The killer awoke before dawn

I’ve been caught up with work and social engagements recently, and so completely missed the latest big Second Life story; Stroker Serpentine’s lawsuit against Linden Lab over the thorny issue of IP rights, and the Lindens’ efforts, or lack thereof, to protect them.

The details of the case, and its merits, have been well covered in the Alphaville Herald and New World Notes, and there’s no shortage of comment around the SL blogosphere (like here, here and here). In such circumstances any opinion I care to offer is bound to be superfluous, as well as being thoroughly uninformative, seeing as how I have no knowledge whatsoever of contract and copyright law as it is applied in the state of California. But what kind of blogger would I be if I let ignorance of the topic or fear of repetition stand in the way of weighing in with my two cents worth?

Everyone agrees that content theft is an issue; Stroker’s case revolves around the question of whether the Lindens are mere providers of the framework in which the criminality occurs, and thus not responsible for it, or if the fact that the Lab profits from copyright infringement by collecting dues from the malefactors makes it part of the evil enterprise. The precedent that is being quoted is the case of Louis Vuitton Malletier, S.A., v. Akanoc Solutions, Inc., et al., where the luxury goods maker was awarded $32 million damages against a firm that hosted websites selling counterfeit Vuitton items. The Taser case seems relevant too, as well as the Lab’s previous actions in banning in-world gambling and banking, which presumably stemmed from a realisation that the US Department of Justice was likely to regard hosting illegal activity as an offence in itself.

The Lindens’ defence will probably rest on the “safe harbor” provision of the DMCA, but they may be on shaky ground there, since any claim to be at one remove from the murky business of SL commerce would be rather undermined by their ownership of XStreet, and their record of assisting aggrieved creatives with DMCA filings is allegedly very poor. There is some speculation that the Second Life Terms of Service, specifically the sections prohibiting residents from suing the Lindens, might be the Lab’s get-out-of-jail card, but it seems unlikely that any court would enforce a contract containing such obviously unfair terms.

All these legal questions are mildly diverting, but what is much more interesting is the underlying psychology. It reminds me of a gritty crime movie, the part where the heist has gone wrong and the thieves have started to fall out. One can only imagine that Stroker’s sex-bed business must have hit the skids before he would pursue the nuclear option of suing the Lindens. I’ve no doubt that having his designs ripped off has at least partially contributed to this, but I suspect that the inherent limitations of the virtual economy (which we’ve previously discussed here and here) have had a more significant impact.

It feels as if there is more to this than mere financial considerations though. What Stroker and other designers want is not just money, but respect, due acknowledgement of their creative talents. Unfortunately, outside of a small subsection of the SL population, being a virtual clothes/hair/whatever producer just doesn’t count for very much, in terms of cash or kudos. This may or may not be unfair (I tend to think it is some way off being the worst injustice in the world), but it’s a fact, and no amount of complaining on the internet or suing Linden Lab is going to change it.

Looking at it more analytically, there also seems to be an Oedipal theme to this lawsuit. By all accounts Stroker was a Joe-the-plumber type before Second Life gave him the chance to reinvent himself as a virtual pornography mogul; it seems ungrateful, to say the least, that he should set in train a process that could theoretically ruin the company that made his good fortune possible. The Lab may have begat Stroker, but he has good reason to think that he is not Philip’s favourite son; the sex business of which Stroker is the most prominent public face is often cited as the biggest threat to the Lindens’ future prosperity. Stroker would not have to be particularly paranoid to see the regulation of adult content on the grid as an attempt to castrate him (figuratively and literally; ridding SL of penises seems to be one of the prime objectives of the new rules). Perhaps the case represents Stroker’s unconscious desire to kill his virtual father before he himself is annihilated by paternal rage.

What would be the most desirable, or least undesirable, outcome of the case? Should Stroker prevail it would surely be a Pyrrhic victory. The suit is a class action, so every frustrated shopkeeper who ever had a texture pilfered would be able to jump on the bandwagon, exposing the Lindens to potentially unlimited liability. Even if this doomsday scenario didn’t come to pass, an adverse judgement would force the Lab to radically change the Second Life retailing landscape, probably by introducing some sort of merchant registration and approval system, shutting out the small scale entrepreneurs who are, everyone says, the lifeblood of SL creativity.

