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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."
I guess maybe we'll have put region codes on music, so we can maintain price discrimination, like on DVD's.
What?
I have never noticed the pricing in CD's to be flexible with the exchange rate either.
The pricing trends you mention are more proof that pricing levels are primarily set by "psychological" price points.
I don't know if these price points actually maximize profit or sales but it seems that most retail goods follow this same model. $199 for consumer electronics, the $999 pc, etc.
The marketing dept sets the prices.
What ever may be the price I don't see a point in buying crippled music. The cost is relative. The amount of salary that people draw in their respective countries would also differ. BTW did you know that drugs(as in prescription drugs and generic ones ) are cheaper in canada than in the US.The same case is with books. In any case crippled music is worth nothing to me.
I can't imagine why anyone would support Walmart. They are taking a loss just to cut down the competition because they can. Apple takes a loss to sell iPods, WTF is Walmart trying to sell (besides the soul of every American consumer)?
Hopefully more record labels will join the fight against the RIAA like New York's GoKart Records.
Sound waves should be free!
Add to that US-$ 22.50 here in Australia.
While it may seem to someone in America that the UK may be overpaying for their online music, it probably doesn't seem that way to someone actually in the UK.
Take games for example. Here in Aus, an average new-release game sells for ~$99, give or take a few dollars due to the store policy or whatnot. Yet there's no outcry "OMG Australians pay $75US per game RIPOFF!!!11!!".
I think we pay this much as a reflection on the average earnings of an Australian, and by our standards, $100 isn't an exhorbitant amount for a single game.
I'm sure the 99 pence songs are seen the same way in the UK. Expensive when compared to the American dollar, but reasonably good value to an average Brit.
It's still nothing compared to consumer electronics prices.
;)
:( Fscking extortion.
For a long time people were used to prices a little bit higher in euros than in dollars. The explanation was that it's to compensate for exchange rates while USD was for a couple of years about 1.1EUR or so. Now, that 1EUR is already more than 1.25USD, most vendors didn't even change their prices, and some changed them to ``uniform prices'': e.g. Palm T1, T2 was $399 and 399eur at the time of introduction.
Now finally new Palm models are priced according to exchange rates. Did enough Europeans buy them via eBay with shipping to Europe?
But my favourite digicam Canon EOS 300D was still $800 and 1100eur last time I checked -- half as much
Robert
Bastard Operator From 193.219.28.162
I've been doing an ongoing series of reviews of online music services (iTunes, Napster 2.0, Wal-Mart, Bleep, EMusic, and Audio Lunchbox so far), and one thing I've noticed is that a fair number of these sites are entirely unavailable to international customers. Either for DRM reasons or for simple payment processing issues.
It seems to me that there is a huge untapped market overseas. The traditional distribution mechanisms are even more disadvantaged when compared to online stores, as the cost of transporting physical goods is significantly greater than moving a digital copy. This is just one more area in which the companies that can move the fastest toward the new media stand the most to gain.
OK what about 6 months ago when everyone was complaining that CD's were $18.99 and that's why we downloaded music off kazaa? Did music suddenly become cheaper, or is it that once downloadable albums appeared for $10 bucks, now we're complaining because they're all only $9.99 at best buy?
The author is using the lense of exchange rates to say that Candians are getting music cheaper.
This is wrong for two reasons. First, the advent of the Internet and its subsequent use as a distribution method of music has made music an information good. All music is charged at a monopoly price because the price at which music is sold is above the marginal cost of production.
Second, because all music is priced at a monopoly price, what is a "bargain" or "being ripped-off" is moot. We are all being "ripped-off" when we purchase music because we're paying above the marginal cost of production.
Yet the problem with information goods is that information is expensive to make and easy to deliver.
The story about price differences between countries is not a story about exchange rates, nor a story about getting ripped-off or getting bargain prices. It's a story about price discrimination.
In monopolies, price discrimination is good because it allows buyers to pay for the good at their respective reservation price. For instance, everyone needs water piped to their homes for say, $50 a month. The monopoly must charge that price for everyone and can't price discriminate (e.g. charge a different price for everyone). This type of monopoly is inefficient because those that can't afford $50 go without water, although the marginal cost to give that person who can't afford water is nill. Yet with the advent of digital technologies, global distribution and subsequent pricing has changed. Companies that want to sell music to different markets according to that particular market level of income can do so.
