Tobold's Blog
Wednesday, May 13, 2009
 
1 Euro is not equal to 1 Dollar

Over the last 365 days 1 Euro bought you between $1.25 and $1.60, with an average of $1.40. Thus if you could find suckers to which you could sell 1 Dollar for 1 Euro regularly over the last year, you made a 40% profit just from the exchange rate. But who would be willing to pay 1 Euro for 1 Dollar? Unfortunately all European customers of Steam, as well as some other online game distribution services, as well as some MMOs, including Free Realms. All these platforms offer identical services in the US and in Europe, but what costs $1 in the US cost 1 Euro in Europe. European customers pay 40% more for exactly the same service. (In the case of Free Realms you could even argue that the service is worse, as the servers are in the US, and we get more latency.) If you're just laughing about this, because you hold an US passport, be aware that if you ever live for a period in Europe, like being stationed as a soldier, you'll overpay in Euro too, the price is based on location, not nationality. If you try to circumvent that using a proxy or other technical means, you will get banned by Valve, and all your Steam games will stop working.

Of course the European customers of Steam aren't happy, the 1 Euro is not equal to 1 Dollar Steam group already has nearly 20,000 users, and that's after Valve banned the most vocal ones. Of course we are used to getting screwed like that with games that come with a DVD in a box, for example The Sim 3 costs $49.99 in the US and 49.95 Euro in Europe. But in that case at least I can order the game in the US, and still come out ahead in spite of transport cost and VAT.

Curiously Valve is well aware that their price policy is hurting them, as they know how much better games sell at reduced prices. Overcharging European customers by 40% MUST have a negative effect on Steam's sales over here. Of course they aren't alone in this, the game publishers share the responsibility for setting prices and cashing in on the exchange rate profits. But the next time you hear how video games sell less well in Europe than in the US, you'll know why.
Comments:
The exchange rate is killer. As tempting as it is to go and grab some awesome values I see in ads, there is still the 19% VAT. I logged into Battlefield Heroes this week and found all of my costs in Euros, but figured out how to get it back to USD. That was scary, $20 is NOT equal to 20 Euro.

As much as I wanted to switch to a European server, I never did because of friends, and the fact that the exchange rate is a beast. But hey, let the EU keep letting in poorer countries. That will just make the dollar stronger eventually.
 
Nice post. ;)

Personally I haven't bought that much on Steam since they introduced 1$=1€. I've bought a few low budget games as weekend deals + one pre-order at 75%. I have still overpayed compared to people in the US. The point is though that I would have bought probably 3-4 full price games also on Steam just since the start of 2009. Just yesterday after your post on Puzzle Kingdoms I did buy it from D2D, although Steam would have been my first choice if the price wouldn't have been in euro. As you say it must be affecting them. It's just a question if they are even aware of it or have just stuck their head in the ground regarding this issue.
 
If it makes you feel better (it won't) the situation is the same in Australia. You can walk to a store and save 10-20% off the steam price.

Add the fact australian ISP data caps are quite low and it makes non-steam AAA title releases much more attractive value.

Just like with music, the publishers are attempting to kill the distribution method. I just dont understand why, surely bandwitch is cheaper than pressing CD's and shipping them across the world?
 
Wow, didn't realise they did that with Free Realms. They don't equate 1 pound to 1 dollar.

eg. It's £4 for a month's sub, but $5
 
In the past when I queried the high prices of some Steam games (compared to shop bought copies) it was generally blamed on the publishers who forced Steam into selling at a fixed price while real world shops have more freedom to play with prices. Surely STEAM has become an important enough distribution channel at this stage that it no longer had to kowtow to publishers. I am not aware of Amazon being forced to sell books at an inflated price.
 
Nah. Valve's own games are priced in the same way. If they had to follow publishers prices they would still be free to set their own prices the way they want.

That said, there actually are a few games on Steam where the prices are somewhat reasonable. Apparently that's when the developers/publishers have explicitly stated that they want fair prices.

