Thursday, October 7, 2010

Galactic Landlords

Generally speaking, PVP alliances make lousy landlords.

Take Shadows of Death, the renter alliance run by Legion of Death, for instance:

At the beginning of October, they found that system rentals were down. Withing their sphere of influence, a full 25 designated renter systems were without occupants. As a result, Shadows wasn't making their earnings targets - i.e., Legion wasn't getting as much money as they expected out of their renter alliance.

Well, to the brilliant business minds at Legion/Shadows the answer was obvious: Raise the rents on their occupied systems. Tenant corporations were informed of the following changes to their rental agreements.

- Rents would no longer be based the number of belts in the system
- Base rental for all systems is 300 million ISK per week
- For each level of sovereignty a system holds, add an additional 100 million ISK per week "sovereignty tax'
- The jump bridge tax would be discontinued

In other words, rent of the wormiest, nastiest Sov 1 system in the drone regions, the monthly rent is 1.6 billion. A Sov 5 system? 3.2 billion per month.

Of course anyone with the slightest insight into business and/or economics will know what happened next:

Within three days of this announcement 40 additional renter systems went vacant.

In some cases, the renting corporation simply got angry enough to go looking for a better deal. With all the territories changing hands in nullsec, Carebear corporations are in high demand. Everybody wants the renters necessary to generate the income needed to pay the sovereignty bills and, (if the landlord is the wise, insightful sort), to support a lively market and a healthy industrial sector within their sphere of influence. Consequently, those renter corporations who've departed Shadows likely walked out with a warm welcome and much better rental terms awaiting them elsewhere.

In other cases, the tenant corporations stayed with Shadows/Legion, but reduced the number of system they were renting. Such corporations assessed the relative trade-offs of the systems in their possession and released those that returned the least value once the new rent structure was taken into consideration.

Now, I expect the Carebears in question could have made enough cash in their systems to pay that rent. However, though it may shock the lads down at Shadows/Legion HQ to hear it, Carebear corporations don't exist merely to pay alliance rents.

They exist to enrich themselves and their members.

I know, it seems so petty of them, but there it is. If you're charging 3.2 billion a month for a system your Carebears can rent elsewhere for 500 million to a billion, any business bear worth the name is going to head for the doors. Even if he has no other options, why would your business bear keep the overhead of three systems at an elevated price when his corporation can do quite as well with only two?

Chances are, the last brick from this barrel hasn't hit Shadows/Legion on the head as yet. Some corporations will have made the decision to leave, but are waiting until they've got their stuff out of Shadows' sphere of influence before announcing it. This is often a wise tack to take when your landlord is grumpy, well-armed and capable of reprisals. Other corporations will remain with Shadows, but will take a month before deciding which systems to dump ... er, that is, to opt out of.

Now, even if those abandoned systems were all of the Sov 1 variety, that's 192 billion in expected revenue Shadows is not going to take in. Makes me glad I'm not the Donald Trump who came up with the rent recovery plan and promised all that missing money to the parent alliance. Boy, his face must be red right now, assuming he hasn't been vented into deep space by the alliance directorate by now.

In his February blog post, The Mittani lamented the loss of pre-dominion sovereignty mechanics, where holding space was just a matter of dropping POS and superior firepower. He complained that, with sovereignty costs in place, PVP alliances had to trouble themselves with the headaches of administration and revenue generation. That now, instead of just looking for good PVP, a nullsec empire had to administer their space - to involve themselves in the petty concerns of the CareBears who make the money, that pays the cost of empire, that frees the warrior class from the tedium of day-to-day revenue generation.   

As I've said elsewhere, all this is by design. Those crafty devils at CCP have made the CareBear a nullsec empire must-have.

I've yet to meet a PVP alliance that understands the mechanics of the industrial side of New Eden, or has the faintest grasp of how markets work. To top it off, the PVPer's natural contempt for Carebears tends to slop over into their business dealings with them - never the sort of thing that wins hearts and minds. With the current renter's market in nullsec, this is a big problem for alliances that take the old-school 'youz my bitch' approach to managing tenants.

Never forget: The relationship between a Carebear renter and the renter alliance is transactional. Loyalty - the lynch pin of the PVP alliance has limited application in the landlord/tenant relationship. The Carebear renter gives you money, which spends better than loyalty. All he wants in return is fair value for his ISK. But even so, a little Carebear love and understanding goes a long way toward keeping some slick-talking alliance in Teneferis or Catch from luring your revenue bears out from under you.


  1. It seems to me that the Northern Coalition has a different business model, one where "tenants" are all equal, and all expected to fight. The "tenantless model", perhaps? I see this is a stronger and more viable model. Do you agree?

    This is my first time commenting, and I have grown to love this blog's thoughtful comments. I especially like the RMT arguments you present.

  2. Arggam -

    I've heard something of the NC model, but don't know enough about it to comment with accuracy. It seems to be less hierarchical with more of a generalist approach to New Eden as opposed to the usual PVP elite/everybody else approach.

    I've held forth elsewhere on the nullsec Carebear being a lot rougher and tougher than his highsec cousin. Some nullsec Carebears are out and out grizzlies when pushed to a fight. NC may well have noodled out the value of arming bears (heh) and deploying them in tandem with elite corporations and alliances when the barbarians come knocking at the gates.

    If you have any contacts in NC that would take the time to talk about their approach to Sov and nullsec Carebears, I'd be happy to sit down and be enlightened.

    Thanks for the kind words - thoughtful is the target, and I'm glad to hear there's an audience for it.

  3. concur on the value of your blog. I consistently check for updates and I truely enjoy your topic choice.

  4. The NC system is a good one yea.
    they basically give systems to carebear alliances at the promice of helping defend others space and obtain new space where needed.
    Along with this comes the promice of the big pvp alliances to protect the carebear alliances when they need it, this however does not mean that if a pos is attacked MM comes with the super caps this only reflects on sov problems.
    And even then only if the enemy came in with a grunge and apears to be serious about taking the system not just anoying the holders.