The ability to create a new Basic (the old ad-free Free) account level was removed from LiveJournal. That in itself is not exactly surprising. With LiveJournal seemingly doing about everything possible to drive people to not spend any money of their service, it's to be expected that they might be getting desperate for revenue. The move was poorly thought out, but the execution of it was even worse.
It was not announced beforehand. When it was discovered, some VP (in charge of Product Development) claimed it was to "streamline the account creation process." He claimed the process was simplified as it was too confusing. These two things were not greeted well in the least.
The result of this is yet another firestorm of angry users. It didn't help when it was found that Brad (he of the newly created or being created Advisory Board) was not consulted, then when he found out about it he was either ignored or mostly ignored. People are looking at this as LJ pulling a fast one and hoping it wouldn't really get noticed. Surprise! Then claiming it was for simplification, which many have translated as the VP of Product Development saying, in effect, "The users are idiots." And that doesn't sit well. Also, that the Advisory Board wasn't even asked about the change indicates how well that Board is apt to work.
Now, had they announced this was going to happen, many people would still be unhappy, but at least there would have been some honesty about what was going on. Sure, there would be a rush of last-minute Basic account creation. Most of those would likely remain dormant, so they would not really be any loss of potential advertising revenue. It would certainly have been less costly. Now even more paying subscribers are saying, "That's it! No more money for you. You cannot be trusted." So that's a real loss right there, as well as the further erosion of reputation.
Then there was another news post that reads like a bad press release and comes across as rather condescending. It's like last May all over again. The initial trigger is different, but LiveJournal's reaction is about the same, only slightly sped up. The new news post doesn't really say anything except that when the users saw right through the VP's claim, they were right. And even that was re-phrased so it sounded like they were answering a question and not admitting to have been called out on the matter.
The "sneak & lie" is obviously bad business. But what about eliminating the free (Basic) accounts? That was an attraction and caused people to sample and some to stay, and those could become paying account holders. Even if they didn't, those that stayed would generate content that would both attract others and keep people around. This a case of trying to get the golden egg and stupidly slaughtering the goose.
Between the action itself and how it was handled - and the reaction to it handled - the result will almost certainly be a decrease in revenue as more paid subscribers decide that their money shouldn't go to a place that isn't being up front with them. Ads can be blocked, and there is at least one new community, admittedly small right now, calling for the collecting of advertiser information so that they can be boycotted and be told why.
Had they truly thought this out, they wouldn't have done it. If they had thought this out a little bit, they would have announced it properly. And had they had the right reaction, they'd have admitted that the execution was botched, rolled back the change at least temporarily and apologized for the poor handling of it.
Since none of that has happened, I expect further bad decisions as LJ/SUP gets more desperate for revenue as it dwindles due to self-inflicted wounds. People are suspicious that it's only a matter of time before the old Basic level accounts are "upgraded" to so-called Plus accounts that have advertising. That permanent accounts don't obviously generate new revenue makes them seem a probable target in the future as well. Such moves would be incredibly stupid and counterproductive, but that hasn't stopped LiveJournal before.
Its continuing failure to properly communicate might suggest that LiveJournal is in some sort of holding pattern. But a holding pattern isn't the only way to go around in circles. LiveJournal could well be circling the drain.
I do not expect LiveJournal to fold up and die overnight. But it's getting closer and closer to a tipping point where a significant number of users bolt. Each time something like this happens, some do. Each time it's evidently seen as a small thing. A small leak won't sink a ship, but many small leaks can. A sieve has nothing but small leaks, but that doesn't mean a sieve is anything near watertight. This looks like the first sign of real desperation as revenue drops due to annoying the users into not spending any money on poor service, and then making it worse in an even more desperate measure to get revenue. Right now even more people are deciding to let their paid accounts lapse, and/or moving to alternative sites.
That's bad for LJ, as advertising alone is unlikely to sustain it. Evidently there was even consideration of foisting ads on paid account holders but that was rejected as the ads would generate less than the subscription fee. That it would cause a mass exodus was probably not taken into consideration. LJ/SUP seems to see users as commodities rather than people.
If you only have a LiveJournal account, you might do well to consider having a backup. I recommend InsaneJournal. IJ might also only have two levels, ads and paid, but at least IJ is honest about that, and announces changes (and even asks the users about them) well before they are put in place.