News and Commentary: Second Life Revenue Reportedly Down By Half In Eight Years, Number of Sims Drops Below 24K

Some troubling news was posted on the SL Universe forums by Tyche Shepard, and passed on by Hamlet Au. In Tyche's private estate survey in January, she estimated that the revenue Linden Lab makes from Second Life sim tiers had dropped to just under three million US dollars a year, or 36 million a year. Hamlet Au when seeing this information calculated that as the Lab makes about 80% of it's money from Second Life through tier payments, the rest through premium accounts, Linden dollar purchases, and fees, their total income from the virtual world was about 50 million US dollars.

While that is a lot of money, consider that in 2009 Linden Lab's income was estimated to be about 100 million dollars. This represents a drop in income of fifty percent. The Lab is making only half now what they were eight years ago.

This drop in revenue can easily be seen as an explanation for certain actions Linden Lab has taken over the past year and a half, such as reducing the set-up fees for getting sims, lowering sim tiers for a time (in exchange for a fee), and increasing the prim capacity for sims. It's also a partial explanation for why Linden Lab is making a gamble with Sansar. They're not making the money they used to.

But according to Tyche's statistics from January 2, despite the moves Linden Lab has made, the overall slow decline of the number of sims in Second Life continued throughout 2016. In the first quarter of 2017, the total number of sims dropped below 24,000. Linden Lab may very well conclude Sansar is their sole chance for stopping their revenue slide. Hamlet's earlier observation that Sansar was starting to remind him more and more of the old Blue Mars virtual world, which after less than two years was pretty much on it's way out, is not exactly an encouraging sign.

While Sansar may not be "do or die" for Linden Lab as Hamlet also suggested, it's failure would be a huge blow as it would mean a significant investment in resources would get no return, and limit the Lab's options. In the short term, it might mean more tier reductions and more advantages for premium account members as Linden Lab takes more steps to try to stop the decline. In the long term if the decline continues, the Lab may decide to let some of it's members go in a "restructuring," reduce customer service, and other steps to reduce their overhead. And if that doesn't work, well, that may be best left unmentioned.

Sources: New World Notes, SL Universe, Second Life Grid Survey

Bixyl Shuftan

Commentary: "Get a Job"

Some people in Second Life don't make much money in real life, or otherwise can't or won't buy Linden dollars. If you're one of these people, how can you afford that nice dress or that quality avatar, or that nice little home for rent? For Syndra (katakanna), the answer is obvious: get a job in Second Life. So what jobs are available? Plenty.

Read Syndra's commentary in Extra.

Businessman Gets Four Months in Prison For Not Reporting Income From Second Life

Gregg Kaminsky, the CEO of Atlanta-based Circlenet, was recently sentenced to four months in prison for failing to report his Swiss Bank account and other foreign holdings of cash in addition to failing to report certain sources of income, including  $150,000 US from Second Life. Kaminsky told the court he thought "there truly was some confusion" over whether or not his income from a virtual world was taxable.

The US attorney for the prosecution, Sally Yates, stated that the case was a clear statement that "U.S. taxpayers are required to report all of their taxable income to the IRS, whether that income is earned in the real world or in a virtual world."

Hamlet Au noted that although Linden Lab has been "cagey" about it's recent economics, in 2009 the Lab reported fifty users were making over $100,000 US dollars from activities on the Grid, mostly through virtual real estate. The top 25 accounts made a total of 12 million US dollars. He also noted that ten years ago, one writer in SL contacted the IRS about taxes from income on Second Life, and was told not to worry about it.

In 2011, Michael Prime, known in Second Life as zFire Xue, the maker of the infamous "Redzone," was sentenced to four months in prison. His logging on Second Life was against the terms of probation for an earlier conviction.

Sources: Atlanta Business Chronicle,  New World Notes, Wall Street Journal, Reddit,

Update on Linden Lab's Blocksworld

Last month, New World Notes reported that Blocksworld, the building game bought by Linden Lab earlier this year, had become number three of the most popular  iPad apps, "For the first time … Second Life is not Linden Lab's sole hit product." A few days ago however, the reports were less rosy. It wasn't in the top 100 in either the "Overall" or "Games" categories, where the big bucks were made. Where it was showing up was in the "Family" selection of apps. A small source of revenue through parents making purchases, though not nearly the amount top apps like "Candy Crush" make.

Ener Hax's "Iliveisl" blog did a post with a graph showing one reason why many feel it's important to Second Life that Linden Lab gets another product bringing in money: declining tier revenues. From it's peak in 2011 when nearly 25,000 private sims were raking in over five million US dollars, the number has shrunk to less than 20,000 private sims with an income of less then four million US dollars. While the rate of decline seems to be slowing down, it's still a shrinking source of cash for Linden Lab.

Fortunately, there's still Linden Lab's indie game distribution site, Desura. And there are hopes that Oculus Rift could give Second Life a second wind. But it appears the earlier hopes about Blocksworld have been cut down to size.

Sources: New World Notes, Iliveisl 

Bixyl Shuftan