Software Price Gap Between the US and Europe 1003
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?"
Or $0 if you get it from https://thepiratebay.org (Score:2, Interesting)
How can such an abyssal difference be explained?
Greed? Well, two can play that game.
Localized versions (Score:2, Interesting)
To make it even worse, as far as I'm concerned they can either keep their localized versions and just give me the US English one, OR make their app multilingual and just ship one version. (I'd prefer the latter option). Apple does this for most (all?) of their software and it's great. I can have an English language version if I log into my account and a Dutch version on a guest account if someone who doesn't speak English should want to use my computer.
They have to do the translations anyway, so why not ship all translations with every copy. This also saves on costs for making several master CD's, boxes, etc.
markets (Score:5, Interesting)
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.
Not only software... (Score:5, Interesting)
Re:Taxes, for one thing. (Score:4, Interesting)
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.
Re:Law of Economics Applies... (Score:5, Interesting)
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.
Re:taxes (Score:5, Interesting)
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.
Re:Because they can (Score:4, Interesting)
Welcome to economics (Score:5, Interesting)
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.
Yes and No (Score:5, Interesting)
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.
Re:Yes and No (Score:5, Interesting)
Still, new products usually appear in English first and if there's demand for them; the localized versions appear later.
I expect the UK gets shafted because they seem to spread the cost of creating the "Euro Version" across all countries; even though it's practically a no-op to convert from US to UK english.
Support also adds to it. Most large software companies have UK support staff, and that adds to the cost.
Taxes add a little more. The UK has 17.5% VAT built into the price; if you have to pay sales tax in the US then it's added at checkout.
But mostly I think it's because they can and because the market bears it
It's not just software (Score:1, Interesting)
It's not just software. It's everything. I'm an astronomer and home-brewer. A barley mill in the US costs $115, whereas exactly the same product in the UK costs £150 ($298!). Yes, there is shipping involved, but even buying it from America and paying myself to have it air-mailed to me saved me over £30 on what it would have cost if I had bought it from a UK supplier.
Buying telescopes is even more ridiculous. They price them on a $1=£1 model, and given that telescopes can go for thousands of pounds, you can fly first-class to America, have a 3 week holiday and get the telescope in America for less than the price of the same model in the UK.
Re:Because they can (Score:5, Interesting)
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?
This just in (Score:3, Interesting)
This just in - FreeBSD, Fedora, Ubuntu, etc, as well as OpenOffice, Gimp, Firefox, etc, are equally free *regardless* of what country you live in.
What is this 'buying software' concept you speak of?
Re:Yes and No (Score:3, Interesting)
Still, new products usually appear in English first and if there's demand for them; the localized versions appear later.
In Europe everyone speaks English and almost nobody uses localised versions of products, if for nothing else than that they've gotten used to the english version before localisations come out.
Re:Real question: Why can they? (Score:2, Interesting)
In a sense, yes. Piracy has brought the price down to levels closer to the marginal value of the product.
Take oil as another example of something that is suddenly "overpriced". The minute the US announced that additional drilling within the country would be permitted, oil prices dropped the same day. It's not the actual production of oil that is driving the prices, but the perceived ability to drive the prices up (and subsequently the inability of consumers to fight back effectively). Once there is a perceived threat to the value of oil (additional reserves being tapped), the prices come down.
So yeah, piracy is one factor that keeps software prices at bay.
Re:You answered your own question (Score:4, Interesting)
The parent post is modded funny, but it should definitely be informative instead. As a Canadian writing heavily regulated documents in the UK, I have been continually amazed at not only how many small differences there are between US and UK English (I find and replace all 'z's as a starter) but how much the English care. We have had applications rejected for being too "American". The culprit? Spelling!
Converting from US to UK English is a non-trivial task, and one of more subtlety that most would give it credit. I am by no means justifying the price gouging, but there is some work involved to make it happen.
As an aside, it doesn't help that the car-wreck that is Word does not pick up on many American words that have UK counterparts. I currently have 30+ in a special dictionary that are always marked as mis-spelled (whether the document is formatted UK or US English). Those words always got me into trouble because they looked right to me!
Re:You answered your own question (Score:3, Interesting)
I object to paying for localisation when my spell checker on Word would still complain about the word localisation no matter how many times I select the British English dictionary!
Re:Real question: Why can they? (Score:2, Interesting)
Re:taxes (Score:4, Interesting)
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).
Re:taxes (Score:4, Interesting)
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).
Re:Or $0 if you get it from https://thepiratebay.o (Score:3, Interesting)
...and despite what anyone here might like to believe, Microsoft is making money hand over fist, with profits rising all the time. If selling software is dead, why is the industry making so much money selling software?
It is clearly true that copying software, once it has been created, is essentially free. However that ignores the fact that software costs a lot of money to create. If there is no financial motive to create software, very little software will be created.
