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Archive 2013 · International Software Pricing
  
 
15Bit
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p.1 #1 · International Software Pricing


The obvious discrepancy between US and international software pricing has long been a topic of some discussion here, and it finally looks like someone is making the first steps at confronting the big players in the field:

http://delimiter.com.au/2013/02/11/please-explain-prices-parliament-subpoenas-apple-microsoft-adobe/



Feb 11, 2013 at 04:04 PM
gabimaster
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p.1 #2 · International Software Pricing


And it's not only about software, Dslrs ,lenses and flashes too. In USA are a lot cheaper and in Europe are the most expensive from all over the world, It's so unfair.


Feb 11, 2013 at 04:23 PM
15Bit
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p.1 #3 · International Software Pricing


There is a major difference between hardware and software though - hardware needs to be shipped to the customer and a support infrastructure of some sort established. Software though, may be downloaded from the same server wherever you are in the world.


Feb 11, 2013 at 04:26 PM
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p.1 #4 · International Software Pricing


Do you think that it might actually be the government(s) themselves that are levying import fees, taxes, VAT, etc...?

Anytime anything crosses an international border, it seems that BOTH countries want something more out of it - mostly the receiving country.

Even here in the states, we currently mostly 'enjoy' a inter-state tax free purchase program: if you buy something from another state (and they don't have distribution in your state) then we don't have to pay the state sales/use tax on it.
Actually, legally, we are supposed to file independently the sales/use tax on it - but I think that is a very rare case that many people submit that!
But supposedly starting next year - all e-tailers and states will be cross-transmitting their sales and shipments to each other, thereby either collecting appropriate sales tax at the time of the sale or sometime after?

This is where international levy's are already in place to transfer 'property': whether physical or digital. So the question may be: how much goverment fees are being imposed on these companies to be able to sell internationally.

Or it may be the extra cost involved by each of these companies to have the process in place for each country: distribution channels, litigation, papers drawn up, etc...?

I honestly don't know...just thoughts.



Feb 11, 2013 at 04:54 PM
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p.1 #5 · International Software Pricing


For sure cross-border taxes have a role in this, and us communist europeans certainly need to finance our welfare state systems somehow But does that completely explain why Photoshop CS6 costs $1200 in Norway but only $700 in the US? Admittedly the US price is sans-tax, but $500 is a hell of a lot of tax even by norwegian standards.



Feb 11, 2013 at 05:42 PM
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p.1 #6 · International Software Pricing


delimiter.com wrote:
    Federal Parliament has issued documents formally compelling major technology vendors Apple, Microsoft and Adobe to compulsorily appear before its committee investigating price hikes on technology products sold in Australia, in a move that finally ends months of stalling by the vendors, who have proven unwilling to voluntary discuss their pricing strategies in public.



Ha! I hope no one shows up or they deliver their messages by sending their most recently hired janitor to flip them the bird (without washing up first!)!

Instead let's assemble a formal committee on how to abolish or defund Federal Parliament!



Feb 11, 2013 at 09:26 PM
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p.1 #7 · International Software Pricing


Price differentiation / price discrimination is probably the first thing you'll learn in any pricing class at business school. You maximize returns by getting different people to pay the most they are willing to pay for the same good or service. There are many ways to do this and I won't get into all of them. One simple reason (apart from stuff like taxes, cost of operation in another country, localization, etc...) and likely the most common reason is that prices are set at levels in different geographies to be what the people there will actually tolerate and pay.



Feb 12, 2013 at 12:43 PM
15Bit
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p.1 #8 · International Software Pricing


Looks like changes are already afoot:

http://afr.com/p/technology/adobe_cuts_australian_prices_after_BgBXyFaCrXRGNIrS1M2fNN



Feb 12, 2013 at 05:59 PM
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p.1 #9 · International Software Pricing


Adobe caved... the big wusses!

Good publicity to be the first like that tho. I guess no one will follow suit of course...




