Activision's Bobby Kotick wants more expensive games

Discussion in 'Console Industry' started by Richard, Aug 6, 2009.

  1. TheWretched

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    Thing is though, at the moment, Europe and Japan are heavily subsidizing the US with the weak Dollar. I mean, in Europe, the MSRP on a PS3 game is 70€, whereas in the US it is 60USD (w/o tax, I might add), which is already quite a bit more, PLUS the unfavourable exchange rate.

    And, I might add, I don't usually wait until a game that I want gets cheaper, I just buy it where it is cheapest, which is, for me, in the UK at the moment, where I save up to 50% on a newly released game. THIS is why I have such a problem with it.
     
  2. zed

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  3. Silent_Buddha

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    Goods, services, and corporations aren't taxed nearly as heavily in the US as in Europe either however. That added to fluctuating exchange rates makes direct comparisons irrelevant. Add to that if there are costs for shipping if the product is produced in the US. Any fees for customs, etc.

    If the product is produced in Europe, than you have manufacturing fee's based on whatever is set in Europe.

    Also take into account whether shops in the Europe require higher margins to offset higher costs of living. At least in the UK I know petrol and car insurance for example are far far higher than the US.

    Those higher margins will be required for possibly higher wages to offset higher costs of living.

    Just in the US itself costs can vary from city to city, although certain items tend to be price invariable. If not for the internet I'd pay MUCH more for my computer hardware in my city than I would if I lived in say Kansas City which has a lower cost of living. And don't even bring in franchise restaurant chain prices which can vary not only from city to city, but within a city itself depending on the cost of living associated with a certain part of that city.

    Anyway, long story short. It's impossible to do a direct comparison of prices between countries due to the different economic factors in play with each country.

    The US has traditionally been able to charge cheaper because taxes, cost of living (on average), exchange rate, etc... have generally been in its favor.

    Regards,
    SB
     
    #43 Silent_Buddha, Aug 10, 2009
    Last edited by a moderator: Aug 11, 2009
  4. Nesh

    Nesh Double Agent
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    Ah....not that stupid things again! I hope not! I hate it when people start making generalizations and assumptions about the EU without knowing what they are talking about.
     
  5. dobwal

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    I am American so the concept of VAT is very foreign to me. The basic concept seems to cost intensive because everyone along the chain has to pay taxes on product from raw material to retail product. When I look at the basic structure of the way VAT is implemented the actual increase in cost seems to be more than the rate indicates.

    The standard VAT in Europe can be anywhere from 15% to 25%.

    If a raw material provider wants $100 profit after VAT for a certain amount of material they have to charge $125 for that amount so that they can pay VAT at 20%. If a manufacturer buys that basic material costing $125 and produces a product with the intention of making $100 profit after VAT it must sale that product at $250. If a retailer buys that product costing $250 and wants $50 dollar profit after VAT it must sell that product $312.50.

    If thats the way Europe charges taxes on goods then I can see why europeans pay more on a product. The problem is that Europe as a market produces a logistical nightmare when it comes to accounting costs compared to the US.

    In the US, the product at the desired profit margins would only have to retail at $250 and sold to the consumer at ~$268 (accounting for an average us sales tax of 7.5%). Manufacturers and basic material providers don't have to worry about accounting for sales tax because it is handled by the retailers when it comes to managing and collect that tax. Sales tax rates in the US vary not only state to state but city to city but only retailers are affected. In Europe, manufacturers would have to account for the varying VAT rates of each country and how much VAT each is owed. VAT seems to add more work in the manufacturing and distribution of product, thereby increasing costs, which mean it affects the bottom line of the price of product with a price tag thats actual more than $312.50.

    Also varying prices may be due to indirect sales versus direct sales. I think games in the US are mostly sold directly to retailers, while the manufacturers or pubs may use distributors and wholesalers in other regions, who add on margins.
     
    #45 dobwal, Aug 11, 2009
    Last edited by a moderator: Aug 11, 2009
  6. PellePlutt

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    VAT is only charged to the end consumer. If you're buying for example computers for an office, you don't pay VAT on them.
     
  7. Colourless

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    In Australia the GST which is a VAT is paid at every stage on every good and service with a few exceptions that are GST free. However if you onsell something, or use something in the process of conducting business, you can get the GST you paids on goods and services back at the end of the quarter. You do get charged GST on business expenses, however as they are used as part of conducting business you can claim the tax credits back.

    So I might buy something that costs me $110 which is $100 + $10 GST. I can then on sell it for $165 which is $150 + $15 GST. As the person I bought the item from has already paid $10 GST, i only have to pay the tax department another $5. If I incurred a loss (for whatever reason) and paid more GST to my suppliers than I received from customers/clients then I would recieve a refund from the government.

    In the end all it means is it does not matter what stage a good or service is traded at, the government gets its money. And if you are a business, it doesn't matter you who you buy things from, you still get it 'tax free'.
     
  8. Shifty Geezer

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    Exactly. You'd need an actual breakdown of costs to know if they are getting a higher profit from the area or not.