Cue GPL zealots....now! :)
Re:Taxes, for one thing. (Score:0, Interesting)
To be technical, when it was ORIGINALLY floated it was exactly equal to the dollar.
But it lost ground shortly after. This was during a time of economic turbulence in Europe and it was during the last year of the Clinton administration, before Bush had a chance to run our economy into the ground.
Re:Nothing New (Score:2, Interesting)
this is an old excuse, and it is not true. If you take guitars instead of software, you'll see comparable differences. The Gibson Melody Maker costs 399, dollar or euro.
Netherlands: 399 euro http://www.maxguitarstore.com/store/index.php?productID=2133 [maxguitarstore.com]
USA: 389 dollar
http://www.zzounds.com/item--GIBMMP1 [zzounds.com]
Re:Because they can (Score:1, Interesting)
A funny by-line is that textbooks in Europe are often vastly cheaper then in the US (so much so, it can often pay to for US students to import the books).
I have many comp.sci books that says "International Edition - not for sale in the US".
Re:Law of Economics Applies... (Score:2, Interesting)
Don't you see, the government needs to step up with price controls on everything because it's not fair that people have to pay for stuff.
Or maybe I'm misreading the SlashBitching going on. It's always so hard to tell what the whiners actually want.
Re:Because they can (Score:4, Interesting)
Did he take into account that European prices usually include taxes that are sometimes excluded in the list price in the US, one wonder?
Also, I assume that most countries have import-taxes on software too...
Re:Because they can (Score:1, Interesting)
You could say that in America, the economy sucks, the job market is frighteningly uncertain
Comparative unemployment rates:
United States -- 5.5%
Eurozone -- 7.1%
Re:Real question: Why can they? (Score:2, Interesting)
It's the very essence of "Supply and Demand." Only in this case, it's refined further to individual markets. Essentially, you're breaking up the demand into different categories, and have a varied pricing structure because of that. This is the goal of all businesses. You price your product exactly so that it encourages every single person that was "on the fence" about the product to make the plunge. Because every individual has a different desire level and ability to pay, that means you want to price the product differently depending on the customer.
This is why people haggle. The seller is trying to gauge interest level and price accordingly. You really want that apple, and can't live without it? $10. You hate apples? 25 cents. The apple seller could just offer *everyone* 25 cents, but then he'll run out of apples real quick.
Its why if you cancel paying for HBO, they'll come back in a month and give you a 50% discount if you sign up again. By canceling in the first place, you made it known to them that you were "on the fence" about it, so they scaled back their pricing specifically for you. It doesn't cost them anything, as long as you were serious about canceling. What's wrong with that? Why should you have to pay the same price for HBO as everyone-else-that-absolutely-can't-miss-an-episode-of-the-Soprano's?
Its why early adopters get the shaft on Blue-ray players.
It's why the same videogame that cost $60 when it was released will be in the bargain bin a year later. Different prices for different interest levels.
Re:Yes and No (Score:1, Interesting)
even though it's practically a no-op to convert from US to UK english.
Hardly anyone even does that. I find it a little grating that most installation software, upon asking me what language I want, offers "US English" as the only English variant. I probably wouldn't care if they just called it "English", but they have to make it clear that they KNOW it's not the same English as I speak, but they just don't care. Why offer the illusion of choice?
At least I get to pay more for the privilege of experiencing this exotic foreign twist on my native tongue.
I guess some bastard would complain if they didn't specifically label it US.
Actually -ize is the more correct way in the UK (Score:4, Interesting)
Re:Because they can (Score:4, Interesting)
Comparative unemployment rates:
United States -- 5.5% Eurozone -- 7.1%
Interestingly, the difference is not far from the percentage of people who are in prison. http://news.bbc.co.uk/2/hi/americas/4481261.stm [bbc.co.uk] More than 2% in the US, and about ten times lower in Europe.
Re:Because they can (Score:1, Interesting)
Packaged Software does not have zero variable cost. Software still incurs variable cost in packaging, advertising, distribution, sales channels, etc. Ironically, its variable cost structure mirrors most closely those of commodities. And like commodities, there is often a large fixed price in developing the resource initially, followed by very low harvesting/duplication costs afterwards.
SaaS model software and other online distribution methods eliminates most of the variable cost; thus the preferred distribution model for open-source, freeware, etc. Open source would not be able to flourish the way it currently does if every copy of each project had to be packaged, shipped, and stored physically.
A lot of the higher costs in Europe have to do with higher local costs (shipping, taxes, legal compliance, "liability insurance", etc). Part of having the EU step in and force companies to "play fair" as often as it does results in companies requiring higher margins to be able to turn a profit should the EU decide to alter their business model, seize their IP, or fine them for X business practice.
This does not mean the EU is wrong, or should not do these things, but when pricing models are created for a local area, the suits in charge are planning on being sued/fined/whatever 3 years out, and are pricing accordingly.