Feb 13, 2013 at 01:42 PM
Lars Johnsson
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p.1 #10 · International Software Pricing


15Bit wrote:
There is a major difference between hardware and software though - hardware needs to be shipped to the customer and a support infrastructure of some sort established. Software though, may be downloaded from the same server wherever you are in the world.


+1 it's a huge difference between software and hardware



Feb 16, 2013 at 10:09 AM
 

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Lars Johnsson
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p.1 #11 · International Software Pricing


thedigitalbean wrote:
Price differentiation / price discrimination is probably the first thing you'll learn in any pricing class at business school. You maximize returns by getting different people to pay the most they are willing to pay for the same good or service. There are many ways to do this and I won't get into all of them. One simple reason (apart from stuff like taxes, cost of operation in another country, localization, etc...) and likely the most common reason is that prices are set at levels in different geographies to be what the people there will actually tolerate and pay.


I understand what you are saying and agree in one way, BUT do Adobe and other really belive people in Thailand (where I stay now) or most other Asian countries are willing and tolerate to pay more than the people in the USA It's many months salary to buy Photoshop for most people here.
Of course that's the reason anyone can buy a working (pirate) copy of photoshop for $ 3 in any streetcorner here in Bangkok.



Feb 16, 2013 at 10:17 AM
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p.1 #12 · International Software Pricing


15Bit wrote:
For sure cross-border taxes have a role in this, and us communist europeans certainly need to finance our welfare state systems somehow But does that completely explain why Photoshop CS6 costs $1200 in Norway but only $700 in the US? Admittedly the US price is sans-tax, but $500 is a hell of a lot of tax even by norwegian standards.


Norway has extremely high taxes. Last time I was there about a year ago I saw a pair of cheap Wrangler jeans I can get here in the states for 25 bucks at Walmart and they were well over $100 there.



Feb 16, 2013 at 06:33 PM
Lars Johnsson
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p.1 #13 · International Software Pricing


rob0225 wrote:
Norway has extremely high taxes. Last time I was there about a year ago I saw a pair of cheap Wrangler jeans I can get here in the states for 25 bucks at Walmart and they were well over $100 there.


The jeans does not cost 4 times as much because Norway has high taxes



Feb 16, 2013 at 06:50 PM
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p.1 #14 · International Software Pricing


Lars Johnsson wrote:
The jeans does not cost 4 times as much because Norway has high taxes


In terms of direct taxation, no. In a general sense a lot of cost probably is taxes of some sort. There will be an import duty on clothing which is probably 10-15%, then VAT at 25% on top. Thats the direct taxation. The rest of the cost represents actually shipping it to Norway (nothing to do with Norwegian taxes), but having a distribution infrastructure, shops and paying the people in them is not cheap and part of that is the high levels of taxation attached to buildings, businesses, fuel etc. A fair chunk will be allocatable to the norwegian labour costs though, which are relatively high at the bottom of the job ladder compared to the US.



Feb 16, 2013 at 07:40 PM
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p.1 #15 · International Software Pricing


rob0225 wrote:
Norway has extremely high taxes. Last time I was there about a year ago I saw a pair of cheap Wrangler jeans I can get here in the states for 25 bucks at Walmart and they were well over $100 there.


And the last time i was in the US i saw many people homeless with no social support, no medical insurance and no hope of every being productive members of society. Our taxes pay for these things. You can argue the relative merits of the two systems (and they both have merits and failings), but thats what the two systems of taxation represent.



Feb 16, 2013 at 07:43 PM
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p.1 #16 · International Software Pricing


As I mentioned before and digitalbean hit on, I think it may be as simple as basic business practices: supply and demand.

What is the cost for Adobe to setup business in a country? I honestly don't know, but my company deals with several states here in the US - for each one we have to register with the state. That means setting up legal council in each state to have the papers drawn 'locally' for us to be filed with the state for our collection of taxes on goods sold/delivered. On top of that, each month, we have to file said taxes - from additional internet orders or even if we have no sales, we have to file it.

So there is a serious financial commitment to do business in a 'foreign' state - or country. Money to pay for legal, money for distribution, money to pay somebody at home office to keep track of the money flowing through and to that state/country.

