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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?"
There's no complicated reason, companies charge more for products in europe because they can.
A bullet may have your name on it but splash damage is addressed "To whom it may concern."
Probably won't make up for all of the difference, but I expect that the US prices don't include sales taxes etc...
The cost of localizing everything is not inconsequential. You can't just run it through a translator and go and you still have to do acceptance testing on the localized version. The number of German or Itallian consumers is small compared to those who use English and the price reflects the marginal production costs per unit.
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!
were not that dumb
http://thepiratebay.org/
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.
E570 is not $900; it's stearic acid. E366 is potassium fumarate.
At the bottom of the
The reason is that the companies create artificial monopolies by creating sole distributorships in each country. On top of that, name/brand recognition goes a long way in semi-First World countries like those in Europe, so something like DreamWeaver is going to gather a lot more interest than XMLSpy (or what have you). So you have a market focused on one product, and only one supplier of that product. The math is pretty simple; consumers lose out to asymmetric market forces.
It's not just "because they can", but it's actually the market that has created those conditions. If Europeans would wake up to the alternatives (like China and India have), software prices would be much more reasonable.
Because Free Software is more popular in Europe, the commercial software companies must make up for the lost stales by increasing prices.
If those damn users would only stop using Free Software, the price of commercial software could come down to a more reasonable level.
Taxes are still not 130% on top of the RRP ;)
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.
Simple. They can get away with it.
Sure, the US price probably doesn't include VAT while the European price does. So let's take those 20% (roughly) of the European prices: that will be $720 for Dreamweaver (1.8 times US cost), and $460 for Expression Web 2 (1.5 times US cost). And I've checked with a local retailer; those are prices for non-localized versions, so that excuse does not apply.
The catch is that we are being ripped off, plain and simple.
Incidentally, the same is true for books. Books are ridiculously overpriced here, and for scientific or technical books it is _always_ _much_ cheaper to order them from Amazon than to buy them from a local bookstore. Even including transportation cost, the difference can be well over a factor two!
The silver lining is of course, that Amazon sells software as well...
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.
It's the same thing with Canada; identical products will cost 10% to 25% more, and in some cases, like automobiles, manufacturers will go to extreme lenghts to insure that canadians cannot buy stuff in the US and import it themselves.
And no, in Canada too, prices are quoted without taxes.
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.
In the last 5 to 10 years the conversion has usually gone something like:
$1 = £1 = 1 Euro
Nice and simple just the way they like it.
Well, Bart, your uncle Arthur used to have a saying: "Shoot 'em all and let God sort 'em out."
Having worked for European companies in the States, I think it's a "business culture" thing. Europeans tend not to be as price-conscious when making business related purchases. US companies will fight until the bitter end negotiating over a few dollars, so software companies know they have to price competitively.
Not quite sure what drives it though; Europeans can be tough negotiators on most contracted services.
Take an example from my line of work -- air transport. Business class tickets sell very well in Europe, mainly because it's considered a perk once you get to a certain level. With the exception of consulting companies and others that can bill away expenses, most staffers and lower managers in the US ride in coach. Business and first are reserved for senior management, and even that requires justification when times get bad. If you're a road-warrior staff member, and fly legacy carriers, you'll eventually get to a point where (through FF miles) you're upgraded to business, but I've never worked for a company that would pay the extra money for a business class ticket, even on 17-hour torture flights!
Maybe there's some parallels to software too.
The governments of Europe hassle companies (in general) more than the US does. This hassle has a cost. The cost is reflected in the price.
Let me put it another way: Adobe considers it worth their while to sell Dreamweaver at $400 in the US. After all the hassle, they consider it worth their while to sell Dreamweaver for $900 in Europe. At $400, would it be worth their while to sell Dreamweaver in the EU at all? Maybe not.
Let me put it a third way: go on eBay and you find that a lot of US sellers won't ship outside of the US and Canada. Why not? Because it isn't worth the hassle. Would it be worth the hassle if the seller could check a box which said, "double price outside North America?" Maybe so.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
Don't get your knickers in a bunch just yet over the price difference. What we have here amounts to a single data point in time.
Perhaps a better question to ask first is "How has the price of software in Euros changed over the last couple of years?"
Why ask this? You are converting prices back to US dollars. The value of the US dollar as compared to Euros has been declining for the last couple of years.
IF the price has been relatively steady (I don't know if this is the case), and people are comfortable paying this price, there is less incentive for US companies to lower the price of their software in Europe. If the Euros are converted into US dollars, they would be keeping more $$$. It's their software, they can charge what they choose.
This only addresses part of your question. Since one US dollar has been worth less than one Euro (at least for the last five years), the price at any point in that period (assuming a relatively constant Euro price of software), would still be higher.
There is probably some holes in my reasoning, but I am sure smarter souls will be more than happy to correct me.
Microsoft has always charged less in developing nations with weak or fragile economies.
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).
Yep, VAT (sales tax) is never included on prices given in the US. You have to wait until you check out to find out how much sales tax you have to pay. In most EU countries (and the Middle East) VAT is included in the sticker price.
In addition, don't forget about import tax that the local country may charge on top of VAT. I'm currently living in Amman, Jordan and VAT is 16%. On top of that the import tax for goods from America, Europe, Japan, etc is close to 24%. That's 40% extra that has to be paid above the US price (which is not discounted).
Of course finlands probably the only country in the world where all the mcdonalds employees speak english
So what do they speak in the US, UK and Australia?
