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Software Price Gap Between the US and Europe
Kensai7 writes "A quick comparison between same versions of mainstream software sold in the USA and the EU markets show a big difference in the respective price tags. If you want to buy online, let's say, Adobe's Dreamweaver CS3, you'll have to pay $399 if you live in the States, but a whopping E570 (almost $900 in current exchange rates!) if you happen to buy it in Germany. Same story for Microsoft's newest products: Expression Web 2 in America costs only $299 new, but try that in Italy and they will probably ask you no less than E366 ($576!). How can such an abyssal difference be explained? I understand there are some added costs for the localized translated versions, but I also thought the Euro was supposed to be outbuying the dollar. Where's the catch?"
Very easily. The US and Europe are different markets. Analytics for pricing have shown time and again that Europeans and Britons are willing to pay more for consumer electronics and for software. Hence, suppliers charge more.
As time goes on and the "global" market homogenizes, this will change. But until then, pricing decisions based upon local markets will continue to create situations like those described in the summary.
As for the reasons that Europeans are willing to pay more, any input I'd have would be speculation. The fact that the development of most commercial software happened in the US (historically, not necessarily presently) probably has something to do with it.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
For example, the game Rock Band for Xbox 360. It costs USD 150 (~ euro 95) in USA (on Amazon.com) and SEK 1990 in Sweden (euro 211 or USD 332). It's more than double the price!!! Did we get anything extra? NO! Oh yes, sorry, we had to WAIT more than 6 _months_ for a European release, which didn't bring anything new/better compared to the American version. FU EA!
Probably a little bit of that, a little bit of benificial up-rounding, and a lot of not adjusting prices down as the dollar falls (I bet the EUR prices were set when the USD was worth more than EUR, and not adjusted since.
Wow, sent an e-mail as suggested when clicking on "use classic" banner, and got a fast response that addressed my msg
Thou wilt be charged what thou art willing to pay for it.
That's not quite true of course. Anyone who had the choice of paying $1 or $100 dollars for the exact same product would pay the lower price.
However, we are allowing ourselves to be trapped legally. It costs the same to make product X in the US, as it does in the UK, as it does in Russia - if that product is intangible. But we are not allowed to buy software from Russia at 1/10th of the cost. Global companies are allowed to go there and sell, but we cannot go there, as consumers, and buy.
If we could buy from any market, we would buy from the cheapest. So this is not truly 'charging what the market will bear'. This is 'forcing the highest possible price for (sometimes necessary) products in every market we can reach, and tying the hands of the consumer on that.
It's another example of the disproportionate price fixing that we face in the digital age.
One thing often forgotten (which doesn't explain the examples, but many others) is that in Europe, prices are always (AFAIK) given with taxes, while in the US they are (AFAIK) without. Since sales tax in Germany is 19%, that explains quite a bit of difference already.
Ah, yes. The 'rock band' excuse.
TCO rock band video game USA: 85 UK pounds.
TCO rock band video game UK: 185 pounds.
Explanation? Value Added Tax (17.5%) and 'shipping'.
Shipping?!? Whip out your bullshit detectors now folks, because these things are made in CHINA.
Spot on. I work for a technology company that sells both hardware and software in the US and Europe, and our European prices are nearly 80% higher than our US prices, which means that even at absolute values our equipment costs more Euros than Dollars. Why do we price our products so high? Because we can. We found that Europeans are much less price sensitive and much more willing to be early adopters; in the US our customers know what features they need and are unwilling to pay for anything extra we throw into the mix. You could almost say that in Europe people purchase new technology for the sake of technology, while in the US people view technology as mere work tools.
Same items in different countries do not cost the same amount when taking into account only the exchange rates.
There are several reasons for this. A couple that are easy to explain are:
Do you think national healthcare is free?? Where do you think these countries get the money for that and other social[ist] programs? They tax the hell out of companies, imports (and individuals)
Don't worry. With the current US economy suffering from too much spending, already high corporate taxes, soon to be way higher taxes, mismanaged and over-promised social[ist] programs, a falling dollar and interest rates designed to trick people into thinking everything is ok while causing inflation to skyrocket it won't be long before the prices you mention even out for us. Maybe even compared to Zimbabwe.
I will never live for sake of another man, nor ask another man to live for mine.
I think that the real reason is because they can, and we dumbass fuckers are (somewhat) prepared to pay for it (piracy is higher here than in the US).
I have personally written to Adobe complaining about the massive price differences, and Adobe wrote back claiming it was because of localisation costs (translating software plus documentation into 20 languages can be pricey).
BUT, the bastards are lying. The localisation of any piece of major software is now a matter of course. It's planned in right from the very beginning.
To the wankers from Adobe reading this forum, I think it's about time the EU took a look at this practice.
A fair price is "whatever the market will bear."
This is an interesting example of just how borked econometrics get by social factors: There is no conceivable quantitative economic mechanism by which the European market demand would justify a price 3 times higher than the North American market. That only leaves qualitative/fuzzy social factors as the explanation. And that, of course, throws any quantitative analysis of the market using econometrics right out the window.
Software may be exceptional because it is unique as a product in that it has close to zero variable costs (ie: same cost to make one copy as 1 billion copies). But personally, I don't buy this. I think most markets are similarly borked by social factors - everything from the price of movies to the price of shoes to the price of legal services. The price really is 'whatever the market will bear', but what the market will bear has very little to do with the actual costs of production in any industry.
Now think about what this means: if prices correlate poorly (or not at all) to costs, that means the industry in question is not competitive. If there were legitimate competition, there would be perpetual downward pressure on prices and everything would be priced just a little more than it costs to produce. Now think what else this means: any industry with profitable prices (ie high margins) cannot be genuinely competitive. One of the defining characteristics of a free market is that consumers are not coerced by force or fraud, where a lack of competition constitutes coercion (think of a monopoly jacking up prices because it has no competitors...).
Gasp! Horror! Profitable markets =/= free markets!
Where is your Economic God now?
A-Bomb
Hah, you almost have it good..
In Australia, we have a 10% GST, but our dollar is reasonably strong these days compared to the US dollar.
For years we've been getting ripped off on video games, historically, the excuse has been shipping, but I'm not sure if I buy that at all anymore, after all, I'm sure most duplicating and printing is actually done locally these days rather than being shipped from the US/Europe/Asia... as proof of it being a case "what the market can bear", and not shipping/taxes, games available on Steam offer a great example.
Bioshock got discounted recently on Steam, in the US it's available for US$14.99, but if you're in Australia, you'll be paying US$24.99. Does it cost Valve/2K Games more to sell the game over here when there's no shipping involved, or is just because in Australia we're used to paying more for games? This isn't the only example of the same kind of thing happening on Steam, but it's the most recent one that I can think of.
Oh, and the "Rock Band" example, TCO for Rock Band over here using the cheapest example is going to be around AUD$400, at current exchange rates, that's USD$380... oh, and it's not even being released before Rock Band 2 is released in the US.
(And no, I have no intention of paying $400 for Rock Band, that's crazy, but as long as hardcore gamers keep buying it for that price, that's what we'll be paying).