The iTunes Games Index

As regular readers of this blog are aware, I have been tracking an iTunes (Song) Index (click here for past entries). The general story there is that (apart from Canada), the iTunes Index suggests that currencies are over-valued relative to the US dollar. This is in contrast to the Economist’s Big Mac Index which has a more mixed story.

One issue in this result was the possibility that with respect to songs, Apple (or US copyright holders) may have underpriced songs in the US (and Canada) as these were the first to be introduced. This week, Apple announced that it would be selling iPod games worldwide via its iTunes Music Stores. Exactly the same game offerings would be available everywhere. This meant that the prices were (a) set at the same time; and (b) were for precisely the same products. So I decided to generate a new index — The iTunes Games Index. Here it is:

There are several interesting things to notice about this. First, the Canadian game price exceeds the (parity) price for the US; so adjusting for current exchange rates, Canadians pay more for games than people in the US. Second, now every single currency appears to be overvalued relative to the US dollar. The next chart compares the over (+) or under (-) valuation for the iTunes Songs, iTunes Games and Big Mac Indexes.

In Europe, the correlations between the songs and games results are very tight. In Australia, games appear at a relatively lower price compared to songs and in Japan this effect is marked. In general, international game prices appear to be relatively less expensive than songs. This suggests that while there was some correction in the US game price on the part of Apple, there is a distinct tendency to charge more internationally than in the US. Why that should be the case is beyond me.

6 thoughts on “The iTunes Games Index”

  1. No it doesn’t. But then again it doesn’t take into account such taxes elsewhere. The same is true for the Big Mac Index. For purchasing power parity arguments, tax rates aren’t an issue.

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  2. The US seems to be the lead market for these kinds of good and provides scale to Apple if it can dominate. As itunes songs have built in DRM, ipods and songs seem be network goods, and complements. Doesn’t taking this into account mean the US prices might make sense? Apple underprices (relatively) product in the US market because they anticipate that dominance there will lead to international dominance due to advantages in scale and marketing and because other markets follow from US trends. Underpricing makes sense because it encourages adoption of the ipod as a network standard in the most important market and leads to this being adopted overseas (as opposed to say a Sony or Creative Labs standard or an open standard). Does this make any sense?

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