    However DLC doesn't help, because with DLC none of these costs matter, but there are regional price differences. Buyers can see we di pay more and extrapolate that to us paying more on everything, which isn't always the case (at least, it's not proven until people do breakdowns, but I'm pretty sure 9 times out of 10 Europeans do provide greater profits per item than Americans :p).
     
  9. fearsomepirate

    fearsomepirate Dinosaur Hunter
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    In Atlas Shrugged, the railroad industry's cartel implements a rule that sounds virtually identical, the main purpose of which is to protect the established companies from competition. It involved price fixing, blocking off territories, and other means of protecting rail lines from newcomers with better or cheaper ideas. This rule about gas stations sounds nearly identical.
    This is false. The USA has the 2nd highest corporate tax in the world. #1 is Japan, which is definitely not a European country. Another difference you're not taking into account is that we have both state and federal taxes. State sales taxes are generally in the 5%-9% range.

    One of the main things driving prices down in the US is our laxer labor law. You can pretty much hire and fire at will. While manufacturers do have to deal with the Wagner Act (which has driven a lot of factories to Mexico and China) and make sure the EEOC doesn't sue you for racism, it's not nearly as onerous as labor laws in, say, France. Another driving factor is the massive amounts of stuff we import. Of course, we haven't been balancing that with exports, hence (among many other reasons) the economic crisis. Can't consume if you don't produce.
     
  10. Nesh

    Nesh Double Agent
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    The regulations dont aim to protect company's from competition in general. They are there to protect the consumer from cartels and from unnecessary price increases, as well as promote healthy competition and prevent actions of unfair competition such as under the table deals and discriminations.
     
  11. dobwal

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    From every description I have read of VAT, everyone pays VAT if not it would be just a sales tax.
     
  12. Shifty Geezer

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    No, there's a big long chain of VAT numbers as items pass up the 'food chain' that mean you don't pay VAT for work items/materials, or you claim the VAT back. AFAIK it's just sales tax by a different name, at least in the ends.
     
  13. dobwal

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    Accept logistically it more complex and adds more work then a regular sales tax.

    If I live in the US and manufacture my own product DobWal's game handling latex gloves and hop into my Uhaul with 10,000 cases of my gloves and drive across the US selling my wares to retailers. When I get home all I have to do is account for my revenue generated and my expenses incurred to determine my profit and then pay my federal and state taxes on those profits.

    If I live in Europe and do the same thing I have to go home and then account for my profits and pay the taxes in whatever country I reside plus account for my VAT obligations in varying countries I sold my wares in and the VAT rates of those countries. Instead of filling out two different set of forms and writing two checks, I end up filling out much more paperwork and writing many more checks.

    VAT's main advantage is that a country can implement a much higher levy on goods and not having to worry about cheating as much as a high sales tax. Since a VAT is levied in many places, cheating has to be more widespread to accomplish the windfall that can be seen by simply avoiding sales tax at the time of purchase.
     
    #53 dobwal, Aug 11, 2009
    Last edited by a moderator: Aug 11, 2009
  14. Silent_Buddha

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    You still have to factor in any government mandated fees/taxes, differing costs of infrastructure in each country, if you have staff located in such countries to maintain facilities, then cost of living expenses for that staff, etc...

    One interesting thing is when looking at Federal jobs in the US. Your pay rate is adjusted by a sliding cost of living scale for whatever area you have to work in. It's interesting to look at how much someone is payed in San Francisco (high multiplier above standard) versus somewhere in Missouri (low multiplier pretty much near standard) to Germany/Great Britain (again high multiplier above standard).

    Granted, it's the US Govt. determining how expensive it is to do business and live in those areas. Thus wages are adjusted from standard.

    I'd imagine that sliding scale could easily be transposed to goods and services relative to each of those areas and might come close to accounting for much of the price discrepency.

    Regards,
    SB
     
  15. DuckThor Evil

    DuckThor Evil Anas platyrhynchos
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    Yes true I don't even make most of my purchases from Play, because their Euro price is significantly higher than their Pound pricing. Blahdvd.com is pretty good place, which I use these days. I just ordered four little bit older games from there.

    -Devil May Cry 4
    -Saints Row 2
    -Assassins Greed
    -Prince of Persia

    Four games for 60€ shipped to Finland is pretty amazing, even though those are not new releases. In Finland I would have to pay double for those.
     
  16. Zaphod

    Zaphod Remember
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    Yup. It's a Value Added Tax. In effect, everyone pays it for their own part as things get handed up the food chain, but companies write off their incoming and outgoing taxes every quarter (the period might vary from country to country). So if a company buys something for 10 money + VAT, incurs other material costs of 1 money + VAT and sells it for 12 money + VAT to the end user they owe the VAT rate of 1 money to the government.
     
  17. Silent_Buddha

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    Ugh, sounds like a logistical and accounting nightmare, but then I guess it keeps more accountants in work to keep track of all of that.

    Regards,
    SB
     
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