Now, offset that with the potential revenue that can be expected from said state/country.

Lets put it all in perspective.
To sell my goods in my home state/country, where I know sales will be strong - I have a $50,000 startup cost to get all my ducks in a row. Cheaper in my home state/country, because the logistics of being local work in my favor. Ongoing expenses are say $10,000 per year.
I also know that I can sell 10,000 widgets per year, so I can price them at $3 each and know that within two years I'm turning a profit.
If it's going to cost me say $60,000 for initial startup costs in another country (because it's not local and there are just more expenses), with $12,000 costs annually to deal with the tariffs/taxes/paperwork/logistics/filing/etc..., and I only expect to sell 1000 widgets per year, then I have to price them at $36 to expect to make a profit within 2 years.

That's 12x the going rate - just to break even in two years!

Those are extreme prices and guess scenarios, but I hope you see my simply point of supply and demand. If it cost $X to supply an area then the pricing will determined by what the demand is.

Now I understand that digital download costs the same whether its in Adobe's backyard or on the other side of the planet, but for the most part, business models were not setup years ago with that process in place. They are still trying to recoup their initial investment, even though the digital age has superceded the paperwork ancestry that built most companies and what they are used to.

Again just thoughts...not policy or supported practice



Feb 16, 2013 at 09:24 PM
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p.1 #17 · International Software Pricing


15Bit wrote:
And the last time i was in the US i saw many people homeless with no social support, no medical insurance and no hope of every being productive members of society. Our taxes pay for these things. You can argue the relative merits of the two systems (and they both have merits and failings), but thats what the two systems of taxation represent.


My comment was in response to the initial post about price discrepancies. It is not always the big corporation trying to get more. There are other factors involved...for Norway it is their high taxes. I wasn't trying to make a comparison between our two social issues. We definitely have our problems but don't believe every thing you see on TV. That said, I'm glad you think your country has conquered the homeless problem and social ills other countries suffer from. However don't complain about higher prices. Your social programs have to be paid somehow.



Feb 17, 2013 at 02:48 PM
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p.1 #18 · International Software Pricing


rob0225 wrote:
Thats fine....then don't complain about higher prices. your social programs have to be paid somehow.


Thats the problem though isn't it? For retail stuff i don't complain. For software though, how much of that "extra" it costs to download Photoshop to Norway do you think actually makes it into our social system?



Feb 17, 2013 at 03:01 PM
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p.1 #19 · International Software Pricing


15Bit wrote:
Thats the problem though isn't it? For retail stuff i don't complain. For software though, how much of that "extra" it costs to download Photoshop to Norway do you think actually makes it into our social system?


It may not be the software makers doing. They are required to collect and remit VAT and import taxes to your govt regardless if it is download or hardcopy. It's not about the extra cost to download, the gov't doesn't care. Software makers aren't going to eat those additional costs, they are going to pass them along to the user.

Norway assess a 25% VAT. There is also an import duty if the software is marketed and sold outside of Norway...I'm not sure how Adobe products are classified...but if they are considered sold outside of the country because the company resides outside of Norway then there is an additional import duty assessed.



Feb 17, 2013 at 05:26 PM
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p.1 #20 · International Software Pricing


rob0225 wrote

It may not be the software makers doing. They are required to collect and remit VAT and import taxes to your govt regardless if it is download or hardcopy. It's not about the extra cost to download, the gov't doesn't care. Software makers aren't going to eat those additional costs, they are going to pass them along to the user.

Norway assess a 24% VAT on software. There is also an import duty if the software is marketed and sold outside of Norway...I'm not sure how Adobe products are classified...but if they are considered sold outside of the country because the
...Show more

No-one is arguing this - you are correct. But the price difference between Photoshop in Norway and Photoshop in the US is a lot more than these import duties and taxes can explain. And the same is true in many other countries. We are being screwed, and Adobe has basically admitted this by slashing the Australian prices now that they are being officially questioned about it.



Feb 17, 2013 at 06:07 PM
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