What I really don't get is why they are doing it. They are shooting themselves in the foot. Besides losses in sale their reputation here in EU is going down fast.
 
Darkfall is the opposite i think. Americans pay 14€ for the sub which probably makes it one of the more expensive games around.

(Please, no more Darkfall blog pvp... Just pointing something...)
 
I find this practice to be really, really enraging me. And still... I buy games from Steam. Well, only those €5 weekend deals where I pay one or two euros more then my American friends. For other games, if a game is up on direct2drive for $15 dollars, why would I pay €15 through steam? I don't.

But the real reason it pisses me of is because they give us no choice. We can not just click the "dollars" button to pay in dollars. I tried to circumvent this rule by going to steam through a proxy and buying a game like that (yes, I really do find it that frustrating and had no idea it can get you banned) but it didn't validate my credit card. Of course the solution is to find an american friend, let him buy it and gift it to you. Great...

Games on Steam are already heavily overpriced. I can often find my games 25% cheaper on Play.com. And there I can choose between pounds and euros even though their exchange rate is fair. Play.com give a boxed version with a manual. Around 40% of a boxed version is money the publisher will never see. While through steam they can get the full sum minus some transportation costs.

All this means that if a game is up for €50 on steam. I can buy it for €37.5 through play.com. However, if I buy the game through steam they would make the same profit if they put it up at €22.5. Yet they put it up at €50. I suppose they put their prices high because retailers complain. But if you ask more for a download then for a box I can see no reasons why I would buy it.

I should be boycotting steam but some of those weekend deals are too fine to pass. I will however not buy anything else as long as their prices are not a bit less then a retail copy. And I do wonder why other people do.
 
Once again, Valve does not control the pricing and only takes this approach with their own titles because the majority of the industry has chosen to do so as well. Valve still offers tremendous amounts of discounts through Steam that are a steal whether they are bought with Europe's Monopoly money or American over-printed dollar bills.
 
Perhaps I'm missing something here, but people in the EU get paid in euros right? So someone earning 50k a year gets it in dollars in the US, and in euros in the EU. Do they adjust your 50k pay based on the exchange rate, to keep things 'fair' between the EU and US? Is that 15 euros you pay a month suddenly taking more money out of your budget because 1 euro is worth more than 1 dollar?

Would everyone in the EU be making such a big deal about Steam if the exchange rate was reversed? Would you still be signing that petition asking for localized pricing to have your 15 increased to make up the difference?
 
Perhaps I'm missing something here, but people in the EU get paid in euros right? So someone earning 50k a year gets it in dollars in the US, and in euros in the EU.

Yes, you are missing something here. For a job that would earn you 50k Euros a year in Europe, you'd earn 70k Dollars a year in the US. And that's before taxes and other deductions, which might take half of your gross salary away to end you up with only 25k net.

And I'm certain that if ever the dollar rose again to be worth more than the Euro (which is unlikely given the trade deficit) Steam would quickly change that 1:1 exchange rate. Other countries, with cheaper currencies, don't get a 1:1 deal.
 
The localized crap seems to be on the raise in the supposed to be international network.
Businesses will keep on ripping off their customers and blaming country laws as long as it doesn't fire back.
 
Heartless: That's just the point. It's not worth buying it unless it's a weekend deal or similar.

This is just a personal observation, but I didn't notice much of this price difference before Steam introduced it. And once again, if they wanted to be fair then they could at the very least set reasonable price tags on their own games. Others would follow.

Syncaine: I can only speak for myself here. I live in Sweden and we have SEK here (Swedish crowns). It is indeed MUCH worse to pay in euros, but we are forced to do that.

The next comment I must admit that I'm speculating about, but to me it seems reasonable. I'm sure someone with more knowledge on that matter will correct me if I'm wrong. Doesn't someone in the US get paid more dollars than someone in the EU in euros? Say the medium salary. It's of course hard to compare different jobs between different countries, but anyway. If that's the case then we are back at the same point.

