Does Second Life need a bailout?

At the end of the year, I suspect that the "2009 Cliche List" will include "bailout" as one of the words guaranteed to have people throwing their dictionaries through the window. Businesses in Second Life, as in real life, come and go. Some 90% of businesses in SL fail (http://www.slentre.com/second-life-business-only-10-of-real-life-busines...) so recession or not, one would expect the collapse of some enterprises. Although some may make the argument that the recession will "trickle in" to Second Life, one may also argue that more people will use SL as an escape, and that folks losing their jobs will actually spend MORE time in SL. I make no claim either way but just suggest both arguments have merit and that currently there is no good evidence to support either.

I suspect that the big problem here was that when the Galaxy was planned, there was likely an expectation that casinos would be a major source of core income for the business. Although I never saw what they did in this area, given the quality of every aspect of the Galaxy I can imagine this would have been carried out in high style, with a Monte Carlo-like atmosphere rather than the tawdry places that some SL casinos were.

However, soon after the Galaxy was launched, gambling in Second Life was banned - which must be said, was welcomed by many people. As a result the income stream would have had shift to to focus on accommodation, and I doubt very much that this was in the business plan. The Galaxy is a wonderful venture but it must have been difficult to turn a profit under those unexpected circumstances.

Thus my personal suspicion is that the Galaxy's problems were caused by in-world changes rather than the outer real economy. In exactly the same way, the very badly-handled and ill-considered decisions Linden Labs has made more recently around the Open Space issue has caused enormous economic disruption in-world - again not directly related to the real economy.

I am seeing the number of residents in-world climbing and climbing with some quite enormous numbers showing regularly. My personal suspicion is that people will be flying to real-world conferences less, holding them in-world more (SL conferencing knocks spots off ordinary video conferencing in my view); going out in RL less and going in-world more; and so unless LL continue to shoot themselves in the feet the way they have done with the OS issue, the in-world economy should be fine - and even thrive.

I am very glad that the ship - one of the star attractions in SL for many - will be saved and I do wish them every success in the future.

I agree with Elrick and Mustafaa, if we are to believe Linden Lab's spin that "there is no recession in Second Life" then the only reason for the SS Galaxy and other leading ventures to pull out is because of the poor business decisions and appalling policy execution that Linden Labs have a reputation for making.

Imagine if you will the SS Galaxy as a newly built ship straight out of the dry dock and setting sail with world-class performances, attractive malls, quality accommodations, and many features and attractions ready for residents to flock to. Most importantly a number of attractive slot machines and gambling attractions were in full effect and usually every seat was occupied. The business plan was solid and the place was humming. Then, without warning, Linden Lab decree that gambling is now illegal and a huge revenue stream is cut on this bright new venture. Glass walls were put in place and the dead slot machines sat on display behind them, gathering virtual dust, as if to make a statement about what the ship is supposed to be used for.

This happened a matter of weeks after the Galaxy's launch. The owners picked up the pieces and refocused their business model, but how can one plan for the future when the rug could be pulled out from under one's venture at any given time?

Therein lies the inherent problem with running a business in Second Life. We residents are all playing in the Lab's sandbox, and they can change the rules at any time. There is an appearance of solidity in SL, but older residents know this is an illusion.
The paradigm could be compared to Stalinist Russia where businesses struggled to do their best but at any time could be seized by the government and the owners ruined. How could an entrepreneur start a business in such an environment?

Second Life still remains a vibrant, dynamic community... for now. But it’s growth is ultimately thwarted by the company that owns it.

I really think it's ridiculous to talk about bailing out vanity projects in SL that can't get themselves paid for. And the owners and creators of this spectaculor sim, starting with architect Bill Sterling, who are very talented and shrew business people know this, which is why they made the decision to take it down -- they couldn't make it pay. If anyone could make it work, they could, as they have vast experience for years in SL making beautiful builds and events. So...somebody came along to pick up the tab awhile longer, but not everyone can get a boat with rentals and special events in it to pay even its costs. The challenges remain, and have nothing to do with Linden Lab, the RL recession, or gambling, all factors irrelevant to this project, which can make it or break it just like any other entertainment project can, by getting customers to pay for it -- that's all. It's not special, it's in competition in a free market, and there is no objective need to bail it out, or berate Linden Lab, the platform that sustains it, any more than you would blame 42nd Street and the city of New York if your particular hotel or movie theater couldn't attract and keep customers.

It don't believe this ship had anything to do with gambling originally. I'm puzzled by this claim from "older resident" who I think is just speculating. I was at its opening, and I don't recall slots anywhere. Bill certainly didn't have them on all his other luxury rentals. As far as I recall from the opening of the ship, l even if gambling was still legal then, it was *not* part of his business model. He had rentals and special events and content -- a different model.

Similarly, recent LL policies about lower-prim openspace sims have NOTHING to do with the difficulties of *these* sims which were the full-prim full-service sims that cost $295 a month tier. It's hard coming up each month with $600 US for 3 big full-prim sims where the rentals are not on dedicated parcels, have little privacy, and are surrounded by crowds of people dancing. I've written about this here:
http://secondthoughts.typepad.com/second_thoughts/2009/02/does-sl-need-b...

Making this project work will require restructuring the living and event spaces most likely and adding more shop rentals and more original content and special events. That takes staff and development expenses, but the people involved are very capable and likely could manage this with a little infusion of capital. It will also take growth in sign-ups in SL, and for that we need from the Lindens that all their planned streamlining for new customers will really work and stop losing people before they even get to see great sites like Galaxy.