Exchange Rates Play With Online Music Prices

EconolineCrush writes "Those looking to purchase songs online may find that the price of music downloads varies quite a bit from country to country. Most vendors seem to be favoring 0.99/track pricing schemes, but $0.99CDN is worth quite a bit less than 0.99 British Pounds. When indexed to the US dollar, Canadians using Puretracks are getting a bargain with tracks costing only $0.76US, while UK residents using Coke's new music store are getting ripped off at nearly $1.80US per song. iTunes and Wal Mart sit between the two, with tracks selling for $0.99 and $0.88, respectively."

Comments

Seems to reflect CD pricing bias

[Humba]

A quick check shows this may not be out-of-line with current CD pricing around the world.

While CD-prices differ widely in comparison - at 1996 exchange rates, a normal CD cost

below US-$ 16.00 in the USA

US-$ 14.00 in Canada

US-$ 25.00 in Japan

US-$ 23.00 in Germany

US-$ 24.00 in the UK

Source

Note, the data is indeed eight years old. (jeeze, was 1996 that long ago?) Pardon the US bias, but this still seems to reflect what I understand are current retail prices.

--H

Re:Seems to reflect CD pricing bias

[quantaman]

The economist just added a Starbuck's tall latte index (a purchasing-power parity test) similar to their Big Mac Index. How long will it be until they add an "mp3 index"?

Both the tall latte index and the Big Mac index show that the Canadian dollar is undervalued compared to the US dollar (which means that we get things cheaper here!). Sweet.

Note that both those products you're paying mostly for service. We earn similar pay as in the US except the dollars we earn are worth less, as a result when we pay for something that can be sold on either side of the border (like a computer) than we pay more of our dollars than americans, if on the other hand we are paying for something that requires local service (like a Big Mac) we pay about the same number of dollars because the workers are being paid in the same CADs that we are paying.

So we don't really get things cheaper up here, we make less and occasionally pay less.

AllofMP3.com

[jea6]

Russia's entry into online music: 1000 tracks, $14.95 per month OR a penny per megabit. Feels slimy but generally agreed to be legit.

Two concepts

[Knights who say 'INT]

The _current_ exchange rates and the _theoretical_ exchange rates are quite different. The current exchange rates are either determined in financial markets or by governments, according to the conditions of the international payment balance.

The theoretical exchange rate is commonly called a PPP (power of purchase parity) exchange rate, and is evaluated by comparing the cost of simmilar baskets of products in different countries.

This can be tricky, as seldom the very same product exists all over the world - and if it does, the costs involved can be very different because of relative prices. "The Economist" often publishes the Big Mac Index, which attempts to estimate the theoretical (PPP) exchange rate comparing the prices of Big Macs all over the world - since it's a product that's pretty much the same everywhere and involves the same costs.

When current exchange rates are unbalanced, there's a strong effect over the importation/exportation ratio. In Brazil, during the mid-90's, US$ 1 was approximately R$ 1, which was totally insane in PPP terms. It was a time during which everyone bought imported goods insanely, and travelled a lot abroad - while people coming to Brazil, specially from other latin american countries, could barely afford a can of coke. That happened because the government wanted to control inflation - and it pretty much worked. But after a while, it lead to a major financial crisis, because there weren't any dollars to pay the importation - exportation balance, and they had to let the dollar rate fluctuate in the financial markets.

If one was to do a very extensive PPP research that took into comparison prices like this, perhaps some of these distortions will be elliminated. But then again, there's the "just under 1 buck" factor. In any case, this should serve as a big caveat when comparing cost of living in different countries.