Microsoft fails to explain UK-US price difference for Xbox One

At £429, Microsoft's new console is significantly more expensive than in the US, where it's $499 (£320). What's going on?

While gamers across the planet have raised eyebrows -- and in many cases, angry Internet voices -- at the price of the Xbox One , here in the UK we have even more reason to be annoyed. At £429, Microsoft's new console is significantly more expensive than the US, where it's $499 (£320). Why is that, Microsoft?

"There are many factors that influence the final price of consumer electronics devices in different markets," a Microsoft spokesperson told me in a statement. "This includes but is not limited to tax, tariff and exchange rates."

Let's look at each of those excuses in turn.

Tax

It's absolutely true that the UK price of £429 includes Value Added Tax, or VAT, whereas the US price does not, because individual states have different sales tax rates. So let's strip the VAT off the UK price and see what we get. £429 / 120 x 100 = £358, or £38 extra. That's still a 12 per cent hike.

Tariff

Some countries may charge import duties to bring in video game consoles. The UK is not one of them. "The duty rates applied to imports into the United Kingdom typically range between 0 per cent (for example books) and 17 per cent (for example Wellington boots)," explain my friends at Duty Calculator. "Some products, such as laptops, mobile phones, digital cameras and video game consoles, are duty free."

Exchange rates

It costs a small amount to transfer money between countries, but I think what it means is that exchange rates fluctuate and may cause additional costs. If the pound were to weaken against the dollar, those 358 after-tax pounds would buy fewer dollars than they do now. Microsoft's bottom line is in dollars, so it would lose money. On the other hand, the exchange rate might go the other way, and it would make even more dosh.  

Don't think Sony is getting off lightly here. The PlayStation 4 is also significantly more expensive in the UK than the US . If we do the same tax calculation: £349 / 120 x 100 = £290, compared to the US price of $399 (£256). That's a 13 per cent difference -- even worse than the Xbox, albeit from a lower starting point. I've asked Sony the same question and will update when I hear back.

I don't expect to hear a better reason for charging us more here in Britain. I suspect the real reason is that these companies are setting prices they think the market will bear -- they simply know we'll pay more. It might be rip-off Britain, but only because we've shown time and again that we don't mind being ripped off.

 

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