Phat Cat's for Auction--What's it worth?

The team over at Phatcat's is putting the whole area up for auction on eBay. Check info on their site here  Why would they do this and what is it worth to someone else?

The why is easy enough--too much work to maintain a popular site and not enough revenue from running it.

Eventually anyone would get tired and need to move on. But why is running an area in SL so unprofitable?  Answer: costs and complexity are increasing over time, while new users are not growing--so how much is your customer base worth when it is not on aggressive growth. Not enough is what it is.  It's a great deal for Linden Labs to get people to work and make "wonderous" stuff--for less than what you can make stuffing cold cuts into a sub sandwich. We know Linden is making dough (and a lot apparently) but where's the upside for the mainstream content creators and area operators? Is the grid only profitable for porno and land speculators?

The why sell it off is clear--no future and no confidence in LL from people most close to the day to day action on the grid.

What is it worth? hmmm...well this is not first time someone has gone to eBay to cash out a sim. Stroker the man sold off Amsterdam a while back. I heard that the sale tanked at least once. Something about price and also complications over who owned the prims and what rights were in the deal. It was later sold to 3D Dutch probably for a lot less than the $USD 50K that it was first auctioned for. Looks like 3D Dutch wanted some promotional impact (or they wanted their home inworld or something). Wonder how happy they are with their acquisition?

Issues with buying old, popular sims are several-- 1) old prims look...er...old. So new owner needs to rework sim to make it look cool enough to maintain customers and attract dem scarce newbies 2) sims generate traffic by constant marketing to core customers and the grid in general--so the core is usually associated to owners. I think Phat Cat would be hard to maintain without existing hosts, lists and access to live acts. 3) what really is brand value on the grid? Sim costs are low enough these days and build on Phat Cat not that hard to recreate. So what are you really buying?  Group lists, brand and newbie flow. Lot of details need to understand what that actually means.

So valuation--hmmm, well assuming new owner would also need to spend (cash or effort) $USD10-20k to upgrade sim build and marketing. If you don't invest in it, it ain't gonna be worth anything after a few months. 

What value can you get from a popular sim? (we ask ourselves this all the time!). Merchandise value is low now--maybe with a merchandise investment you could extract $L500,000 per month ($USD 1,750). But how much effort to create a deep and interesting merch catalogue? and how long to ramp it?   Ultimately a place like Phat Cat could charge for admissions to gigs and stream radio (but of course killer is inworld concurrency which for a live gig is always small). But we got people choking to pay $L99--so can you get away with charging $L500 or more for a single concert inworld? $L2,000 for a live gig is maybe getting interesting if you can sell 100 tickets.

Maybe if you have other sims that are already productive, this will add some value--so mall operators get focused on this offering--but what is uplift possible 30% of your existing sale? Is that gonna cover the expense and the effort--or would you do better with some other investment in your business. If you do $L1 million a month (is top percentile of grid shops) then is 300,000 realistic (=about $USD1,000). So then maybe you got $10-12K uplift to shoot for.  Other side is if you are burning money on SL Classifieds, maybe this is a better way to go.  Classifieds look like just another way to send money to LL, so a destination site seems a better promo play. Some people spending big dough for skins--so this is for sure a better value, but can you run it as easily as making a classified--no way.

Main value here is gonna be in using the Phat Cat name on the web or irl. So is that a defensible brand? Depends on usage really, so maybe for making virtual world content and rl merch like t-shirts. As a recording label? Maybe but then you are in a whole new world of business. Could be that a indy label could use this?

Final comment on valuation--on a cash basis I actually think value is zero. I think the chance to cash-in the Phat Cat was more than a year ago. Now it is an opportunity to spend money on the SL grid for no real return. Deal that is worth making is a revenue split with a new operator agreeing to put up some investment cash to upgrade user experience and develop more merchandise. Ultimately a place like Phat Cat could charge for admissions to gigs and stream radio (but of course killer is inworld concurrency which for a live gig is always small).

Of course value to Linden Labs is higher than nothing--but it is unlikely they will step across and buy it out. Linden needs more mainstream content operators and value to them for Phat Cat staying active on grid is very high--millions even! millions of dollars USD.