Educated Guesswork: Price discrimination at iTunes

September 15, 2004

Price discrimination at iTunes

According to the Register, the UK Consumer's Association has asked the Office of Fair Trading to investigate iTunes's pricing practices. The table of prices is below:

Country	Price	Price in Dollars (as of today)
US	$.99	$.99
UK	£.79	$1.40
Europe	€.99	$1.20

Note that everyone in Europe and the UK is paying more than we do here in the US.

Obviously, there's nothing unusual about having domestic pricing and it's clear that they're trying to choose prices that are near psychological anchor points. From the prices alone, it's not obvious that iTunes is engaging in price discrimination. After all, exchange rates fluctuate and it wasn't that long ago that €.99 was less than $.99.

However, there is one piece of evidence that suggests that the price discrimination is intentional: iTunes doesn't let people in the UK buy from the European service. You need to have an address in Europe to do so.

Posted by ekr at September 15, 2004 09:11 PM | TrackBack

Comments

A quick check on Amazon shows that "The Very Best of Sting and the Police" sells for £9.99 in the UK, and $12.99 in the US. Music in England has always been more expensive--new CD's (albums) were typically priced between £13-£16 when I was there.

Posted by: nagendra modadugu at September 16, 2004 12:35 AM

But is this attributable to Apple, or to licensing fees imposed by record companies worldwide?

Posted by: - at September 16, 2004 05:44 AM

The point I was trying to make, is that UK prices were higher relative to US prices even for music purchased at high street stores. Possibly due to higher recording company fees--my guess is that advertising in the UK is more expensive than in the US, but I don't know for sure.

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Posted by: penis enlargement at September 19, 2004 11:57 AM

The business about having to have an address in the right country doesn't only prevent people in the UK from buying music more cheaply.

Bizarrely, because the weekly "free" download tracks are "bought" for an amount of zero (in your local currency), you can't get the free downloads from the wrong country either...

Of course, Apple hardware is also a fair bit more expensive in the UK than in the US, although a lot of that has to do with the sales tax. Even without tax, though, a 40GB iPod costs about 15% more in the UK. I doubt that the 40% iTunes markup is anything to do with increased costs in the UK, it is just a market Apple have traditionally milked for all they can.

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