Fine iTuneing

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A British consumer watchdog group is calling for an inquiry into U.K. iTunes' pricing practices. Apple's shocking crime? Not charging the same price for music in England as in France and Germany. Of course, iTunes still appears to charge less than other music download services there, but that won't make up for the pain of knowing that Parisians are getting a better deal still. So does the Virgin Megastore on the Champs-Elysees have to ask the same price for a Serge Gainsbourg album as the one in Picadilly charges for an Elton John CD?

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  1. Sorry Julian, you’re off-base on this one. The only difference between the “U.K. iTunes” and the “French iTunes” is that they are different front-ends to the same service. This is analogous to McDonald’s opening adjacent, but otherwise identical, restaurants for people of different races and charging different prices.

  2. Can’t the UKers just buy the songs from the french site?

  3. Brian: I realize that; so what? Perfectly ordinary geographical price discrimination; coupons are another way of doing the same thing.

    Picasso: Apparently not without a French billing address.

  4. Julian Sanchez,

    You should have mentioned the French band Phoenix as well. 🙂

  5. Julian:

    My contention is that it is *not* “perfectly ordinary geographic price discrimination.” As all of the customers entering a meatspace widget store expect to be offered the same prices (exceptions exist), likewise do all of the customers browsing to an internet widget retailer.

    So does “the Virgin Megastore on the Champs-Elysees have to ask the same price for a Serge Gainsbourg album as the one in Picadilly charges for an Elton John CD”? Of course not. They’re not the same store. I’m suggesting that Apple slapping some code together to enforce different front-ends for different countries is not tantamount to their opening *different* stores.

    In case it’s not obvious, I believe Apple has the right to do this. The more salient question is whether it’s a solid business decision to alienate customers in this way.

  6. The only difference between the “U.K. iTunes” and the “French iTunes” is that they are different front-ends to the same service.

    They are not, however, taking input from identical legal environments.

    As much as the EU has been harmonized, there are still lots of local restrictions to be dealt with, and one of the problems of getting iTunes going in Europe to begin with was the nasty web of rights that had to be neogotiated with all the players in the music industry there.

    I don’t know the specifics, but there are reasons aside from physical shipping costs that could cause an online vendor to charge a different price to Limeys than Krauts.

  7. Sandy:

    You’re right, but try explaining that to British music consumers. I doubt you, or Apple, could do so without provoking a veritable onslaught of tomatoes.

  8. The only difference between the “U.K. iTunes” and the “French iTunes” is that they are different front-ends to the same service.

    Not quite. They could also be paying royalties to different entities depending on the location of the purchaser. EMI UK and EMI Music Germany, for example, are separate companies, and may have different royalty agreements with Apple.

  9. I’m sure they’d love to, but I’ll bet British consumer laws won’t let them charge a “UK Government Music License Tax” the way the phone companies add on “FCC Interstate Toll Access” charges, which aren’t real taxes.

    And if they added on a “Virgin Britain Charges Us More” charge, Virgin would pull their music.

    So now the ancestors of the whiny people who get upset when the EPA changes fuels and their price goes up are determined to halt iTunes within Britain.

  10. If you think this is amusing, you should check out the complaints that Lego sets made and sold in Europe (Denmark and Switzerland) cost more than the same Lego sets after they are shipped to the US!

    Amazingly, the price on some Lego sets in the US is about 25% less than the same sets in the EU.

    And apparently that price difference isn’t abnormal.

    One poster said:

    German prices are 86% higher than US ones.

    On average, Lego prices in Europe are 35-40% higher than in the US.

    I think Europeans just like to haggle.

  11. My hazy recollection is that the posted store prices for goods in most of Europe are inclusive of taxes (sales tax, VAT, whatever), whereas of course in the U.S they typically are not.

    Is my recollection wrong (haven’t been over there in about 10 years)? If not, how much of the price difference is attributable to this?

  12. Chuck,

    A number of people suggested “tax included pricing” for the difference, but if they were priced the same, the US sets would be priced at 5-6% less (typical sales tax around here).

