Regulation of Second Life
The history of the Internet shows that people move away from what is controlled and seek what is unregulated. In the beginning the Internet, all consumer access was provided by a few companies which each created a controlled environment for their users. One such company was called Prodigy. Prodigy collected information from news, weather, and sports reporting services and provided it to their users for a monthly fee. Prodigy effectively functioned as a computer bulletin board where only approved information was posted. Prodigy gained popularity when it allowed users to post their own content, and provided forums and email that allowed users to communicate with each other.
Prodigy then started to regulate how many hours each user could remain in their chat forums and limited the number of emails that each user could send per month without an additional fee, which resulted in them losing customers. Eventually Prodigy went out of business when faced by the competition of an unregulated Internet where every user could have unlimited chat and email, paying only for their connection fee. For a typical connection fee their competitors also provided users with server space to host their own web pages.
In a similar way, in the beginning of Second Life users could log on and have a limited experience in an environment controlled by Linden Lab. In Second Life, it was only for a fee that users could contribute to shaping the environment that other users would share. Still, in this virtual environment users built businesses using the virtual currency of Second Life, motivated by the ability to exchange this currency for actual currency. There were even a few users who were even able to earn and exchange enough virtual currency that they earned their real life livings using Second Life.
Predictably, one of the largest and most profitable sectors of the private Second Life economy was virtual world gambling. I do not know under what pressure Linden Lab was acting, but at some point they banned gambling in Second Life. At that time I understand that gambling in Second Life was about ten percent of the total economy. In the short term, this ban on gambling created a huge financial loss to the vendors who owned and developed buildings and scripted machines on the virtual land of Second life. What was more important is that it signaled that Linden Lab was going to regulate Second Life, a step that would inevitably destroy its value to the majority of users.
Almost immediately after the ban on gambling, the entire Second Life banking industry collapsed, causing most users to lose all of the money they had saved there. At that point, Linden Lab declared that they were the only bank and then made a ban on any other in-world banking. One might think that Linden Lab would have learned that regulating their virtual world would drive increasingly more people away, but this didn’t stop them from regulating further.
Next, anyone who generated content and attempted to sell it was regulated. If a person made a piece of clothing and named it after a brand name clothing that person would have that item deleted from their Second Life inventory and be threatened with a deletion of their avatar if they continued to try to sell it. This was true even if the virtual product itself did not resemble any real life product. This was process of inventory deletion was also true for people who made houses, cars, spaceships, or any other virtual product. Linden Lab’s continued search in every commercial area and every private inventory meant that almost every person in Second Life has had items deleted in the name of Linden Lab’s policing copyright infringement inside of its virtual world.
I personally had a number of items deleted from my inventory because Linden Lab claimed that some small part of these objects infringed on someone’s copyright. In the worst case of inventory deletion I had an expensive virtual car deleted from my inventory because Linden Lab claimed that one of the many scripts it contained belonged to someone else. If I purchased the car, didn’t I buy all the scripts it contained? Further, why couldn’t Linden Lab just delete that script and leave the rest of the car in my inventory for me to use. Of course Linden Lab did not reimburse me for the real life money that car had cost me.
The effect of enforcing copyright infringement rules in-world was to drive out most of the skilled content generators from Second Life. Those who did not have their accounts deleted directly simply left Second Life because there was no financial incentive for them to be there any longer. There were a few content generators who did remain because they could market their virtual products through a third party vendor called XStreet. XStreet did not regulate products in the same way that Linden Lab did, and their fees were low so, it was still possible to make enough money selling virtual products to make it worth the real world time to create these items.
Then, in a move that appeared intended to drive out any remaining content generators, Linden Lab purchased XStreet, regulated all the products sold, and increased the fees to vendors. Predictably, this caused another wave of content generators leave Second Life. In the words of one content generator, “All of the creativity is now gone from Second Life.” One would think that Linden Lab would have taken note of a similar vendor exodus when eBay enforced a rule that vendors could not link to their own external web sites to sell products, but were instead required to have expensive eBay stores. Years after eBay enforced this rule, they are still trying to get vendors back.
The lesson is simple, the more you regulate the Internet, the less value it has to users. Increasingly more people are using the Open Source alternative to Second Life, OpenSim. The largest provider of an OpenSim virtual world is OSGrid.org, who encourages any user who wishes to add their virtual regions to the larger OSGrid virtual world by providing PC based virtual world servers free to download.