Video Games

High Taxes Drive Nintendo Out of One of the Biggest Game Markets in the World

How to create black markets and encourage game piracy

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Brazil never should have named Bowser Secretary of Commerce.
Nintendo

Brazil is a huge market for video games. Latin America as a whole lags behind the West and Asian countries as a total gaming market, but it's a growing market, and Brazil is the fourth-largest consumer of video games in the world. Forecasts had Brazilians spending $1.5 billion on video games in 2014.

So it may be surprising to hear that Nintendo is pulling out of Brazil's market. That's crazy! But it's because of the taxes. Brazil has ridiculously high import taxes for tech goods. When Nintendo's current primary console, the Wii U, was launched a couple of years ago, gamers in the United States could get it for as little as $300. In Brazil, it cost the equivalent of more than $800. Polygon notes how it has impacted other game systems sold in Brazil as well:

Brazil's high tariffs on video games have driven up the price of the PlayStation 4 to 3,999 reals, almost $1,500 U.S. as of today. An Xbox One, which Microsoft manufactures in Brazil, costs 2,199 reals, a little more than $800 U.S.

When the PS4 launched in Brazil, Sony explained that 63 percent of the console's price tag was attributable to fees and taxes applied to the importing of the console. Sony, in an explanation to shocked consumers, mentioned the possibility of manufacturing the PlayStation 4 in Brazil to avoid the taxes and fees. Sony already manufactures PlayStation 3s in the country.

According to some stats about video game sales in Brazil, console gaming is only a small part of the country's market, six percent. Mobile, social, and free-to-play games (like League of Legends) dominate the market in Brazil. But what do all of those games have in common? They don't have physical objects to tax in Brazil.

Even so, those numbers may only be part of the picture. Scroll down to the comments in this IGN story about Nintendo's pullout and you'll see stories from English-speaking gamers in Brazil talking about the methods they use to try to get games without having to pay their homeland's absurdly high tariffs. Nintendo made it a point to say they will continue distributing their products in Latin America, just not Brazil ("Wink, wink; nudge, nudge"). There are undoubtedly a significant number of consoles and games that make it to citizens of Brazil through various avenues that avoid paying those taxes and therefore probably don't even show up in game sales figures for Brazil. High taxes lead to black markets. They always do.

Or in this case, piracy. Entertainment piracy is often presented as consequence of selfish consumers wanting to get something for nothing. But it's also a predictable consequence of trade manipulation and government revenue-seeking that distorts the marketplace so much that it makes it impossible for the consumer to connect to the goods he or she seeks at a rational price.

(Hat tip to NP Complete)

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28 responses to “High Taxes Drive Nintendo Out of One of the Biggest Game Markets in the World

  1. Time to develop a game for the Nintendo system called Black Market Madness.

    1. If the guy who did Papers, Please! developed it, I could see it working.

      1. But what does Anita Sarkeesian think of all this?

  2. Surely this is harming women and minority gamers more than white gamers (who will tend to have more discretionary income).

  3. On top of it, Brazil requires those taxes and tariffs are built into the street price. It isn’t like here where you see: $499+tax = $3500.

    According to a Brazillian coworker, it is cheaper to fly to the US buy a PS4 and fly home than it is to buy there.

    1. I went to some training in Nashville a few years ago and one of the other trainees was from a company in Brazil. We struck up a conversation and went to lunch together…then he wanted help locating a store where he could buy a couple PS3s for his family. He said they were really expensive so he was going to haul a couple back. Hope he made it through customs.

  4. Obviously Brazil needs a high tariff to protect the famous Brazilian video game industry.

    When you see countries putting massive tariffs on products they don’t even produce, that’s a great piece of evidence that tariffs aren’t meant to ‘protect’ domestic producers, just to up government revenue.

    1. They used to be one of the few and largest sources of revenue for the US government.

      1. Alcohol taxes were the single largest source of revenue for the federal government. That’s why Prohibition couldn’t happen until the creation of the income tax.

        1. The government exists to prey on the citizens, not to protect them.

          1. I’m not that cynical. Government can do legitimate things, like provide courts that allow people to resolve disputes without resorting to violence, enforce criminal laws (things with like actual victims and stuff), protect the borders from armed invasion, and enforce property rights and contracts.

            A functioning economy is quite difficult without the latter.

            Government is like fire. Life without it is cold and miserable. But like fire, when government gets out of control, there is little it won’t destroy.

            1. I have moments when my inner AnCap jumps to the surface.

        2. “Alcohol taxes were the single largest source of revenue for the federal government. That’s why Prohibition couldn’t happen until the creation of the income tax”

          And prohibition ended when the government needed even more revenue for it’s expansive New Deal programs, because you can squeeze only so much blood from turnips.

  5. I went to Brazil for a conference a few years ago and couldn’t believe some of the prices. I expected that shit would be cheap (it depends where you go). And I saw ads for cars that should be $20k going for $40k. I saw plenty of cars on the road so either everyone is rich or just pays 30 years for their car.

    1. Or there’s a sizable black market.

    2. And you can buy even the smallest items on installment plans. I went to a bookstore in Brazil that would give you an installment plan on a single book. Crazy.

      At least the beer is cheap.

  6. What do you expect. You see a guy with a cheesy mustache grabbing a bunch of gold coins and jewels, what do you expect a particular government will learn from it?

  7. Mario didn’t look so super last night.

  8. *Deadpan voice*

    Country of the future….always will be.

  9. As an avid online gamer, there are few broad swathes of people I dislike more than Brazilians. Annoying, rude, laggy, cheating bastards, they are. If getting bent over by the government keeps more of them off my servers, the better.

    That said, taxing the hell out of something your country doesn’t even make is a pretty crappy thing to do.

    1. That’s because they’re playing these MOBA type games because they’re free. There would be a lot less of them playing these games if they could afford Xboxs and what not.

      Peruvians tend to be worse than Brazillians.

  10. This is not a huge shock. I work in retail, and the Brazilians that visit our country for work or vacation drop an average of $2000 on videogames every time they or a relative visits. I asked why, and they pulled up the Brazilian website for a retailer there, and the PS4 was something like $1200 US in Brazil.

    1. How do they get through customs?

    2. Oh, I knew a guy who would do that with computers in Poland. He’d go back to see his family once a year or so. He’d buy 6 laptops (nice ones) for $800-1000 here and then sell them for twice as much there. People were still getting quite a good deal.

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