Re:Real question: Why can they? (Score:3, Interesting)
Actually, I'd say the EU is what the US was intended to be. A group of allied separate "states" (meaning "countries") with a political governing body that can consider the interests of all the states in the union.
The US may not be that anymore (if it ever really was), but it was definitely the intention.
I do note from time to time people saying things like, "I am a citizen of Texas" or so on - I actually applaud that sort of wording, as it is closer to the original intention. "I am a citizen of the US" would also be true, but should seem a little "odd", like someone saying they're a "European citizen" (which also technically exists, by virtue of being a citizen of an EU country, but would be VERY rare to hear)
The EU is to blame, and Kroes twice. (Score:1, Interesting)
As far as MS is concerned, it's only logical, and the others (like Adobe) are just following suit in a trend they see that works.
The EU, listening to complaints from companies some of which are worse than MS (and you may include some OS fanatics in there too), fined them a ridiculous amount just for being more successful than their competitors were when they were trying the same.
You didn't believe for a second that MS was going to let its own American customers be the victim of such lunacy, did you? The price of Windows was approximately the same in the US and Europe before the verdict (apart from import tax, which is another matter). When Vista came out, European customers got it at a 1:1 dollar/euro exchange rate, right from the start.
And because Kroes let that happen (she wasn't allowed to complain by her sponsors, and she didn't want the EU public to find out that she HAS sponsors in the first place, because that's illegal here), the current exchange rate for new products is 1.5 euros on the dollar. Not just for MS, but for al US manufacturers with somewhat of a name.
Who lost? The EU customer. Who's to blame? The EU voter.
Re:Real question: Why can they? (Score:2, Interesting)
Re:Because they can (Score:3, Interesting)
The only new member states in the Eurozone are Cyprus and Slovenia, so I doubt it skews the figures that much. Poland, Romania, etc. hadn't adopted the Euro last time I checked.
But, yes, you make valid points. The USA does seem to have more dead-end make-work jobs (store greeters, fuel station pump attendants, etc), and it would be interesting to know how that compares to having more people on benefits in practice. I doubt we'll ever know, though, because the political feeling and rhetoric are too strong.
Re:Yes and No (Score:1, Interesting)
UK prices are typically even higher than the Euro prices. And most companies don't bother to localise their software at all for the UK -- even Microsoft just leave the US spellings intact, try to enforce American grammar, etc.
Re:Nothing New (Score:2, Interesting)
Using his reasoning that America is much more flush with disposable income compared to other nations then the exchange rate or GDP makes it appear, it would make sense that goods are much cheaper in the states since it is the exchange rate that is wrong.
The problem I had with the article was more to do with the authors assumptions that greater disposable income = greater standard of living, and that he failed to address the distribution of income.
Re:Real question: Why can they? (Score:3, Interesting)
Actually, I don't think PPP is out of line on this. Or at least the way the comment was stated.
If I make $100 and you make $50 a year, and it costs me $60 a year to live while it costs you $30, Who has more money? You do because you can buy more for your dollar then I can. If you were to move to my country on the same income, you would be $10 shy of being able to survive. But if I went to your country on the same income, I would be making twice as much as you after living expenses.
But if you look at the numbers your showing, lets take the Luxembourg for example and compare it to the US. We are looking at $104,673 compared to $45,845. So what could we do to even them out, First, we could kill or kick out half of the population which should double the GDP/capita in the US. The other thing we could do is pass a law raising prices and wages for everything from milk to rent to gass and everyone employed or seeking benefits elsware in the US by 125%. This should effective increase the GDP by 125%. So at $45,845, 125% would be around $57,306 and since it is an increase that would become (45,845 + 57,306) $103,151. That's pretty damn close and all we did was blow smoke up your ass.
But you see, if everything went up all at once, Nothing would be different in America. You could still only get what you could get before the 125% increase. PPP attempts to address that in which it brings everything down to an inflation adjusted dollar that can reasonable predict associated expenditures when comparing two divers economies. When you make $100 and have to spend $60, and I make 100 and have to spend $40, I have more money then you. But If we both spend $60 or the equivalent, we are pretty much even.
Now that was primarily income driven in those examples because they make it much easier to show the worth of PPP. However, when you look at Luxembourg, you realize that over half of their work force, (121,600 of the 205,000 workers) are citizens of foreign states living in those foreign states and only going into Luxembourg for work and leaving, you realize how important PPP is. I mean if the EU was able to cut the population in half, their $33,482 would become 66,964 or so. And if that other half went in and worked then left again, then the GPD would remain on track to where it is at. It would also sort of screw whatever other country those citizens went to but that's another story.
You need a way to account for circumstances like this. PPP is a way, the most common way, but it isn't infallible either. But it seems to be the best we have as of now.