The Windows Phone 7 Marketplace’s 50% Hidden Tax
Sebastian Grey, the developer of Fierce Game Hunting for Windows Phones, provided the following which is staggering:
FACT: Applications on the Windows Phone 7 Marketplace will cost you more, if you don’t live in the USA.
When uploading an application to the Windows Phone 7 Marketplace, a fixed exchange rate is used, across a number of geographies and depending on what price point you select there is a relative difference to the final amount that is actually charged to the end consumer. As an example, we will use the pricing for Fierce Game Hunting, which I priced at the 1.99 USD price point. At this price point the foreign currency equivalents are calculated and displayed. In Australia, a game price 1.99 USD is priced at 3.00 AUD – which is well above (50% above) the current exchange rate; I always assumed that this was a local and isolated issue for the Australian currency and it’s value in Microsoft’s systems but apparently not.
Below are the details, all of these exchange rates have been taken from Bing.Com using the 1.99 USD in AUD format query.
The current conversion rate is shown and the amount in brackets is what you will actually be charged if you are a consumer from that region, based on the WP7 Marketplace pricing setup:
1.99 US Dollar = 2.003725 Australian Dollar (AUD 3.00 price on the WP7 Marketplace)
1.99 US Dollar = 1.532302 Euro (EUR 1.99 price on the WP7 Marketplace for Austria, Belgium, France, Germany, Ireland, Italy, Spain)
1.99 US Dollar = 1.982446 Canadian Dollar (CAD 2.49 price on the WP7 Marketplace)
1.99 US Dollar = 15.468326 Hong Kong Dollar (HKD 20.00 price on the WP7 Marketplace)
1.99 US Dollar = 90.290381 Indian Rupee (INR 110.00 price on the WP7 Marketplace)
1.99 US Dollar = 24.330604 Mexican Peso (MXN 30.00 price on the WP7 Marketplace)
1.99 US Dollar = 2.627202 New Zealand Dollar (NZD 3.49 price on the WP7 Marketplace)
1.99 US Dollar = 2.578656 Singapore Dollar (SGD 3.49 price on the WP7 Marketplace)
1.99 US Dollar = 1.916372 Swiss Franc (CHF 2.50 price on the WP7 Marketplace)
1.99 US Dollar = 1.287725 Pound Sterling (GBP 1.99 price on the WP7 Marketplace)
As you can see from this list, you are charged more for living outside of the USA and it’s not just in one region, it’s across the board. Perhaps the Australian difference is one of the larger differences but it is different for all currencies and in all instances it is setup so the price charged on the WP7 Marketplace is more than the equivalent exchange rate.
I realize that there must be a hedged exchange rate being used behind the scenes and I’m yet to see any information if that hedge rate would ever be allowed to go in the opposite direction e.g. a comparative price in a region outside of the USA being charged less.
However, there is one other point of consideration, who actually benefits from this?
Will the developers, who’s applications are being charged out at these inflated prices actually benefit from the difference in the exchange rate or will Microsoft pocket the difference and only pay against the hedged rates they use internally? We will only really know once the marketplace payments start.
Cheers,
Sebastian
Sebastian, thank you for the information. Very informative and it leads to a lot of questions. I presume this makes apps less attractive in some cases as they appear overpriced. Lets see if the Twitter community can get an answer from MS and figure out where the exchange spread is going.
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wow were MS hoping ppl wont notice and let these ‘rates’ get lost in translation? that’s pretty shady…
Interesting observation and hopefully things will work out in the end. Since nobody had been paid yet, you can only speculate on how they’re dealing with this. Perhaps when we get paid for our apps it’ll be paid out at the correct conversion rate at the time of each users purchase.
Canadian microsoft customers have been dealing with this since since the birth of xbox live. I’ve called to complain, but of course nothing changes. CDN dollar is basically on par with US, but everything sold to us from Microsoft is at a premium. I pay $7.25 for 500 MSP. I’ve noticed Sony’s prices for Canadians are much closer to the US prices.
This is exactly why people around the world pirate. Why bother paying when Microsoft is clearly abusing those customers from the get go.
Wouldn’t call it abuse, but maybe more like a misguided effort, using average exchange rates or something else. It obviously needs to be changed.
Don’t know why they can’t figure out something using “points” for everything, and allow users to buy them preferably with CC or PayPal.
How are operating overheads and sales taxes accounted for, could this not be a portion of the price difference?
@Alex Norcliffe: unlikely. In NYC I get taxed on what I buy through Zune. That’s after I pay my $.99 though and it shows as a seperate line on my bill.
Exchange rates shown on search sites usually show intra-bank exchange rates (banks borrowing/lending money from/to other banks), not the buy/sell rates banks (or even worse credit-card companies) use. Try http://www.oanda.com and see what rates are given there for buy/sell by consumers (think it has some option to see the different rates)
However, when I sell $10.00 US to EU, I see only $5.02 at payout. That’s 50%, not 70%. So, to those of us who sell software on MP, we are still losing out.