And what if Stroker loses? There has been the usual Atlas Shrugged-style posturing from various bloggers, with talk of how an exodus of talent will leave the rest of us wailing and gnashing our teeth, bereft of prim hair and erotic animations. In reality, of course, little would change, since any designers who did flounce out would be quickly replaced by others with equal skill and a rather more realistic estimation of the value society places on virtual creativity. It would be for the best in the long run, since Second Life can only benefit from a population that is more interested in enriching the collective experience than amassing personal wealth.

So I’m hoping that the case goes to court, and that Stroker loses. I doubt that this will happen though; the Lindens’ corporate lawyers will want to avoid the uncertainty of going to trial, and will push for a settlement, which I suspect is what Stroker has had in mind from the start. Even if they don’t admit liability the Lab will have to introduce more regulation to avoid facing similar actions in the future, and the nature of Second Life will change forever.

Whatever happens, it feels like a chapter, if not the whole book, is drawing to a close.

It’s the end of our elaborate plans…

Brother, can you spare me an ISK?

More virtual-life-imitates-real-life news from the futuristic universe of EVE Online, where EBANK, one of the game’s largest financial institutions, has frozen all deposits after new management discovered a 1.2 trillion ISK (InterStellar Kredit) hole in the accounts.

At first glance this seems to be a repeat of the Second Life banking fiascos of 2007, but, to be fair to the directors of EB, they do seem to have been trying to run a proper retail banking operation rather than just a glorified Ponzi scheme, with interest paid to depositors theoretically covered by interest charged to creditors.

The initial stories of EB’s troubles focused on the embezzlement of 250 billion ISK by the bank’s former CEO, but what really seems to have done the damage is the spectacularly high level of bad-debt provision. Just about the whole of EB’s loan book looks to be unrecoverable, a failure of risk-management that makes even the most delinquent of real-life banks look ultra-cautious.

It is, I think, another example of cargo cult consciousness, the belief that you can capture the essence of something by replicating its superficial form. In this case EB did the things that a real bank does, like taking deposits and making loans, but without the social infrastructure than underpins such a business in the real world, like a legal system that allows creditors to pursue their debtors and seize their assets. More importantly, institutions of finance capital can only exist in the context of a system where there is actual value being produced, rather than an imaginary universe where work ultimately counts for practically nothing.

It’s surprising that anyone still believes that banking and other financial wizardry can magically create wealth, rather than just existing parasitically on the labour of the workers, given that recent events in the real world have shown up the masters of the universe for the frauds that they are. (ISK also stands for Icelandic Krona, and we all know how well that’s been doing recently.) A certain suspension of disbelief is required to enjoy the experience of EVE Online; perhaps for the more avid players their time in New Eden detaches them from reality altogether.

I want to spin my little watch right before your eyes

My Twitter feed is gradually accumulating a small band of adherents, all of whom, I am sure, are keen to digest my scintillating prose, rather than just following people at random as part of a Twitter-spam operation or SEO scam.

Quimbe, one of my new buddies, has been especially keen to share with me an amazing opportunity he has unearthed. Do I want to ” Discover A Rebel Psychiatrist’s Amazing Secret?” One that will let me “Put People Under Your Control Quickly & Easily … and Get Them to Do Anything You Want?” Well, who doesn’t? This arcane knowledge can be mine for only $197, thanks to the amazing generosity of master hypnotist Igor Ledochowski.

Actually, what Igor is peddling is not particularly new, drawing as it does on the work of the fairly well-known American psychiatrist Milton Erickson, pioneer of hypnotherapy back in the ’50’s. Erikson had a somewhat idiosyncratic concept of the unconscious as an entity whose therapeutic power could be tapped by entering into a hypnotic trance, which he famously could induce in a subject using only his secret handshake. Erikson’s ideas were always on the fringe of respectability, and his modern-day followers, most notably practitioners of Neuro-linguistic programming, which draws heavily on his work, are largely confined to the life-coaching and self-improvement industries.

