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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.
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.
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 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...
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