In the US they seem to virtually all be native Spanish speakers, and in the UK they have such poor grasp of their own language that most custom orders seem way above them.
I'm nearly convinced that the average Scandinavian high school student has a better grasp of English than those in the UK or US :(
Back in the 90's when I was shipping software to Europe, the price I'd charge the wholesaler was the same I'd charge local wholesalers. Getting through customs however, wasn't trivial. Import duties in the 90's which were separate from VAT were running around 15-20%. The wholesaler paid that on top of the price he paid us and added his markup which he passed on to the retailer. The retailer turned around and added his markup to the price he paid which included the duty cost plus the wholesaler's markup on the duty cost. By the time it got to the customer, the customer was paying markup on markup on duty plus regular retail-wholesale markups. What initially appeared to be a relatively small duty cost mushroomed into a sizable burden.
I was talking to one of the wholesalers about it and he laughed it off by saying 'yeah, but we get trains!' He'd then piss and moan about his more savy customers buying directly from retailers in the states and avoiding the double markups. That of course, reduced his market which meant he raised his prices more to cover his fixed costs.
Another factor driving prices in Europe was the fact that we'd sign exclusive distribution agreements so a wholesaler owned the market for a specific country. We did that because the wholesaler handled the translation and marketing costs in the specific country (we were a small company). Since he was the only source for a product, there wasn't any price competition. Here in the states, we'd wholesale with 5-6 distributors and those 5-6 companies were cut-throat with each other. The ones who couldn't compete on price, didn't survive.
Back in the 90s on Usenet I used to tabulate and compare prices between MacWarehouse's UK and US catalogs. I'd subtract the VAT to ensure the comparison was fair. The result showed markups of 50-100% on a regular basis.
In most cases, any localization done was incomplete. For example, ClarisWorks still referred to "color".
As I recall, the #1 winner was Dave Winer's Userland Software. Their Frontier product had something like a 200% markup in the UK, and zero localization performed.
I actually contacted some of the winners about their UK pricing. One company told me that the markup was because a small number of distributors controlled the UK software market, and those distributors were the ones setting the prices.
It's worth noting one of the side effects of this practice: my experience in the 90s was that everyone ran the US version of Mac OS and ordered their software from the US in order to save money. This indirectly killed the market for Mac software in the UK.
Also, the BSA used to estimate software piracy by comparing the number of people running (say) Microsoft Word with the number of UK sales of Microsoft Word. So the gray market meant that US piracy stats were depressed, and UK piracy stats were artificially inflated.
(I was going to link to some of my 1992 Usenet posts, but Google Groups doesn't seem to have them.)
GCHQ Quantum Insert installed. If only our tongues were made of glass, how much more careful we would be when we speak
Microsoft make money because the market has not matured enough yet... They also snuck in through the back door as the hardware market was maturing - people went for the cheaper more open hardware, and overlooked the impending software lock-in because it was a relatively small cost compared to the benefits of cheap open hardware from multiple vendors.
As for your comment about little financial motive...
There are many ways to make money that don't involve directly selling software. IBM and RedHat make a lot from support, Many companies make a lot of money from hardware, while investing in making free software (including free as in beer like drivers).
And your claim that very little software being created without someone hoping to make money from selling it, just look at how much free software is available, there is a truly insane amount of software available for free these days.
http://spamdecoy.net - free throwaway anonymous email - avoid spam!
the disparities have fueled a growth in open source software and their alternatives. And, as a result, some very good alternatives have come out of Europe. Enough that some companies like MS have set up lobbying efforts there to try to stop governments and businesses from adopting the alternatives (why would they cut the price, it's not their "way").
One has to remind oneself that the image the US gives itself internationally mainly comes from the people on the "lower" end of the intelligence or/and educational-scale from time to time.
Actually, I have never actually meet anyone idiotic from the US. In my experience, most you meet are nice, intelligent and well informed people, so I assume that the idiots simply are a very vocal minority.
One have a tendency to remember the bad experiences better than the good ones, though. =(
/.Mattsson - My native language is not English, so please don't whine over linguistic errors. (That's lame anyway...)
I can't speak for the UK and Australia, but here in the US they typically speak either Spanish, or some sad combination of English and nonsensical gibberish.
Just another ignorant American.
It is localization in the UK as well. The preferred ending according to the OED is -ize although -ise is acceptable and seems to be very common in modern usage. An Inspector Morse episode once hinged on the fact that en English professor would not write a suicide note using -ise because -ize is the more correctending. This is why I always get really irritated with spell checkers: the UK versions refuse to accept -ize as valid.
That's just as much BS as their old excuse for shipping things to Europe despite being closer to China where all the electronics are actually made and Microsoft makes their EU discs in Ireland so the cost is minimal for shipping.
As far as translation...for starters they never actually give you software that uses British English so we see no benefit in it and do you think they get "file", "save", "copy, etc translated for each version? A previous employer of mine only paid approx. £110,000 to get a whole book translated into about 26 languages. It was a small company so they certainly didn't get a good rate. Now if Microsoft or Adobe somehow pays double that, that means they only have to add £1 per disc if they sell 220,000 copies which they will. There is no excuse for something that should cost us £150 to cost £300 (or more).
The only reason they do it is to boost their profits because European currencies are worth more than the dollar. So they abuse their positions to sell over priced software to help their bottom lines. That's the only reason.
This is also yet another reason why I use products like Open Office and Gimp. Honest companies, like JCreator, will get my money too seeing how they don't try to rip me off for not living in the US.