Igor may not have much clinical credibility, but he does show some appreciation of modern business trends. He used to charge thousands of dollars for his seminars (he says), but there was a physical limit on how many of these he could do, and also a small pool of potential customers, for whose attention he had to compete with all the other gurus out there. With the advent of digital distribution channels he has been able to benefit from a new, and much more lucrative, revenue model – mass circulation and (relatively) micro-payment.

All this came to mind today when I read about the travails of the Second Life music scene. Apparently musicians and venue owners are struggling to get audiences to pay anything at all for their live music experience. Mankind Tracer, alter-ego of musician Seth Regan, is proposing that venues start charging a cover, and he feels that L$500 would be about right for one of his performances, though comments on the thread suggest that people think this would be too much for the market to bear.

My first thought was that if punters won’t pay US$2 to see your band then you probably need to practice a bit more. I’m not out much these days, but back when I was an avid gig-goer I would regularly pay US$10 or more to get into a club without even knowing who was playing. I guess the difference is that in real life even if the band sucks you can still have a good time, because you are in a bar, with your friends, but in SL if the act is no good then the night is a washout.

Even if we take the stinginess of virtual audiences as a given, it should still be possible to make good money if you put on show that is good enough to draw a big crowd. If you played to ten thousand people you’d still do OK even if 90% of them paid nothing at all and the rest coughed up a dollar apiece, and even better if you dropped the suggested tip to 25c and half of them put their hands in their pockets.

The problem is that this mass-audience/micro-payment plan requires a scalability that Second Life currently does not provide. Full sims can theoretically support up to 100 avatars, though on the rare occasions when I’ve been somewhere with more than a couple of dozen or so other people (which have all been music events, interestingly) the experience has not been particularly enjoyable. So even if your band could pull in a five-figure crowd (which is not entirely unrealistic, given the potential world-wide reach), the sim would crash long before you started making money.

Blue Mars, which has (finally) gone into public beta this month, promises the capacity that could make this model work. If that turns out to be true, virtual musicians on that platform might get the rewards they deserve.

There are certainly some bands I’d pay L$500 to virtually see…

Forward to the past

This time last year I was just starting to rekindle my interest in the US presidential elections, having gone off the process a bit after my favoured candidate, Hillary Clinton, failed to clinch the Democratic nomination. At that time it looked as though the race could be uncomfortably close, but that was before the Republicans unveiled their secret weapon, VP-nominee Sarah Palin, and the world breathed a sigh of relief, safe in the knowledge that Obama had it in the bag.

Ms Palin has been back in the news this month, having decided that staying on to complete the job she was elected to do in Alaska would be the “quitter’s way out”, and that she would show she was no quitter by, er, quitting. Now that she no longer has the tiresome responsibility of looking after the wellbeing of her constituents, she is free to start building her campaign for 2012.

It amazes me that anyone in the US, even those on the right, could think that Palin is the best shot the GOP has at regaining the White House, especially after the drubbing they received back in November. The one thing sure to keep the coalition that swept Obama to power together is the sort of intolerant social conservatism that may play well to the ever-shrinking right-wing base, but just alienates the rest of the population.

The Democrats would be much more vulnerable to the sort of fiscally conservative/socially liberal approach that’s being peddled by David Cameron and the Conservatives here in the UK. In a depression no one cares too much about gay marriage or abortion; they’re too busy worrying about losing their jobs and their homes.

I guess the Democratic and Republican strategists will be waiting to see how the election here works out, when it finally comes. It seems sure to be fought on economic rather than social issues. I think that there will be a real divide between the main parties this time around, with Labour proposing a continuation of deficit-funded government spending, which will, theoreticaly, kick-start the growth that will eventually pay off the national debt, while the Conservatives will be offering painful public sector cuts now with the promise of better times in the future. It’s difficult to see a Labour victory though, since the mood of the country, like the US last year, is for change, unsurprising when one considers the economic mess we are in.