    I don’t think tax alone can account for the 35-40% higher prices across the board – can they?

    Are European taxes *that* out of control?!?

  13. Brian
    Sorry Julian, you’re off-base on this one. The only difference between the “U.K. iTunes” and the “French iTunes” is that they are different front-ends to the same service. This is analogous to McDonald’s opening adjacent, but otherwise identical, restaurants for people of different races and charging different prices.

    Excuse the politically incorrect response, but this is fucking retarded.

    Bringing ‘race’ into this to make a point is a weak attempt to make us believe that there’s something SINISTER going on here. If you understand ANYTHING about economics, Itunes has the right to charge whatever it wants in different markets- as defined what each market will bear. France and England are different markets with different drives, wants and needs. Those markets are also hardly ‘adjacent’. Are we to expect to pay the same for a cup of coffee in Paris as we do in Berlin? Yes, maybe one day when the European Union has beaten all of its locales into “Union Submission”, but for now, they’re physically different markets.

    And if you were serious about the ‘race’ comment, I’m sorry, but two groups of white folks ain’t different ‘races’. They’re barely different ethnicities. But races? Save that talk for another forum, and another subject.

    Paul

  14. Paul,

    Gee, that’s some insightful analysis. I’m not sure whether it’s the interesting choice of language or the utter misapprehension of my point that so endears me to your response.

    My example doesn’t rely on the use of race as a criterion, so please stop beating that strawman. It could have been any identifiable characteristic such that it allowed for easy classification of people. If you had read the rest of my follow-up responses, you would have seen that I believe Apple has every right to run its business as it sees fit. Government intervention is both unnecessary and undesirable. The salient point is that groups of people are being charged *different* prices for the *same* product within what can arguably be considered *one* store, and this is commonly thought to be an inappropriate business practice. If the person in front of you in line at Wal-Mart received a 20% discount – based only on his street address – you would not be happy about it, and don’t even try to argue otherwise. The point is that customers at an online store perceive that it is *one* store for all internet users. One can argue that the different front-ends constitute different stores, but this is not at all obvious. Ultimately, whether they are right or wrong doesn’t matter, but whether they decide to patronize your business or not matters quite a bit.

    And as for “physically different markets,” the point is that people don’t perceive themselves to be purchasing in different markets when they are both ordering a product from the same web site. In fact, this notion is becoming increasingly accurate – the internet *is* radidly creating a global market which even consumers can participate in. Particularly, when the product is a bunch of bits, it becomes increasingly difficult to justify the assertion that the products are being sold in different markets, since the physical properties of traditionally delimited regional markets are strikingly irrelevant economically.

  15. Brian:

    Thank you for the clarification of your point- and no, for the record, I hadn’t had a chance to read your follow-up responses.

    In my defense, I’d say my analisys is correct given the particular post to which I was responding.

    I will say that your clarifications bring your comment into a far more debatable forum, one I still disagree with, but at least we now disagree on details, not premise. And I’m more than happy to not discuss race– which I admit inflamed my passions on this particular subject.

    Yes, the web does homogenize (word?) markets dramatically. On this, I agree. If I go to ‘x.com’ and buy a product, it ‘feels’ like I’m going to the same place as my neighbor. However, in this case, my neighbor, or as you analogize person in front of you in line at Wal-Mart received a 20% discount – based only on his street address is not really my neighbor. It’s someone living in a different country, with different regulations, different tax rates and different demographics.

    This debate is probably too far reaching to be covered in a blog, but consider something else: books and magazines. Go to your local bookstore, look at the printed price on the cover and often it’ll say:

    U.S. $12.95
    Canada: $19.50

    (or some such disparity).

    Now, one can come up with ALL sorts of reasons why this is appropriate- but to do this would (unwittingly) be making the case for Apple’s pricing. Same book, same paper, same cover: two different prices based on your street address.

    When all markets become completely homogenous a better argument could be proffered as to why pricing should be uniform. But until then (and likely even then) as long as we have recognized borders and seperate governments, this neither surprises me, nor annoys me.

    Paul

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