High Land Cost, High Profit
The primary product of Linden Lab is the monthly taxes that users pay on virtual land. It is free for a person to create an avatar and logon to Second Life, but most users want a home that they can come back to. A home is place that users can feel safe in, where they can keep their things, and a place that they can express who they are to other people. They want a place where they can entertain others they know. Even in a virtual world where one never needs to eat or sleep, a place where no one else can take or even move one’s possessions, users still want a place that is their own.
Linden Lab has recognized the need that humans have to possess their own private space, and have exploited this for their own profit. For a private region in Second Life, Linden Lab charges $1,000 US dollars. This is lot of money for virtual land, but what is worse is the $295 monthly Land Maintenance fee that Linden Lab charges. This is in addition to a premium membership fee of $9.95 per month that users need to pay to even own land at all. Then, even when you buy land, you are limited as to what you can build on it by the low number of objects Linden Lab permits per parcel. Each object is constructed of primitives and the maximum number of these you can have for an entire region is 15,000. This may sound like a large number, but most users cannot afford to own this much virtual land.
Most users who own land pay $9.95 per month for a premium account, which comes with 1/64th of a region of virtual land. This gives you just enough room to put your house with the spacing that is typical of a housing development, where each neighbor can look out their window and into the window of the person next door. Worse than not having much space, these tiny homesteads have a primitive limit of only 117. A house may be built in forty primitives, a single piece of clothing may have nine primitives in it, a couch may be built in four primitives, a vase may be made of only one primitive. What this means is that even if your house is almost empty you are extremely limited in the way you can decorate it because of these highly constrained primitive limits. But Linden Lab makes a lot of money on these little homesteads. If they rent one region to sixty-four people they are collecting $636.80 per month for one region of virtual land, more than twice what they would be collecting if only one person rented it.
To estimate how much profit Linden Lab must be making on virtual land consider the cost of OpenSim per region. For $75 per month I rented space on a commercial server that specialized in hosting virtual worlds. For this $75 I had four regions of space. There was no purchase price for land and no maintenance fee. All that I needed to pay for was the use of the use of the server. Unlike Second Life I had no upper primitive limit, although the company that rented me the server suggested that I not exceed 30,000 primitives per region, twice the hard limit of Second Life. I was able to log onto my virtual land using the same browser that I used for Second Life and have access to all the tools and features of Second Life, except for the Second Life economy. The result was that I was only paying $18.75 per region per month with a higher primitive limit, and no noticeable lag.
According to Wikipedia, it has been estimated that Linden Lab currently has about 31,430 regions for which they are collecting Land Management fees. Linden Lab taxes these regions from $75 per month for a low primitive count region up to $295 per month for a high primitive count region. Taking the average of these Linden Lab charges about $185 for a region per month, although the number is likely higher than this as I have demonstrated, based on Linden Lab dividing a region up and renting it to more people. But even using these conservative numbers, Linden Lab is making about $5,814,550 per month on virtual land rentals, with an operating expense of only about $589,312 based on OpenSim rental prices, and probably less based on the economy of scale of Linden Lab. Subtracting expenses from income this calculates to Linden Lab is making about $5,225,237 per month, or about $62,702,850 a year in PROFIT! Although this may sound like a high estimate, this is close to Wikipedia’s estimate of the Second Life economy being about $55,000,000 per year.