Obama doesn’t seem to be making much headway in tackling the financial crisis; there’s every chance that come 2012 he could lose to a Republican candidate promising small goverment and a balanced budget. With Cameron in charge over here it will be the Reagan/Thatcher years all over again.

On second thoughts, maybe a Palin candidacy wouldn’t be so bad…

Is that a blog in your pocket?

Farhad Manjoo at Slate posted an interesting article a couple of weeks ago about the economics of social networking sites. Apparently Facebook spends US$1.5 million on electricity and bandwidth every month, and US$2 million a week on new hardware, all to store and display user-derived content that is proving hard to monetise. YouTube has similar problems; both sites are burning through capital like it is going out of fashion.

Does this mean Web 2.0 is going to be the next dot.com bubble? Probably not, but the multi-billion dollar valuation of social media firms is likely to be revised sharply downwards before too long.

Are the prospects for professional bloggers any brighter? If you believe Mark Penn at the Wall Street Journal, there are now more people in the US earning a living from blogging than there are lawyers. I was initially excited by this news, before I remembered that Penn was the genius behind Hillary Clinton’s “Big State” strategy in the Democratic primaries. Lane Hudson at the Huffington Post takes Penn’s blogging figures apart very efficiently; it remains depressingly true that the vast majority of bloggers will fail to emulate Mae West – they may keep e-diaries, but their e-diaries will never keep them.

Unrewarded talent

In a thread over at Metaversally Speaking headed (surely ironically) “Entitlement”, various luminaries of the SL fashion scene muse once again on the inexplicable reluctance of the public to pay more than token sums for their virtual creations. The problem is identified as an unwarranted sense of “entitlement” among consumers, who fail to recognise the importance of rewarding creative types handsomely, lest they take their talents elsewhere. Freebie culture is the villain of the piece; the remedies suggested include a price-fixing fashionista cartel, and state (or Linden) intervention to maintain price stability. (Regular readers will recall that I have my own theory about the determinants of value in SL; if you don’t like that one then I’ve got another).

I might find all this a little less ridiculous if I believed that the distressed designers were the sort to visit their local farmers’ market rather than Wal-Mart, drink nothing but fair-trade coffee, and make sure that their clothes don’t come from sweatshops. Maybe they are, but I can’t help thinking that the these virtual entrepreneurs are more likely to be the type who worship the free-market (except of course when it works against their interests).

There is also some irony in the fact that virtual worlds like Second Life could never have come into existence without the collapse in hardware costs over the last decade, which in turn has depended on wholesale exploitation of workers in developing countries. If the SL fashion crowd want to know about being inadequately rewarded for their labour they should talk to the people who inhale toxic fumes in Chinese factories while producing the cheap computers, routers and flat screens that we in the west feel “entitled” to.

It all raises the question of why people are getting so bothered about something that seems fairly inconsequential. The figures from the Lindens, backed up by a survey reported in the Herald last week, show that only a very few people are earning more than a pittance from virtual commerce, so it’s not as if anyone’s livelihood is at stake.

What is at stake is self-image. Are you really a fashion designer, or are you just playing the part of one in a game? If you’re happy to accept that it’s all just role-play, then the in-game pay-off of L$ and attention from other players will be reward enough. If however part of your real-life identity is invested in your virtual activity, then you will want something more tangible, like crisp US$ bills, that you can show to your friends to convince them, and of course yourself, that your Second Life status is actually worth something in the world beyond the SL blogosphere.

When the material recognition of your virtual talent is unforthcoming, as it generally is, you have two choices – you can get angry with the world for failing to give you due respect, or, more productively, you can reassess your goals, ask yourself if it’s really worth getting so bothered about a game, and redirect your energy into something that is more likely to make you happy.

Gimme Gimme Shock Treatment

Bloomberg are reporting that Taser International Inc. have filed a trademark-infringement lawsuit against Linden Labs, alleging that the sale of virtual copies of the corporation’s stun-guns in Second Life is damaging the firm’s reputation.

