About Responsible Land Pricing in Second Life

This article will give you some insider details about land pricing in Second Life and point out the risks of “to good to be true” offers, 1L$ land, and other temptations you might enounter in your SL land shopping experience.

Lionheart belongs to the most reasonable priced estates on the Second Life Grid. Our pricing structure has been carefully developed around a list of specifications which our pricing structure needs to meet, in order to offer our customers a good value for their money and to guarantee them a stable and reliable partner to work with on long term.

We’ve split up both parts of land costs for you, to give you a better insight and understanding about how these fees work and why they exist.

Things you need to know about land purchase prices

Everyone who has done some research on the land market has noticed, that these days, a lot of estates charge a symbolic 1L$ charge for their land sales. Why is that? Well, basically it’s because a lot of these estates would like to attract a lot of customers at once, at every price and taking the risk of making an economic loss when a parcel stands empty for a while. As logical consequence, most of these estate companies are forced to sell off underoccupied sims when they don’t expect it to fill up quick enough again, and either move their residents to another sim or refund them. In some cases, and we’ve been hearing these stories a lot from customers who come to Lionheart telling about their experiences, they didn’t even get a refund and lost all their paid tier fees, sometimes really high amounts.

Some competitors though, charge a low purchase price like 1L$, 99L$ or similar, but charge you much higher tier fees instead, in order to operate economically. Read our 1L$ Land article about this topic by clicking here.

At Lionheart, all our sims are connected to a continuous continental landmass. It makes sense that we can’t just sell off a sim should it become uneconomical at some seasonal low occupation point, as it would leave a big hole in the continent and interrupt our infrastructure.

We want to guarantee our landowners at anytime a hassle-free experience, without having the need to move to another sim because the estate doesn’t know how to manage the finances well. For this reason, our purchase prices (which on top, mostly also include your tier fees already paid for a couple of days) are helping us to cover a part of the costs for parcels standing empty, as they need to be paid for at anytime, being occupied or not. This is why at Lionheart, we’ll never will ask a resident to move to another sim so we can close and sell off one, because we’re unable to cover a seasonal low for a couple of weeks. These fees also make it possible to have a dedicated sales team available 24h a day, to help you with their advice and knowledge in a professional way to find a property which meets your needs best. Just like in real life, a well paid and motivated team is the key to customer satisfaction. Our staff fluctuation has been very low to non-existant since years which is why we can provide you with a highly professional, knowledgeable and around-the-clock sales support.

As you can see, a fair and well balanced upfront charge serves you in return and provides you with stability, professional guidance and the peace in mind to be able to trust and rely on a location you’ve been looking for your new home and / or business in Second Life.

What is Tier, and what does it cover?

Tier is a usage fee for any land you own in Second Life. The term is easier to understand if you see tier fees as a level of allowed landholdings, which (for example on mainland) can vary depending on the amount of land you are entitled to own within each tier level. Different than on mainland and a few other private estates, at Lionheart you are not put into tier levels, as you pay only the tier fees corresponding to your real land holdings.

Tier fees include usually the running costs of an estate, as well as a small profit margin. To give you an understanding of the cost positions which are covered by tier fees, we’ve put some of the most obvious costs together, based on the example of Lionheart:

  • Sim running fees
  • Estate management and landowner support staff
  • Advertising
  • Inventory (Products bought to be used for the estate)
  • Technology (such as webserver, license fees, domain costs etc)
  • Research and development (working on new features and technologies for the benefit of our customers)
  • Acquisition of new sims to expand the continent
  • Prim usage of the protected land areas at all sims at Lionheart (which are prims which cannot be sold with the parcels, but still need to be paid for each month)
  • Community costs (such as concerts, etc)

As you can see, Tier fees cover much more than just the land you’re owning at an estate. Specially at Lionheart, the tier fees are making it possible to provide you with real protected, public land areas which often cover up to 55% of a sim’s area. Roads and railroad networks, waterways, woods and beautiful parks are possible because of the way we calculate your tier fees.

How are the tier fees at Lionheart calculated?

Lionheart’s tier fees are calculated in a very careful way, to enable us to guarantee you all the above mentioned features at all times, while still being in a position to give you one of the most reasonable priced plans possible in Second Life.

The tier fees are calculated based on a very simple formula. Each prim a parcel offers costs $0.007026 per week. At the current L$ / USD Exchange rate at the time of writing of L$258 / 1.00 USD, this would mean that a parcel offering 234 Prims would cost you $1.64 or L$424 per week (thats L$1.81 per prim/week).

How protected land influences the tier pricing

Now take into account the many extra features Lionheart offers. One of the biggest cost positions for us is, besides our staff which serves your support needs 24/7, the protected land we offer. More than 55% of Lionheart is designed as public land, which of course also needs prims. These prims we cannot sell with the parcels to our customers like all the other estates do, which just split up sims into square cut parcels and don’t care for sim decoration, infrastructure etc. However, we think that the public land is a very important and integral feature of Lionheart, and the feedback of our customers proves that we’re right, and they love the sim designs of our continent. It’s understandable, that we have to include the costs of public land into our tier fees.

Now if you would imagine for a moment that Lionheart would simply sell the prims our protected land uses as well, our price ratio would also change. If you take this into account, our price per prim/week would boil down to $ 0.00650/prim/week, which would be some L$ 1.68/prim/week and thus, at the very lowest limit of what’s economically possible.

You see, the beauty and usefulness of protected land and it’s landscaping, the paths and roads etc have their price. But still, even taking this into account, the pricing at Lionheart belongs to the most competitive you can find.

Please explain me how other estates are priced and why there are sometimes huge differences

While we cannot explain every other estate company’s pricing concept or want to question their concepts in general, we can help you to identify some trends for you and to understand why they exist.

