Thursday, April 19, 2007

Second Life Economics vs. Entitlement

I spent so much time thinking about the title of this post that it was making me slightly nuts, so this morning I sat down and tapped out what was at the top of my mind. In my life I've had the good fortune of a few writers and editors trying to teach me how to craft an appropriate title, but for whatever reason, I continue to fail them as a student. Nonetheless, this post is purely my opinion on what I see as a natural turn of events as the Second Life population grows and the attendant market and cultural evolution. Evolution, as it were, that sometimes feels more like a retrograde than forward movement but that's just this one avi's opinion.

While the growth of Second Life has been media-hyped, there are market effects felt in world that are not necessarily understood by those merely reporting. The recent onslaught of new residents has done at least two things: 1) saturated some markets and 2) presented new market and social normality challenges that were not otherwise present when the world was considerably smaller, and therefore more "small townish". These changes came on as quickly as the newbs, and it's left some residents in a quandary about how to stay solvent, if not thrive.

On the Marketplace and Value Chains
If you read my Defining Virtual Worlds post, you'll know that I believe that the marketplace of Second Life, enabled by Linden Lab's brilliant decision to allow content creators rights to their digital creations, is critically important to success. I place it on equal par with the other two points I made, as it's very existence is what motivates some people to participate well beyond the social aspects of the environment. I hesitate to categorize the Second Life platform as a true economy because of a few nuances, such as things like the lack of a central bank and stipends, but let's not debate those here. Regardless, there is a true marketplace, and much of what drives successful businesses in SL is the ability to tap into a market and serve it accordingly.

1) The live music case below was stimulated by a recent dialogue within the Live Music community and assumes that the value chain participants want to profit or stay solvent. The cases where an individual merely wants to participate at his own expense is provided as a counter example in the Second Life Artists discussion.
2) Among other things in Second Life, I'm part artist and part performer but certainly not an economist. I concede that as a human that the following represents my own thinking and observations from that vantage, not as an economic treatise.

Live Music as a Market
Recently, one of the most vocal discussions about marketplace dynamics and social norms has been in the Live Music community. Live Music is certainly not the largest entertainment draw in Second Life, but it does present a valuable and unique opportunity for the marketplace participants which include listeners, venue owners, performers, promoters, distributors and publishers. Just as the real world, a many-person value/supply chain can be complicated to navigate, and if you do not realize what part you play, understand what value you add, know what each contribution is worth to the consumer, and how to play nicely with the other contributors, you will fail. [If you don't believe me, read any article on the success of Toyota or Walmart.]

For the Live Music community, there are sore spots all along the value chain but I'm going to focus solely on Venue Owners and Performers as Publishers/Promoters have been fairly silent. Unfortunately, the case has been generically presented as "should live music be free or not?", the utterance of which is simply an ignorance about how a marketplace thrives so I am not answering that directly.

Music Venue Owners
There are many types of venues in a endless resource market, from pure music venues to casinos, each with their own value proposition. Slim Warrior, performer and proprietor of the Menorca sim, started a free form discussion regarding the inability of music-only venues to stay solvent given the current overhead of paying performers as well as on-going land, streaming server and maintenance fees. The fees Slim outlines are real, but as part of the value chain, do consumers distinguish between venue types and if so, what is the value they place on a "not for profit" or music-only venue, versus a revenue-supported venue (e.g. a casino) and most importantly is there a cost value within that distinction? One way to test is to charge admission, which to the consumer may present itself as "I'm paying to enter this venue" or "I'm paying to hear this performer", or both. Does that matter? It matters only if you plan to have a successful marketing campaign.

Slim's personal initiative started a fire storm of debate and discussion, which highlights an interesting aspect of the Second Life community insomuch as there are not yet standards bodies, unions or organizations from which structured discussion can emerge. Hence, basic human nature leaves us with cliques, collusion as well as soap box theatrics.

I chose not to use the word "musician" here, because I am making a market judgement that the live music market value proposition in Second Life is as much about performance as it is raw musical "talent". This subtlety regarding value from the market's perspective- not the performer's perspective - may be where this case breaks down the most. Arguments stemmed from Slim's discussions that performers are not making "what they deserve". At one performance on Menorca, a live musician took time out of a set to complain that it was unfair that escorts were making more than live musicians.

This is how Entitlement came to be part of this post's title. In a marketplace, you are "entitled" to what the market will bear, and how you compete against the other market entities. The Second Life market is not the same as the real world market. While some can leverage the aspects of the real world market toward their in world value, the simple argument of " I make this in real life, therefore I should make this in Second Life" is critically flawed, even in the case of escorts.

There have been a number of outspoken performers on this issue. Silas Scarborough chose to use his position as the performer for the Dreams Community Fair American Stroke Association benefit concert to announce his personal perspective regarding live musicians playing casinos and asked musicians to strike until casinos delivered what he called fair and reasonable pay for musicians. He also used in world live music groups as a distribution platform for notecards and t-shirts reiterating his views. Likewise, Flaming Moe, a long time performer in Second Life, scoffed at an offer of $25USD for a single hour of play at AOL Pointe - arguably one of the most successfully promoted corporate venues in world to date, right behind the L Word sims. I won't use any space here debating Silas' or Flaming Moe's points, since if you've understood any of what I'd said in the opening paragraphs, you know my opinion.

A different view to the above has been eloquently presented by Komuso Tokugawa. Komuso started his discussion here, but today I read a follow on comment post from him on the subject, citing a brilliant article by Bob Lefetz . Komuso's comments are on target, from which I must quote:
I think in this changing environment indie musicians [esp indie musicians with dreams of making it “big”] need to seriously start questioning conventional wisdom concepts such as “exposure”, “cd sales”, “promotion”, “marketing” and other so called traditional routes to musical “success” and start devising ways to connect with and communicate authentically with the only people that really matter…the people who are moved by your particular style of sonic manipulation and will ultimately put their hands in their pockets to reward you for doing that…if financial gain happens to be your core objective [or one of them] from being a musician.

If music is art, how are the other "artists" in Second Life managing the same market dilemma? I think the answers can be found in any number of places, but this Reuter's article is packed with an interesting contrast to the above case. From the article:
“My experience is that 99.9 percent of the artists here are not just out to make a buck. They just enjoy having their art seen and if they sell a piece here and there, it’s icing on the cake,” said Sasun Steinbeck, who maintains a list of art galleries for Second Life. “I know for me I get much more thrill out of watching someone have that ‘oooo aaaah’ moment when they see my sculpture than in the ‘cha ching’ sound of making another sale”.
And finally, to my friend DrFran Babcock- an individual that in real life has a "day job" but has embraced Second Life for the opportunity it affords us all. In Dr Fran's Friday podcast about the success of her bird buddies:
"I think of Second Life as my creative and social playground. I would rather not make money, than spend all my time in SL preparing objects for sale ... Poor but happy is what I'll be, and that's a conscious decision."

You are entitled to be happy, you are not entitled to profit simply because the platform allows it. Leverage the endless possibilities that Second Life affords its resident to think creativity about your craft, your "brand", your existence and your business. Allowing yourself to be trapped in the models and attendant expectations of the real world will leave you shallow, unfulfilled and probably the subject of one of my next postings.
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