What’s interesting about this is that it is Linden Labs that is being sued, rather than the creators of the knock-off weaponry. Anyone who has ever shopped in SL will know that there are plenty of fake Gucci bags and other designer merchandise in circulation, but until recently there has been little incentive for trademark owners to go after the counterfeiters, since the chances were that they wouldn’t have enough money to pay any substantial damages.

That’s all changed now that Linden Labs has taken over XStreet, and, as Tateru Nino notes in her coverage of the case over at Massively, effectively become the retailer of the dodgy goods. Suddenly the lawyers have a profitable corporation in their sights instead of some penniless hackers, a corporation that will probably settle out of court to avoid the nuisance of ongoing litigation.

This could open up a whole new career path for SL entrepreneurs; virtual patent troll.

Whatever, here at SLS we’re still happy, happy, happy, all the time.

Career Opportunities

Further to my last post, I’ve been doing some calculations based on the figures in M Linden’s “State of the Economy” report.

The survey quoted had 2645 responses, which is said to be 15% of business owners, so the total number of enterprises must be 17633. Of these, 64%, or 11285, report that they generate positive net income – 52% generate up to 20% of their total income from Second Life, 5% generate 20-40%, 2% generate 40-60% and 5% generate 80-100%.

If I was a statistician I could probably use this data, along with the US$100 million cashed out figure, to construct a model that would show how many people were earning the big bucks, but I’m not, so I’ll just engage in some idle speculation.

Let’s generously assume that when M says that “a good part of [the US$100 million goes] into Residents’ pockets”, he means that half of it does. That’s US$50 million split 11285 ways, or an average of US$4430 plus change each. But clearly some people are creaming off more than others. We don’t know what the top 5% (of the whole 17633) are earning, but, for the sake of the argument, let’s say they are fairly modest types, for whom US$50K is a good living, so the 881 of them collectively take home a little over US$44 million, or just about the whole pot. If we lump together the 7% (1234) who are getting 20-60% of their income (nobody seems to get 60-80%) and say they average US$15K, then that’s another US$18.5 million, which leaves less than nothing for the bottom 52%.

Of course statistics can be made to prove anything, especially when you just make up the figures like I have, but I would argue that, if anything, I have been too optimistic (from the point of view of a potential SL entrepreneur) in my assumptions. About a year ago Hamlet Au at New World Notes calculated that land fees added up to US$6 million a month, plus more for land sales, so it seems likely that much more than half of the US$100 million that is cashed out goes straight back to Linden Labs. In a more recent article Hamlet noted that a few of the top-grossing businesses were taking out more than a million US$ annually, so even in the top 881 there must be a heavy skew, with a handful of big earners and a mass of also-rans, and in the lower reaches of the economy the average income can’t be much above double figures.

None of this is necessarily a problem – I’m sure that most business owners see their SL enterprise as a self-financing hobby, and won’t lose too much sleep if it doesn’t make them rich. Linden Labs should perhaps embrace this spirit, instead of continuing to peddle the myth that there is serious money to be made (by people other than themselves that is). Statements like “In the current real-world economic climate, I think the additional income generated from a business in Second Life must be a welcome addition to our Residents’ personal budgets” (from M’s report) look at best ridiculous, and at worst dishonest.

Still, I guess “SL entrepreneur” just about beats making tea at the BBC.

M is for Pangloss

There’s an interesting post over at the official SL blog this week, wherein M Linden considers the “State of the Economy“; if you don’t have time to read it and the many responses it has generated I’ll sum it up for you:

M Linden: Everything is just grand! The future is rosy!

Residents: No.

I’m exaggerating, obviously (though not much; the picture accompanying the post shows a virtual tree, but instead of leaves it has, like, dollar bills! So even the illiterate can tell that the economy is booming). M seems to base his optimism on a couple of headline figures – 2008 user-to-user transactions of US$350 million, and US$100 million cashed out via the Lindex in the same period – and a rather vague survey of business owners showing 64% claim to generate positive net income and 61% are optimistic that their revenues will grow.

