In introducing Point to Point (P2P) movement in Second Life, Linden Lab fundamentally altered the economic structure of the virtual space. In response to protests Linden has offered to buy back land as a form of ‘compensation’. Taken together with the recent FBI reports is this the dawn of a liability culture within Second Life heralding a new form of virtual space?
First some background (anyone with SL experience can skip this bit).
Lindenomics of Location 101
Second Life is a set of servers (simulators or sim) many of which are in a contiguous space (the 'mainland'); many other are ‘islands’ in a virtual sea. Since opening, users of Second Life have been able to teleport themselves from place to place by simply double clicking on their desired destination in a map view of the virtual world. But, until recently, one did not materialise right at the point that that selected but at the nearest, so-called TeleHub. This feature of Second Life was responsible for one of the economic dynamics of SL. That is: land with or near to a telehub was more valuable because the traffic to those points would, on average, be higher than to points further away as one would expect more people, thus more potential trade, thus more potential money (i.e. the virtual application of the old marketing principle that there are only three things you need to get right: Location Location and Location). What’s more land would be ‘sold’ by Linden to users of SL on the basis of it having or not having a telehub.
In changing from Point-to-Telehub to Point-to-Point movement Linden changed some of the fundamentals of the social and economic dynamics of Second Life. Or to put it another way, it is alleged that the change is costing some users of Second Life a significant amount of money in the immediate term through loss of revenue, and in the longer term through the loss in value of the land that they ‘own’. Prominent Second Life user Anshe Chung, for example, estimates her losses at $25,000 USD (yes you read that right).
Some Second Life users are not simply annoyed about this, they want compensation. What’s more, The Herald reports that at least one legal justification has been forwarded as basis for the claim.
According to The Herald, Second Life user and lawyer katykiwi Moonflower suggests that Linden were selling telehub sims at the same time as developing P2P code which constitutes misrepresentation under US contract law. Quoting katykiwi The Herald says:
"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"
In a move that has surprised many Linden have offered to buy back parcels of land – though this offer has a number of date and location restrictions, does not concede any legal liability and is at a price which many might not find acceptable. Here is an extract from the announcement:
Many people who own land near telehubs have expressed unhappiness with the recent deployment of pinpoint teleporting. The short leadtime between the announcement and the actual implementation of the feature made adequate planning for telehub land difficult.
To compensate landowners who currently own land in the telehub regions we would like to offer to buy back telehub parcels in these regions at a price of L$10 per square meter...
I wonder what kind of potential liability this chink of greenback light (I note the world ‘compensate’ in the post, though one assumes this is for unhappiness and is a gratuitous offer) might open Linden up to.
Here I think it is useful to look at a broader liability culture that is starting to arise around Second Life. On the one hand, as reported by The Herald and covered here on TN, there are suggestions that Linden have turned the details of ‘griefers’ over to the FBI. Now these users were using basic building and scripting tools provided to them by Linden and used them, so reports say, wholly within Second Life – this raises questions of what Second Life is, who is legally responsible for what and who should be compensated if this goes wrong.
Jump cut to the end of the recent Herald article, Second Life user Aimee Weber is quoted as saying "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".
In order to understand the growing liability culture I think one also needs to understand a number of disputes that have been occurring between Linden and its user base and how these reflect on the nature of what Second Life is and Linden’s relationship to it. One thing that it is important to see is that Linden both operates a market and is an actor in that market. Irrespective of how Linden actually act, this is leaving them open to all kinds of accusation of malpractice, favoritism and market rigging - all of which I have personally heard from SL users.
One example of this is the virtual currency the Linden Dollar. Long time TN readers will remember the discussion that I had over Linden and 3rd Party currency exchanges with Cory and how the leading independent exchange GOM closed down and Linden’s own exchange started up (c.f. RIP: Gaming Open Market?).
The current state of play is that third party exchanges still exist. The current SL client now has a blue ‘L$’ symbol with the mouse-over text ‘buy currency’ which takes the user to Linden’s currency exchange. Given the discussion over P2P, can currency traders make similar claims on Linden. That is, that if they had an account and bought currency using that account, the purpose being to operate a currency exchange, at the same time as Linden were developing their own currency exchange, is there a similar ‘detrimental reliance’ at stake.
All this leads me to two conclusions:
1/ First Civil World?
As I’ve argued for many years now - at least some virtual worlds, and I think Second Life might be the first, will gain a status such that they will start to accrue moral and legal duties that they will not be able to contract out of. At this point running a virtual world on current economic models may simply not be viable as the cost covering legal liabilities through operation, code, insurance and legal fees will greatly outweigh the potential revenue for such a thing.
Philip Rosedale has spoken about the possible future of Second Life being beyond Linden with fully user run servers. This is a fascinating vision and one that might take into account a lot more possible issues with a central run virtual world than many (though not I suspect Philip and Cory) have realized.
And to fall back to my 4 Worlds Theory taxonomy, I believe that Second Life could be mutating into the first true Civil World.
2/ Market Regulation and Operating Separation?
Just so long as Linden run the current business model and operate in the market they run, they leave themselves open to accusations that are in no one’s interest. To me, as a European, these markets are just like other markets - ones that have rules and should have regulation. So how about this:
a/ An independent market regulator is formed.
b/ Linden can operate in land and currency markets but only through an independent legal entity with a Chinese-wall and open to regulator audit.
I would like to spin these conclusions out into something grand. To suggest that there are lessons that we can draw across virtual spaces generally. But I'm not sure that this is the case. Other spaces just do not explicity invite people to literally set up shop within the world, to build businesses based upon its architecture and trade in their own intellectual property. But I'm not sure this makes SL any the less profound or its birth pains any the less interesting.
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