Also to answer your question: Of course not. But you can turn that around the other way too. If the conditions were changed so that the dollar was worth 30% more than the euro, do you think that the US people would sit silently with their thumbs up their a***s? Why do you think they are so silent now? Could it be that it doesn't matter much to them? They've got the sweet end of the deal anway as it is. So what's the solution? Fair prices of course. There are different solutions to how that could work I'm sure but anything is better to how it is at the moment.
 
Ah, Tobold beat me to some of my points. :)
 
Taxes are taxes, and you get (presumably) what you pay for (healthcare and all that)

Is that 50/70 (or whatever numbers we want to use) ratio apply across the board though, short of Steam? I mean is it a given that a 70k job in the US is a 50k job in the EU? Is anything that's 70k in the US cost 50k in the EU, excluding Steam? Are games usually priced $50 x exchange rate?

If so, you have a point (and a simply choice to not use Steam), but otherwise I don't really see the complaint.

DarkFall's sub rate is euro-priced, and in doing so Aventurine is basically asking US gamers to pay more than the standard $15 a month. I don't view it as 'unfair', I simply view it as having to pay a certain price for a product/service I want. If DF was of equal value to me as WAR, I would play WAR due to price. How is Steam charging what it charges any different?
 
What's funny is that I was about to become a member up to the point that I read the article and confirmed it by reading SOE's faq.

I am not getting a membership not because I think 1.8 USD is above the worth of the membership but because their transactions are listed in $ and I consider that to be missleading. Good Job SOE! And thanks Tobold.
 
You cannot equate the currency exchange rate to the price of goods. Prices are set by what a region/place is willing to pay. It is never meant to be even across the board. Valve and other company charge what they can. 14.99 & 49.95 (insert currency of choice) is a nice round number that people are willing to pay. I am sure we can find example where the opposite is true.

Blizzard would charge $19.99 a month for WoW if they thought it wouldn't negatively affect revenue (meaning that wouldn't lose more than a quarter of their subs).

I think all this hub-bub is for naught. The only way to get prices to drop is not buy the goods. They will reduce the price to increase sales.
 
Personally, I feel that us in the UK pay far too much for games, DVDs, music and the like compared to the US. I think we're so used to play a lot that we accept it and companies take advantage of us!
 
At points in the past, 1 Euro has been worth less than 1 Dollar. When a Euro was .87 cents, I'm sure people who were paid in Euros were happy enough.

And exchange rates change. The dollar has been worth more in the past, it may indeed be worth more again in the future. It is the economic environment in which we must live.

Given that, what would you suggest Steam, Blizzard, SOE and the rest do? Peg the price of their games on the value of the dollar? Do you want your WoW subscription price to change every month? Do you think that declaring the Dollar the standard for pricing in Europe will make Europeans happy?

And of course this all assumes that the cost of doing business in the Euro zone is exactly equal to the cost of doing business in the US.

This "Today I feel I'm being ripped off by Steam/Blizzard/SOE" seems to me to be a rather simplistic view of the economic situation.

Now, maybe individual companies ought to look at their pricing models in local markets. (Go ask an Australian about the price of games before you start in on it.) But the blanket statement that being charged 1 Euro for something that costs 1 dollar in the US is wrong just doesn't seem to stand on its own for me.
 
sorry, stupid test post, showing off openid logins on blogger, feel free to delete this comment, lol.
 
At points in the past, 1 Euro has been worth less than 1 Dollar. When a Euro was .87 cents, I'm sure people who were paid in Euros were happy enough.

What we Europeans are trying to explain to you is that when the Euro was worth 87 cents, the game distributors curiously were able to make the calculation and sold games for more Euros than Dollars. That calculation stopped when the Euro hit egality, and since then we've been stuck at 1:1.

