The Alphaville Herald

Barons Get Buy-Back.

by Urizenus Sklar on 02/01/06 at 7:35 pm

by Dow Jonas

In a surprising move, Linden Lab has offered compensation to landowners who purchased telehub land, now widely viewed as devalued since the advent of point-to-point teleportation earlier this month.

The announcement met with lukeward response from telehub landowners looking for a heftier compensation and appears not to have significantly benefited SL’s largest land baroness, Anshe Chung, due to the cut-off dates in the offer.

The reparations for a business loss stired controversy and resentment on the SL forums, where most commentators weighed in against taking any action that could be viewed as favoritism of one class of people in the virtual world, or could open the door to endless litigation against LL and a chill on creativity.

"I think it’s not fair period," cried Lector Hannibal. "Sheeshus Krist, what a little whining will get ya. Excuse me while I leave to figure out a new way to extort LL."

A common admonition on the forums to all business people and would-be investors has been: caveat emptor.  If you put your real-life dollars into pixelated land, and the land changes, then it is your loss. In RL, say many forum contributors, if the city moves in a bus shelter, and you invest in a coffee shop hoping it will bring traffic to your shop, if the city moves the bus route and the shelter later, you cannot expect compensation.

The conciliatory gesture may partially assuage angry land barons, but it is also sure to dismay all those who purchased telehub land before August 1 and not after December 8, 2005, the time period indicated in the offer. The date appears to be arbitrary, possibly dating to the month in which the first admission was made by Robin Linden (August 29) on the Linden forum that LL was contemplating the move to telehubs and was considering compensation.

One telehub land owner and business person, katykiwi Moonflower, who is also a RL lawyer and says she sent her legal analysis to the Lindens, thinks the case is very clear:  Linden Lab knew it was going to move to p2p in August because it began developing the code for it, even as it knowingly continued to sell telehub sims on the auctions. This "misrepresentation" is a classic torts case.

"One distinction I see about the hub situation is that LL itself marketed the land as telehub land and set the minimum auction bid higher for lots, and later sims, located in a telehub sim," said Moonflower. She added, "legally this is called DETRIMENTAL RELIANCE in contract law. The buyers of the telehub land relied upon the factors, and benefits set into place by LL to their detriment. This is a legitimate financial loss that constitutes legally measurable damages. In addtion, the action creating the measurable loss was an intentional breach," she explained.

The offer for compensation is just $10/meter, which many will find unacceptable; right before the confirmation that LL would move to p2p, telehub land was selling at $50/meter in some areas, particularly as Anshe Chung began to sell parcels of telehub land after purchase at auction rather than to rent them. Telehub-area land is selling for widely different prices now, ranging from $6/meter in older sims to $15/meter in newer sims when it is also near clubs, believed to be newer and more promising magnets for traffic and vending.

Anshe Chung and Blue Burke, another telehub land owner, began selling their hub land last May and June when the first discussions began to surface that p2p was in the works. Particularly astute land-watchers realized soon after that when the Lindens created a far better rendered and detailed map showing buildings constructed, and removed the list of sims to pull down to travel on the map, that they could well be setting up to move to effective pinpoint teleporting.

Telehubs have been converted to "infohubs" which are widely seen to be "ghost towns" now as nobody visits the dull, official-looking areas that have a few Linden information or Linden-sponsored content signs, InfoNet terminals, and hippo statutes.

Some malls located near telehubs continue to attracts shoppers for their content; others have experienced a dramatic drop in customers.

Insiders say the offer of compensation came after the Lindens first checked their statistics to see if the former telehub areas really had experienced a drop in sales; Philip Linden is reported to have acknowledged that in their heyday, telehubs had 50 percent more sales than equivalent areas. Store owners brought forth information that their sales had dropped drastically.

Meanwhile the beneficiaries of p2p are now those who can afford high-profile classifieds; who had already established word-of-mouth reputation prior to p2p; or who use third-party shopping sites, the forums, and friendship networks, as well as the delivery of landmarks to spawning newbies, to bring traffic to their stores.

Sources who asked not to be named said that Philip Linden and Robin Linden agreed to met with an angry group of telehub landowners in a secret meeting at a private location they declined to note several weeks ago to hear their complaints about what they considered Linden Lab’s "bait and switch" tactics. The barons presented petitions to the Lindens asking for compensation, stood up, and said that they would maintain a united stance on demanding compensation. They were invited to send e-mails to the Lindens indicating the land parcels they felt should be compensated. Several said they were cashing out or taking investments to other games.

In her forums announcement Friday, Robin Harper (Robin Linden), senior vice president of LL, acknowledged that "many people who own land near telehubs have expressed unhappiness with the recent deployment of pinpoint teleporting." She noted that the "short leadtime" given after the announcement and the actual implementation of the software update — about a week– left many unable to cope with the dramatic business loss.

The specification of 128 meters from the telehub as the distance for land to be compensated is likely to be contested by some who bought land in next-to-telehub sims also at greatly higher prices than similar land elsewhere.

And the dates for the offer — August 1-December 8 — mean that some who view themselves as victims of bait-and-switch will not be compensated. Those are the land dealers who bought telehubs when they were put on the auction at demonstratively higher prices than other sims by the Lindens prior to the June 2005 changes to the auction system, and purchased often at $10/meter or higher — and developed businesses that they decided to keep going despite rumors of p2p.

The compensation will largely buyer of sims auctioned on the mainland, and who had continued to win bids on telehub lands right up to the announcement, even as she sold many other hub lands in anticipation of the devaluation. Anshe’s compensation is not clear from this deal; at various public meetings, she has estimated the size of her losses at $25,000 US; the compensation per meter offered will likely return a considerably lower amount than that figure.

An unknown number of other dealers who have complained about getting caught with the rapidly devalued land will also benefit; others who bought the land prior to August 1 and did not displace their mall and other tenants will be left trying to ride out another SL economic storm.

The compensation move is the first of its kind in the history of SL, other than the account credits given for long service outages when the grieds have crashed in the past.  It is believed by some to make the Lindens vulnerable to demands for other kinds of compensation, such as from those whose land has been devalued by land extortionists and sign griefers whom the Lindens have not removed due to concerns about a free land market and freedom of expression.

Those who bought snow land, which later became devalued, well may well raise the issue of whether their ill-advised land purchases should also get attention; those who bought sims on the auction which later suddenly sprouted Linden roads in water without notification, or made it possible for new buyers on the next sim to block waterfronts, are other aggrieved parties who might step forward with similar demands to telehub owners.

A number of business people who saw the sudden telehub disruption as a sign of an unstable investment climate may be wooed back now after receiving their compensation, or realizing that the Lindens are likely now to provide more lead-time when they change the nature of their virtual world.

Meanwhile, content creators who condemn LL’s move as merely caving to "whining land barons" have contemplated forming a union and eventually gathering the clout to stage a strike in order to demand similar compensation for lost inventory, bugs that caused their vendors to give items for free, griefers’ thefts through hacks and the many other losses of Second Life.

"The next time content creators suffer losses from Linden actions, I will lead a charge the likes of which SL has never seen before until our losses are repaid," said Aimee Weber, who wrote that she had lost half her sales inventory from an October 2004 bug. ""Turn your back on Governor Linden" will seem like childs play compared to what I have in store," she added, referencing a Herald placed by Anshe Chung after the p2p announcement.