Around the grid, you’ll find tier fees which are compared to Lionheart’s tier fees either around equal, higher (sometimes significantly higher) or lower (and sometimes significantly lower). We’ll give you some points to consider about these differences to help you understand why they exist. To make it easier, we’ll not talk about the equally priced competitors now.

Competitors with higher tier fees

These competitors often advertise their land with a very low upfront cost, mostly 1L$ or the purchase price being setup matching the first week’s tier fee. What they basically do is waive the upfront charge for you, but instead they ask you week after week for sometimes significantly higher fees than you would pay at Lionheart. While Lionheart charges you (as calculated above) L$1.81/prim/week, we’ve seen estates charging you some L$2.14-L$2.35 and even higher amounts per prim/week. This way, you may save some L$ on the purchase, but in the end, already after a few weeks, you’ll end up paying way more for these parcels each week than you would at Lionheart (See our article about 1L$ Land for more details and price comparisions).

Competitors with lower tier fees

In this category of competitors it becomes more interesting, and also sometimes dangerous for you as customer. While we do not deny the existance of some good offers on the market, we also have to ask you as customer to be cautious when it comes to offers which sound to good to be true.

Just like the real life real estate market led a whole world’s economy to sled into one of the biggest economic crisis of the last century, some competitors on the market in Second Life continue to use questionable tactics hoping to make a quick buck on the risk of their customer’s investments. Let us explain this further.

We have the cheapest land!!! – Sorry, we’re going to close the sim!!!

Just as every business model, Second Life attracts also a big amount of gold-diggers, who try to join an apparently well running market to make a quick buck. Not a small amount of them lack any experience in the market, or even cared to conduct a bit of research or work on a solid and sustainable concept. So what’s the best way to attract customers? Right, offer the lowest price you can! We all know, that every human being is too easily tempted to grab a good bargain, so some of these competitors manage it to fill up some of their parcels.

Common Estate Sim Example

It should not surprise anyone, that most of these sims look just as boring and conceptless as so many on Second Life do, offering nothing but simple square cut parcels with the infamous water canal between them, sometimes they even feel entitled to sell such parcels as “beach land”.

At some point these estate owners will notice, that everytime a parcel stands empty for a while, it costs them money, due to the lack of sufficient income to compensate this loss. Some will pay out of their own pocket for these losses for a while, but in the end, most of these estates close down from one day to another, the same quick way they have appeared on the grid. Not surprising either, that unfortunately most of them are not even able to refund their customers who have paid for their parcel sometimes for weeks or months upfront, simply, because the estate owner has run out of money as the costs ate up their incomes.

The grandfathered sim phenomena

This category of competitors enjoys a timely limited privilege granted by Linden Lab. To understand this better, lets look back a bit in the history of Second Life.

In the early days, the monthly usage fees for private estate sims were priced at $195.00 per month, which have been raised later to $295.00, means $100.00 more. To prevent a mass-abandoning of sims at this point, Linden Lab has decided to grant these old priced sims a special status, commonly known as “grandfathered sims”, which would keep their lower tier fees contrary to the new sims which have been ordered since this moment.

Today, most of the sims on the grid are priced at the $295.00/month level, with a minority amount of grandfathered priced sims left on the grid. With the end of old Class 4 servers, there was no technical reason anymore to keep grandfathered pricing conditions up. For this reason, Linden Lab has started 2010 with a slow termination of the grandfathered priced sims by introducing new policies which for example forfeit the grandfathered pricing upon sale of a sim to a new owner. This grants a slow decrease of grandfathered sims on the grid. Also it is fair to assume that Linden Lab will align all remaining grandfathered sim prices to the new level at some point.

How does this grandfathered sim pricing affect your tier fees? Well, that’s very easy to explain: Sim owners owning a grandfathered sim can do a couple of things to your tier fees:

  • Charge you the same or slightly lower tier fees as other responsibly priced estates (such as Lionheart) do, to get the maximum profit out of each grandfathered sim. As grandfathered sims are not tagged publicly, it’s not visible for anyone if the simowner is charged the normal tier fee or the grandfathered rate. This makes it hard for a customer to make fair price comparisions, as they don’t know the underlying facts. As these simowners pay for example for 20 grandfathered sims $2000.00 less per month to Linden Lab, they are able to make an unequally higher profit out of their sims, invisible to their customers.
  • Charge you a significantly lower tier than other responsibly priced estates do which operate on the normal $295.00 fee. While this is a real benefit for the customers at this point, as the simowners basically forwards¬† their savings to the customers, it can lead in a very short timeframe to a life-threatening condition for the whole estate company, once the day arrives when Linden Lab announces the ending of grandfathered fees for the remaining grandfathered sims on the grid. The estate would have to either significantly raise their tier fees to compensate the additional $100.00 burden for each sim/month, or they will simply go out of business. If you’re depending on a stable long term location in Second Life, this would be something you should consider as well when you stumble upon very low priced land.

Conclusion

Pricing always has been, and will continue to remain a very sensitive topic for every service provider as well as for their customers. Our advice for you is to always be cautious when some offer appears to good to be true, because most probably it indeed is. Investigate their business model to see if it’s really sustainable or if you would be in risk of losing your pre-paid tier fees when the estate owner suddenly has to sell off the sim where you have bought land on, because they no longer can pay for it.

Remember: Only a profitable company with a well developed business concept will be able to be there for you not only today or tomorrow, but also in the further future.

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Statistics

Sims: 13
Total Land Sqm: 851,968
Public Land Sqm: 399,952
Citizens Land Sqm: 452,016
Parcels: 270
Parcels For Sale: 65
Directory Entries: 24
Citizens Prim Capacity: 381,248
Citizens Prims used: 125,850