Given that, what would you suggest Steam, Blizzard, SOE and the rest do? Peg the price of their games on the value of the dollar? Do you want your WoW subscription price to change every month? Do you think that declaring the Dollar the standard for pricing in Europe will make Europeans happy?You don't get out of your own country a lot, do you? Of course most other goods did change prices over time in line with the exchange rate. If all prices were fixed, there actually wouldn't be a variable exchange rate. Do you really think Europeans are paying 57 Euros per barril of oil now that the barril is worth $57? Of course prices don't change daily, but the Euro has been worth more than a Dollar for years now, and no economic paper I read believes in this reversing any time soon.

You are asking whether declaring the Dollar the standard for European prices would make Europeans happy. Can't you understand that this is exactly what we are complaining about? The dollar *is* the standard now. Somebody makes a complicated calculation of costs, taxes, and profit margins to determine that a game should cost $49.99, and then when shipping the same game to Europe he doesn't make any calculation at all, and just changes the currency symbol. Why can't they do the same calculation of production cost, profits, and taxes for Europe? We'd still pay less for the games than now!
 
Game, Set and Match, Tobold.
 
"You don't get out of your own country a lot, do you?"

Here I thought you were above insults, but even Tobold has to get in a cheap shot. Please don't assume you know a thing about me.

Yes, prices for things like commodities change because there is a good deal of competition. So perhaps the pricing from companies is based on what competitors charge in your local market? Are games from publishers in your own country of similar quality significantly cheaper than games from the US? I rather suspect that if there were a big price gap it would close rapidly.

Your assumption is that complex calculations about costs, taxes, and such going into the price of a piece of commercial software on the store shelf. Having worked in that part of the industry, I'll tell you that the going price for comparable items has a much bigger influence. If European publishers think 49.99 Euros is a nice price, then outsiders are going to go for that price as well.
 
Here I thought you were above insults, but even Tobold has to get in a cheap shot. Please don't assume you know a thing about me.

Just a natural reaction to your blatant, hostile anti-Europeanism. Your "given" assumption that the Euro could in the foreseeable future fall below parity with the dollar isn't supported by any economists, not even American ones.

And competition doesn't work the way you describe. Somebody who wants to buy a game usually wants that specific game, and not some similar game from another game company, local or not.

And big regional price differences only makes sense if there is some barrier to entry, some transport cost or other involved. That is not the case for games distributed over the internet. The competition of Steam is not a European publisher, but a different online game distributor, like Direct2Drive, selling you exactly the same game for 50 dollars instead of 50 euros.
 
I was not trying to be hostile and I am sorry if you read that into my comments. In fact, I was trying to say in my initial post that pegging the price of game in Euro currency countries off of the dollar price in the US would seem, to me, to be extremely arrogant. It would appear to me as pushing the primacy of the dollar over the Euro.

The topic is actually interesting to me, and so I am going to carry on in the spirit of inquisitiveness on my part. However, if I am annoying you, I'll let it go and won't comment on the topic again.

As for how pricing works in the software business, well, I'm coming up on the 20 year mark in that industry, so I think I have some insight on how it goes in the US market. But I am not sure I can demonstrate that it works that way except by saying something like, "Did you ever notice how game prices always seem to be 19.99/29.99/39.99 etc.?" which isn't all that convincing. From the inside though I know the first question the person in marketing wants answered is "How much is the competition charging?"

I tried using Amzaon.com and Amazon.de and Amazon.fr as a possible experiment. Amazon tends to be a bit below market on most things here, but when I put in "Orange Box" and compared prices for like items, the prices in Euros were actually higher across the board.

So Amazon is either not trying to be as competitive when selling in Europe, the average market price "number" is higher in those areas and Amazon is just culling more profits, or the cost of doing business is significantly higher than you are estimating. Do Amazon's Euro prices seem in line with other software outlets, online or in-store, to you? You are the man on the spot, so you probably have at least a gut feeling on the subject.

And, yes, that is not exactly an analog to Steam, but Valve does have to price in such a way that does not piss off its retail vendors, lest they stop carrying Valve's products.
 
You are completely correct in that European prices for games in many cases, not only from Steam, are higher than in the US. I think there are historical reasons for that, with most games having been developed in the US, and then ported to localized European versions. Many US games when bought lets say in Germany or France will have German / French text and speech, and of course that localization does cost something and justifies a higher price.