US$350 million may sound like a lot of money, but for a place with around 1.4 million active residents (according to the latest statistics) it’s small beer. For comparison, in San Francisco, with a population of a little over half that figure, the city council alone has a budget of over US$6 billion. Furthermore, it’s unclear how much of the spending actually takes place in commercial transactions, as opposed to people moving money around between their alts, or other such transfers.

The US$100 million figure has already been debunked by Urizenus Sklar at the Alphaville Herald; I can’t add much to his analysis. M claims that “a good part of [the money] went into Residents’ pockets”, but when asked in the comment thread what Linden Labs’ share of it was his answer is a not particularly forthcoming “We do indeed have accurate and up-to-date figures about how much comes back to us for land fees. It’s not a number we publish which is why I didn’t publish it.”

The survey had a response rate of 15%, giving a sample of 2645; I have no idea if that is a respectable figure for these sort of things, but I would want to see some comparisons between the responder/non-responder groups before I accepted that the results were generalisable. Even if they were, the figures are essentially meaningless without a lot more context. 68% of enterprises are maintaining or increasing their investment compared to the last six months, 15% “significantly”, but how much is significant, and what is the base level? 5% of business owners say that they generate 80-100% of their total income from Second Life, but is that their total household income, or just their personal income, and what are the absolute figures? The guy you pass in the subway every morning may make 100% of his income from panhandling, but that doesn’t mean he has hit on a viable revenue model (or maybe it does).

I long ago concluded that I would never make any money from Second Life, so I shouldn’t really care about any of this flimflammery, but I can’t help but feel that the Lindens should stop trying to pretend that SL is something that it is not, and concentrate on maintaining their income by looking after the people who will be around for the long haul, those who see the virtual world as an opportunity to explore new frontiers, rather than a venue for disposable entertainment, or a place to make a quick buck. Prime mover advantage doesn’t last forever, and there is always something newer and shinier just around the corner, ready to tempt the disaffected away. I’m quite attached to the old place now, and I’d miss it terribly if it disappeared.

Girl from Mars

After a prolonged gestation period, the virtual world of Blue Mars has started to recruit beta testers, and will, if you believe developers Avatar Reality, go live sometime in the summer.

The visuals, which utilise the CryENGINE2, certainly look pretty, and A-R are promising that users will be able to play without having to buy the latest graphics card, though they are keeping the details of the minimum hardware specifications a secret for now. Windows Vista is required though, so my old linux box definitely won’t work.

It’s claimed that the platform will be able to support thousands of simultaneous users in each region, which would be a massive advance on the paltry number Second Life can manage. It appears though that this will be done by a process of sharding, which I’ll admit I don’t really understand, except that it involves running separate instances of the same location on different servers, with new ones being spawned as necessary. I would have thought that this meant that if you had arranged to meet someone at a popular place then you might miss them because they were on a different shard, but there might be some technical way around this.

There will be a content generation system, but this will be limited to developers who have paid to sign up with A-R, leaving no space for amateur creativity. A central item registration system will protect IP rights, and, presumably, allow A-R to prevent the manufacture of the sort of things that have generated all those lurid stories about the perversity of Second Life. Some sort of virtual currency will exist, but ordinary users won’t be able to cash it out into real money.

So is Blue Mars a Second Life-killer? The graphics are a lot better, the scalability sounds attractive, and there does seem to be plenty to do. I can’t see too many current SL residents being tempted away though, since they would surely miss the freedom to produce their own content, and the potential, however illusory, for making some money.

Hard-core SL fans are unlikely to be the target demographic for Blue Mars though (but then, judging by Linden Labs’ recent actions, hard-core SL fans aren’t even the target demographic for Second Life). Avatar Reality will have their sights set on the corporate and educational markets, as well as new VW consumers who have graduated from places like Habbo and Club Penguin, and are more interested in the metaverse as a place to be fed entertainment rather than an outlet for their creative urges. These of course are exactly the clients who, we are told, represent the future for SL. If A-R are successful in stealing away this potentially lucrative business, they might just end up messing things up for those of us who do stick around in Second Life.

I was originally going to go for the obvious Bowie track as the title for this post, but I like this tune better.