Compare music pricing to regional encoding and DVD pricing. It's the same story.
it's the purchasing power of the currency that matters. although a pound may be worth more than a dollar when it's exchanged, people in england get paid in pounds, and purchase everything in pounds. it doesn't matter (directly) to them how many USD their pound is worth. they only care about what they can buy in england with their pound
i think a pound has the purchasing power of about 1.15 USD or so. that means, that with 1 pound, you should be expected to be able to buy about 1.15 times as much stuff then if you had 1 USD. Thus, in england they should only have to pay ~0.86 pounds per song (0.99/1.15).
that would be fair
If record companies were really competitive, CD prices would be close to the cost of production (including salary of musician and others, not just pressing plastic of course). In fact, they would often sell below cost, hoping to make it up with some especially popular albums later and we should see a big label go bankrupt once in a while.
In that case, if a label can make ends meet by charging $0.99CDN, they wouldn't charge a euro for the same song in UK, lest the competitors beat them on price. We would also see $0.10 loss leaders with decent music who hope to grab the market share and then somehow raise the price and/or lower costs.
Nothing more to say except hope that smaller labels take hold and make some music that is worth itds price.
If only the trading of music files were a liquid market. This would be a perfect arbitrage situation. Basically, buy it from one country at a cheaper rate [relative to another country's rate] and sell it there and make the profit. I mean, the profit in Foreign Exchange market works are fractions of a cent, a difference of 20 cents in some cases for music file would be an enormous take on the arbitrage.
argh..this is how I know I've spent too much time working in this industry...
_______________________________
"I'm not Conceited...I'm just a realist..."
man, i totally agree. so many of us need to admit that we're thieves justifying what we do with babble about greed, quality of product and value. so few of us even know what the difference between value and cost is.
scott king
We have been in a global economy since the shipping innovations of the mid-nineteenth century and British Imperial hegemony promoted truly intercontinental trade. For all of you who think that the internet fundamentally changed how the global markets worked, please review the historical impact of telegraphy. Its huge significance can hardly be underrated, and pretty much everything that Silicon Valley "visionary" philosopher/prognosticators claimed would come to pass with the invention of the internet had already happened with in the age of global telegraphy. I don't really have much respect for those rag writers, they apparently had neither technological competency (otherwise they'd have been tech workers during the bubble) nor had they a strong historical/social science backround, else they'd realize that most "big new things" have historical precedent. For reading on the telegraph see esp. Tom Standage's Victorian Internet for a fun overview of the technology and its economic impact.
Your moniker is "Dutchmaan" so presumably you should be aware of the hegemony of the United Provinces, way back between the fall of the Spanish and the rise of the British Empires? Dutch hegemony was based on international banking and shipping, way back in the seventeenth/eighteenth centuries.
Basically, my point is that if the disparity in music prices was a market economy issue, it would have been solved by wholesalers long ago. The issue has to do with RIAA content control that is taking advantage of economic differences among states to maximise their profits. The same contractual/legal issues, issues that are just as much a barrier for the internet (which is why iTunes has taken a while to expand to Europe); this has nothing to do with the internet (unless you want to talk about piracy, in which case you'd have an argument). To specifically answer your point, only after five hundred years of capitalism in Europe has a unified continental government emerged there, and certainly the consolidation of nation-states in Europe had a lot to do with the geographical reach and modes of trade, but DO NOT assume that the reach of trade implies that governance over the same area. Yes, American hegemony led to IMF/WTO trade rules, but in the post-Cold War world, anything can happen, and don't assume things won't swing the other way (in regards to increasing global market integration, or international compliance with American goals).
America could be heading for financial trouble, if the federal deficits and the state budget disasters do not get solved masterfully (and soon).. Grey Davis was the first casualty, but in the longer term it could mean the relative decline of our (U.S.) power and a reaction towards mercantilism. See Immanual Wallerstein's scholarship :)
i said puchasing power, not exchange rate. there's a big difference. the currency is at a higher numerical value ("1.80 usd"), but things cost more (once exchange rate is applie) then they would in america. so if you're in england, and you have 1 pound, you could buy 1.15 times as much "stuff" then if you had 1 USD in america.
There are a vast number of products that are sold at different prices in different markets. It used to be standard practice, in the days of minicomputers, for the price to eb 10,000 dollar i the US and 10,000 pounds in England. If I am not mistaken, prices for movie DVDs varies by country.
/. make it very obvious to consumers that this is going on. There doesn't seem to be a consistent pattern. Sometimes the pricing needs to reflect widely varying taxes and operating costs. Sometimes, a market is poorer and a company must change less in that country to sell at all.
What is new is that the Internet and sites like
If we are truly moving to a global market that removes protective tarrifs, then the Internet will level the pricing differentials except for the differences in taxes. And it will become really obvious to consumers how much their country's taxes ar raising their costs.
What would be really great would be if we could actually join the single currency rather then dithering about on the sidelines (as usual). The benefits that transparency in pricing would bring would see an end to "rip off Britain".