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On Nov. 21st, 2019, Linden Lab (the makers of Second Life) announced:
On December 2nd, 2019, commission rates on Marketplace sales will become 10% of the item price. This will be the first commission increase since the Marketplace debuted a decade ago. This new rate remains significantly lower than most digital content commissions across the industry. Apple and Google charge a 30% commission on sales in their app stores, as do many other popular virtual worlds, VR and gaming platforms, such as Oculus and Sinespace.
Many SL users have grumbled that the 10% figure (which will be double the previous 5%) does not accurately reflect the complete picture of how Linden Lab makes its money. Some have pointed out that comparing the 10% figure against the 30% commission charged by Apple and Google is misleading, given all the other transaction fees LL has implemented.
One commentator stated on the official Second Life user forums:
I did this calculation:
If I buy 2500L$, it cost me $9.73, and with transaction fee of US1.49 the final cost is US$11.22
If I sell an item on the MP for L$2500, I now get L$2250 for it. (10% LL commission as of Dec 2nd 2019)
When I sell the L$2250, I get US$8.13. (3.5% transaction fee to LL)
When I withdraw the balance to my bank, I get US$7.72 (5% Transaction fee to LL)
So if a SL member buys L$2500 and the merchant cashes it in, we are seeing a transformation of US$11.22 to US$7.72, and LL are effectively taking 31.2% for themselves.
LL say in their blog post: ”This new rate remains significantly lower than most digital content commissions across the industry. Apple and Google charge a 30% commission on sales in their app stores, as do many other popular virtual worlds, VR and gaming platforms, such as Oculus and Sinespace.”
They refer just to the 10% MP commission, but we see that LL is actually creaming off over 30% if you follow the money from start to finish.
10% MP commission is one thing, but then all the other charges just add up to something that is somewhat unfair.
I found this explanation very instructive, so I wanted to share it with you. If you want to read the entire thread on the forums, here it is. You might also find this conversational thread interesting.
I think that this is yet another step in a long-term strategy. Linden Lab is continuing a multi-year, concerted effort to shift its main income generation away from charging for land, and more towards charging for services. Once LL successfully launches SL sims “on the cloud”, as opposed to running its own expensive servers, I do expect that the cost of buying (or more accurately, renting) virtual land in Second Life will decrease as a result. But obviously, we aren’t quite there yet.
So, what do you think? Is this a price gouge on the part of Linden Lab, or a necessary cost of doing business? Please feel free to leave a comment below, or even better, join us on the RyanSchultz.com Discord server and tell us what you think there! We’d love to have you.
5 thoughts on “Editorial: Second Life Users Are Less Than Happy About Linden Lab Doubling Commission Rates on the SL Marketplace from 5% to 10%”
Doubling the tax is a price gauge, for sure. It will be interesting to see how many merchants just stop using the Marketplace. At 10%, that is far more than just running your own site, with far more and better features.
The entire cost factor of being a merchant/creator in second life will dictate just how many people will even want to bother with making anything. People migrated to Second Life as developers and artists because it was advertised as a digital environment to do business. Linden Labs is making the same mistake that most large cities make when facing revenue issues, which is to just raise taxes on those that make things better and more interesting. This in turn will run off developers and cause them to use their efforts elsewhere which in turn will make Second Life less attractive as a whole and stunt its growth or more likely kill it. Unless LL wants to make everything, rent everything and just charge a subscription this ridiculous tax on developers will backfire. Of course everyone knows what happens when the government or one entity is the provider of all things, it just turns to crap.
necessary cost of doing business. As you said yourself , Linden is in the middle of swapping over its business model ..They are swapping it from a system built on land sales , to a system built on Commerce. Land prices are way too expensive for the average user to afford , how is the average user suppose to create their world when the barrier to land a sim is 249 Dollars a month that’s a car payment. Because of that people dont stick around, i personally have a bunch of friends that left SL because of the land prices and no longer log in , they switched over to the open sims for the cheaper land so that they could build.
They did recently lower the price of land a little bit but its not enough. But i do see one thing missing from your calculations, most major stores aren’t just on MP , most have in world store locations which cost them lindens to run. As land prices go down they will be saving some of that linden and converting it to dollars as they cash out. My hope is land prices go down drastically over the next year as their cloud system goes up , i mean like 50 bucks a month drastic.
LL is a business they aren’t here for us to make money that’s just a extra perk , LL is here to make money themselves and answer to their investors. If they lower prices in one area , they have to raise prices in another in order to meet profit margins and keep their investors happy along with paying their staff, paying for infrastructure , and paying for maintaining and updating SL.
We as creators , yes im a creator too , have to run our own business’s the same way , especially if you are using SL as your living. When LL makes price changes i as a business owner adjust my pricing ..for example this 5% increase (10%) total is just going to get added to my MP prices. If i want to make 90L on a product , then i will raise the MP price to 100L, while keeping my inworld store prices at 90L. Im sure to advertise across my social media platforms and to my in world support group hey the cheapest prices for my items are in world. Not only are they 90L in world, but most likely if you are a group member you will get it for 75L because of group member discounts. Creators really need to switch their focus away from MP and push their audiences to their in world locations
slight edition , cause i cant find a edit button , some Second life user are unhappy yes, but the vast majority dont care cause it doesn’t effect them. Does it effect me sure , but i run a business and i adjust my business accordingly just as i do in real life. Will me adjusting my pricing structure for my store make some customers unhappy , most likely , most wont even notice, and my base buyers normally buy in world because of the group discounts that aren’t available on marketplace. You either adjust or get swallowed whole by the LL Shark.
Informative information TY
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