Thursday, August 23, 2007

Show Me The Money

Lindens in game are worthless to LL, even if you pay texture fees, classifieds, group costs, and the like.

You pay them RL money for fake money. It gets passed around, and eventually either you or someone you paid (directly or indirectly down the line) pays a fee in L to LL.

But that doesn't make money for them. Why? They already got their money, they sold it to you in the first place! The only way they can make money at that stage is to resell the L they've collected. And that can only happen if people are buying L.

So what if no one is buying? Then it sits. It's like a rechargeable battery, it's spent and it's not going anywhere or doing anything.

They collect more L when people cash out, where they gain a tiny profit (i.e. they'll set the buy-back price lower than the original buy-in cost, generating a tiny income).

The important thing is that paying LL in L doesn't help their bottom line. They'd have to resell the L they have on hand to make money off of it. It has the potential to garner them revenue, but by itself it is worthless to LL.

They can't just keep printing L either, or else they'll trigger an ingame inflation. And if they sell too little, the price of a L will skyrocket to the point where no one will want to buy. In other words, they have a very tight rope to walk.

So many people get confused by this because they are looking at the situation from the point of view of the consumer, not the mint. They paid dollars for their L, and when they sell their L they get dollars, so they assume that when they pay LL in L, LL gets those dollars. But that Peter robbing Paul to pay Paul. LL behaves like a mint. Having currency in their vaults is worthless to a mint, they have to recover costs (in LL, this cost is time and employee salaries) so they sell their currency. If you sold your money back to a mint (highly unlikely :) ) then they'd sell it again, because having dollars and cents stacked around isn't making them money. Selling it is.

So everyone claiming that increasing uploading and group fees ingame will generate income for LL is delusional, all it would do is give them an excess of L they'd have to sell, and by definition there is no guarantee they will sell. That's what LL needs. Guaranteed profit, not projected.

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