as Basic Accounts) would know that if they priced it from L$0-50, they would get newbies to buy their content. If they wished to go upscale and sell to Premium Accounts, up to L$500 would mean that they’d get a sale per week. That’s why the first generation of outfits (usually just two pieces!) would cost up to L$500, since you expected residents to buy one per week (hopefully!). Skins, or other items that wouldn’t be bought every other week, like vehicles or animation overriders, would cost around L$2000, since you wouldn’t expect them to buy a new one very often. So that’s why things cost what they do 
When GOM first introduced their currency exchange for Second Life, a similar question was asked: what would be the “fair” price to charge, in US$, for a handful of L$? Again, we needed a reference. Since the easiest way to get L$ in-world was by being a Premium Account, and that costed US$9.99/month (less if you paid annually!), and this got you L$2000/month, it meant that LL “valued” (indirectly) L$200 to be worth 1 US dollar. Well, almost: since the cheapest way to get L$ was to pay an annual fee — for US$72 — this meant that you could get L$333 for 1 US$. There’s your range — from L$200 to 333. Average it, and you get L$266/US$. Now you know why the L$/US$ ratio has been floating around that “magic” value for so long
Finally, land is also valued used similar baselines, although here the concepts of “speculation” and “location” play a huger role! Still, like in real life, you can see that the cost of land can be compared to the “base welfare stipend” (the original L$2000/month) which included 512 m2 of tier on the mainland. The value of land overall is tied to this and is not totally arbitrary.
So knowing the base metrics that define why things cost what they do in Second Life, we can ask ourselves next: what will be considered a good, successful SL-based business? And what will distort the market? And this will finally let us ask us the last question: should Linden lab attempt to “regulate” the market (in the good, European sense of the word) or just let it do whatever it pleases and whatever the results are (in the American sense of the word)?
How to make money out of digital content sales
3D content creators that are used to sell content on Renderosity are close to a “pure” market. Buyers and sellers sort of agree to what is “reasonable” to pay for a meshed object that buyers can then use as often as they like (there are no technical restrictions, just merely licensing agreements that most poor digital content creators are rarely able to enforce). It’s an “opportunity” market; since 3D object meshes are available completely for free on popular sites like the Google 3D Warehouse, it’s hard to tag a huge price on a model, since the higher it will be, the more likely someone simply uploads it to one of those “free 3D models” sites and just lets it stay there for anyone to copy. Sure, you can DMCA them out of those sites, but there are simply too many to track, and no overall organisation to remove stolen content.
3D modellers are thus familiar with this business model, which, in a sense, is not unlike indie music creators who sell online. The “impulse buyer” will be willing to spend a few US$ on digital content, if they need it for a project that requires proof of purchase; if the model is too expensive, and not worth the trouble (say, for making a quick movie or even a still image to illustrate something) they will just look elsewhere for a free model instead. I have recently been at a conference where academic researchers, encouraging the audience to participate in virtual worlds, explained that 3D virtual worlds are actually very easy and insanely cheap to create in a learning environment “because of all the free content that is available”. They definitely undervalued the role of the content creator by saying that 3D meshes, being so widespreadly copied and archived with relatively good search engines, are basically ubiquitous — hiring a 3D modeller is only wise when you need very specific content targeted to a special environment (say, recreating an exact replica of an existing building that nobody has created yet).
So, 3D modellers mostly work with content-as-a-service. They get hired to do specific models, but generic ones are not “sellable”. They might be posted on Renderosity and similar sites to give them some exposure and give potential buyers of 3D content a taste of the kind of 3D models they’re able to create. In a sense, this is not unlike semi-professional photographers that post their pictures on Flickr or Stock Exchange but might sell them (very cheaply) on Fotolia. It’s a way to build up a portfolio, get some exposure, but the real money will come from getting a contract to take some special pictures of an event or a person. Granted, the long tail will help to make a small income out of selling a few pictures from those very-low-cost sites.
In a sense, the overall trend is that anything digital is next-to-free on the Internet — music, videos (think YouTube!), pictures, and 3D meshes — since it’s impossible to prevent copy, and amateurs flood the market with free content for anyone to download. Very cheap and free content allow digital creators to get some exposure to (hopefully!) attract the attention of someone who might be willing to hire them to provide services. That’s how it works.
No wonder, then, that the amount of money made directly from selling digital content on the Internet is not a huge market, even though the few sites selling cheap digital content still make enough to cover the costs of archival and storage — typical examples are Magnatune (or even Apple Store!) or Getty Images. But there is not much room at the top of the pyramid.
11 Responses
On a point of order, I think what Linden Lab have toyed with more closely resembles economic anarchy than economic libertarianism. As one of the resident mad-dog libertarians, I'd point out that our preferred laissez-faire capitalism requires the ability to prosecute fraud and some sort of instrumentality for contract enforcement – even the anarcho-capitalists admit that – and those are two things which Linden Lab has always declined to provide.
