Money is based on something of value. In the case of the U.S., money is backed up by gold. Next to gold, only land is worthy of high value. Land prices affect any economy more than just about anything I could name. So land prices have to be worth what you pay for it or at least, very close to it. You could say merchandise and services are based on land prices. If the economy is strong, land prices can be healthy and the cost of goods and services will be right up there too. After all, in order for a merchant to sell their products or services, they have to have a shop. They have to pay for land to fill this shop with what you want to buy. But if the profit from the merchandise does not cover the cost of owning land, then you have an imbalance in the economy. Second Life has such an imbalance now, and it's been going on for a very long time now.
Back when I discovered the wonderful world of SL, I purchased everything I wanted. Clothing, land, house, vehicles, hair, eyes, skin, and everything else. It was expensive! But I had to have things like Animation Overrides (AOs), radar HUDs and HUDs that allowed you to fly faster and higher. These items made the SL experience much more realistic and wonderful (oh I know, you can't fly in real life but so what? I'm sure you would if you could!). I had a plot of land, a house, a bed that allowed myself and my friends to do unspeakable fun things in it and even sofas to sit on and visit. I had a motorcycle and car and helicopter. I had clothes! So many clothes I could eventually not keep track of them all. And everything was expensive. The land cost, for a very modest 1024 x 1024 plot was L$800 per week. That was about 5 years or so ago. Guess how much that same parcel costs today? That's right! L$800 per week. But the cost of everything else has dropped considerably. Why? Because the Real Life economy is in rough shape and has been for several years.
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The cost of a complete men's outfit used to be around L$400 to L$600. Now it's usually under L$100. I purchased a complete space shuttle fashioned after Star Trek's Deep Space 9 Runabout for L$89. It has sounds, tons of animations and sits and even a hover-cycle in it. It comes in two versions: One you can rezz on your land and fly or one you can wear for sims that don't allow you to rezz. All that and much more for L$89. I had to find a quick outfit for a New Year's Eve party. I found a sculpted top hat with mesh lettering and a particle effect for L$5. I would place the cost of that shuttle back in 2008 at around L$2000 and the hat at L$100. And these are just a couple of examples. There are countless more. So if the price on products has come down so much, why haven't land prices? I can only chalk it up to greed.
Merchants and creators are dropping their prices so much because they want to sell their items. People are not willing to spend much money anymore on clothes and vehicles and "toys". In order for merchants to move these items, they have to lower their prices. They realize the economy is slow and they are compensating for it. Yet the land prices stay the same. The creators/merchants have the same cost for their shop tier, but they are making much less profit. But Linden Labs is still making the same amount on land as they always have. That's not right and something's got to give.
Back in 2009, I was discussing with my then fiance' Dylan, the number of people online at any given time. It was typical at that time to see around 75,000 people online. She predicted that there would be 80,000 online on Valentine's Day that year and as it turned out she was quite wrong. Not everyone uses SL as a dating service. But that's beside the point. Today, it's rare to see as many as 55,000 people online. It's usually quite a few less. That's what's going to give. That's what is giving way now. The number of users has dropped dramatically.
SL has lots of new features compared to 2008. They have mesh now that can be designed offline and uploaded into the virtual world. They have mono scripts which runs with much less resources than the old scripts ran with. They have Server Side Includes. Well, that's supposed to be better but I personally have only seen things get worse due to that "feature" but that might be my video card too. Who knows... But my point is, while things are supposed to be getting better, the experience is a lot worse than it used to be.
Right now, I have the fastest computer I have ever had or imagined. Yet when I think back to my old IBM 386, it was running SL with ease and often times with two viewers at the same time. That's right, I could have two avatars logged on at the same time and it only slightly affected performance. Today, even with my lightning fast system, I avoid running two viewers at all costs. Nothing rezzes properly, frame rates are low, too many avatars are partial or fully invisible, crashing is almost a daily occurrence, lag is horrible and land costs way too much. If it were not for the majority of merchants lowering their costs, it would be very difficult to be an SL user. And that statement reflects in the loss of at least 20,000 daily users.
None of this would be that bad if Linden Labs would recognize what is going on here and adjust their tier prices accordingly. Oh, and stop trying to improve something that's working pretty good just the way it is. At this point, they are losing too many users due to lack of an enjoyable experience and yes, it has affected me too. I have friends who are helping me with the high land costs and I have not been purchasing any goods to speak of and my time in SL has been cut drastically mostly because I'm tired of crashing. Instead of wandering around, exploring and shopping and partying, I log into my home and Instant Message with friends. That's pretty much it anymore. No wonder SL's population is waning. They need to make the experience more enjoyable. I see too many new users logon and complain after a few weeks then show up less and less often until they are gone for good. Make SL affordable again and make it run smoother. That would make a huge difference for everyone.