But then there are also German games, for example Sacred 2, which have been developed in German, and then ported to a US version. At which point a German paying more for the German version than an American paying for the US version looks like a ripoff.

With online distribution the ripoff becomes just more obvious. I'm not even trying to buy a localized version, I just want the US version. When I'm on a business trip to the US, I can go into a shop, buy a PC game, and it will run on my computer in Europe. Example: Sacred 2 for $47. If I don't travel, I can order it for the same price from Amazon, but the shipping cost make it more expensive. So instead I might want to buy Sacred 2 from Direct2Drive for just $30 as download, available worldwide. But at Amazon.de Sacred 2 cost 49 Euro, and at Steam even 50 Euro ($68). Of course I'm upset at that ripoff! Steam is selling exactly the same game and same service to an American for $50 than they sell to me for $68. They have no additional expense of me downloading the game in Europe.

Imagine you stand in a bar in Shanghai and see a Chinese guy buy a beer, and the bartender demands $1 for that beer. Then you ask for the same beer, and the bartender tells you for you it costs $8, because the GDP per person in the US is 8 times higher than that in China. Would you accept that, or would you be upset?
 
Heh, I don't actually have to imagine that, I have seen it live and in person. My mother lives in Hawaii where the primary industry is tourism and all prices are set to... um... soak the haoles, the out-of-towners. But if we go out to dinner with my mother, she shows her ID to prove she is a local and we get a serious price break, the kamaaina discount.

The people in Hawaii are wise enough not to announce to the other patrons "these people just got that $27 entree for $16." But yes, if they did make that error and I was not the one getting the discount I might feel a bit disgruntled. I am not the type to make a scene but I am likely to take my patronage elsewhere in the future if it is rubbed in my face.

Unless, of course, it is something I really want, like World of Warcraft. As you point out, we live in interesting times and information about prices flows freely, so we know that in the Internet cafe next to that bar in Shanghai (and I hate that bar) people are playing World of Warcraft for about six cents an hour. I want to pay six cent an hour! You too, I bet!

Labor and infrastructure costs for The9 are cheaper than they are for Blizzard in the US and Europe, but not that much cheaper. Instead I am pretty sure the pricing scheme was chosen because that was what people were used to paying for comparable games.

The market was the likely source of the price. That was also the likely pressure for the German developer to sell the US localized version of their game at a price cheaper than it is sold in Germany. If you bring a game that sells for 49 Euros over to the US and try to sell it for 68 dollars, life is going to be difficult for them. 68 dollars is an expensive game on the shelf here in the US unless there is something really special about it. I've watched overseas sales wither and die for a product because somebody dictated that the profit margin for a given package had to be the same in all markets.

The German developer no doubt justifies this price change, at least internally, by pointing out that a US localized version is going to serve a market of 300 million people, so potential sales, even at a reduced margin, are worth the investment. And all the more so since the actual hard part, the real investment, is in the code that runs the game. Localization, if planned for in advance, can be a pretty trivial cost relative to initial production costs.

Which brings me back to Valve, whom I cannot say I envy. For their own games they have refused to pick one world or another, so still sell retail and digital. But to keep the retail channel happy they cannot drastically undercut retail prices with their digital channel, which in turn makes them look like they are totally gouging people on digital sales. At least they have decent discounts online once in a while I suppose. But things get even more complicated in your example because Valve is only the distributor. I would not necessarily jump to the conclusion that Valve is ripping you off deliberately or reaping the bulk of the proceeds without knowing what their agreement is with the developer. The price may be part of the contract and Valve may be getting only a small margin or a per unit payment.

So, not to diminish or trivialize your sense of being ripped off, because it looks like a blatant slap in the face even from here, but at least at the bar in Shanghai I know who to be mad at. In the case of variations in software pricing between regions served by different monetary instruments, I am not sure I can point and a single entity and say, "This is your fault! You're ripping people off!" It seems to be a conspiracy.
 
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