Frankly, as I occasionally do business inside SL, I'd love to see the necessary instruments of laissez-faire capitalism in there, but no sign yet!
I was at that conference as well, and it was indeed curious to observe that academia – fiercely protective of their own IP and copyrights – apparently is rather unconcerned about those in other situations…
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If you're interested in the list of alternatives to XStreetSL I recently completed a review of most of them. There is at least one new one that's been added since I wrote it. You can read it at http://eloisepasteur.net/blog/index.php?/archives…
See, Eloise, we ought to have finished our own
Thanks for the link!…
Your number of freebies sold vs payed content is similar to mine.
After the announcement I was curious, so I went through my last few months of xStreet sales. I have about 40 items listed, including 2 freebies. I sold 130 items that cost between L$20 and L$1400. My freebies sold 1200 times.
Moon wrote,
"it was indeed curious to observe that academia – fiercely protective of their own IP and copyrights – apparently is rather unconcerned about those in other situations"
Perhaps you can provide an example of our protectionism in the Ivory Tower?
Don't confuse universities' heavy-handed "branding" of mascots or university-held research trademarks with academia's "gift economy" for scholarship. These are two completely different enterprises.
Faculty exist in a "Freebie culture" in our scholarly lives: you work with others' ideas, but you cite and help recognize good work. If you get caught plagiarizing scholarship, that's another matter. I think it can even lead to revocation of tenure at my university.
This is very different from being "fiercely protective," isn't it?
As for SL? I'll keep giving away whatever content I make in-world. I really don't need XstreetSL to do that. I also pay out-of-pocket for great content to creators I support, and I give them credit in our builds and at my blog. I encourage others to shop with them.
So for those who wish to make money in SL, I wish you all success. I don't think we academics are competing for Linden Dollars, however, if I release tools or other content to help educators and students.
Finally, a red-herring argument at play in this debate over freebies, one of a few such claims, is that we eggheads are big supporters of freebies. It clouds a more ominous development that has not gotten so much ink spilled: the monthly listing fee per item is going to hurt the hobbyist content-creator and just enrich the Lab. And that really does tick me off, as an educator and a lover of the creative work I see on display in SL.
@Vlad, now that's a curious fact!! Someone ought to really do some statistics…
@Ignatius, yes, you're right about the "freebie culture"… I believe it's actually related to the way our society thinks that educational institutions are worthy of our respect and of special rules, because our civilisation is strongly grounded on universal, very high education levels (comparing, of course, to all other civilisations before the European Enlightenment in the 18th century).
That's why students, teachers and academic researchers get discounts on most of their purchases; why they get public grants, and so on. If education weren't the most important thing that our societies had, we would not be so eager to be so "helpful" towards them.
And this means that you can copy content — if it's for educational purposes. Or at least, you can do it to a degree. In return, almost all work researched is released (for free) to the public: this includes all papers and thesis, often describing highly advanced technology with quite a lot of detail, as well as, on the computer programming side, a lot of applications. All for free.
Nevertheless, I understand Moon's point of view. This "pushing for free content" is a very strong streak of the academic world, and this gets complex when this attitude is passed along to students, who then get this idea that our society is supposed to provide them with free things, at the same time encouraging this same society to pay their bills (via grants and similar methods). I'm also guilty as charged; my own father insists with me all the time that I should abandon my own business endeavours and just get a grant and a job at a university "like everybody else does"…
Dear Ignatius,
My apologies: I have spoken too generally when in fact I had some very specific cases in my mind.
Rest assured that I do believe that you don't use free unattributed content in your academic projects!
Cheers, and good luck on those!
I think I must have missed the point here: most newbies (an important group) don't have any money but most do want to make their avatar distinctive. My guess is that they are much more likely to shop at the large number of inworld freebie places rather than xstreetsl. The availability of such free content, albeit of variable quality, and a shared shopping experience is a major attraction for SL.
As far as education is concerned, it is probably dangerous to generalise but driving freebies out of xstreetsl will almost certainly encourage educators to migrate elsewhere for many of their specific needs. Again, there are already inworld sites for this but I expect web sites with a specific education focus will also emerge, if only because the content will be deemed appropriate for students to search on campus.
It is also important not to see SL in isolation: educators can often see benefits in going with non-SL virtual worlds and, indeed, just this week I was at a conference where one of the major selling points of an alternative was that certain aspects of SL ("silly avatars") were absent.
Like Iggy, I spend on xstreet, inworld and with developers. I also use my blog to promote commercial products that I feel have value or potential. I think many educators pay their way in this regard.
One issue of major importante is the move to server-rendering technology. With the end of rendering at the client, basically content current 3D content theft is gone, as is the low availability of SL due to firewall or hardware issues… Both will contribute immensely to a lively economy. http://www.tgdaily.com/hardware-features/44367-nv…