|Euro vs. Dollar: Beyond the pain barrier.
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|Author:||winstep [ Sun Nov 25, 2007 9:16 pm ]|
|Post subject:||Euro vs. Dollar: Beyond the pain barrier.|
Airbus chief executive, Tom Enders, recently told employees in Germany that ?The dollar exchange rate has gone beyond the pain barrier?.
Most of Airbus?s expenses are in euros, but aircraft are sold in US dollars. On Friday, November 23rd, the euro was worth $1.48, up from $1.35 at the beginning of the year, and analysts are predicting that it will head to $1.50-$1.60 in the coming months. For every 10 cents that the greenback falls against the euro, Airbus loses a billion euros in unfavourable foreign exchange.
So what does this have to do with shareware? Well, if you are a US shareware author, it's actually good news because, from an European customer perspective, your software is now dirty cheap (a factor that, by itself, usually results in a large sales increase) while the price remains unchanged for your US customers.
However, if you are an European shareware author, the constant fall of the greenback against the Euro is a very real nightmare, and one you cannot easily escape from.
When most of Europe converted their currencies to the Euro back in 1999, the Dollar vs. Euro exchange rate was almost on parity: 1 Euro was roughly worth $1.00. In 2000, however, the Euro had lost part of its value in relation to the Dollar, with 1 Euro being worth only $0.8252.
This situation remained stable for nearly 3 years, from 2000 to 2002, and this was actually very good news for European shareware authors: you see, shareware applications, like oil, are usually priced in US Dollars, not only because the US Dollar is a universal currency but also because the single largest market for shareware on the Internet was - and still is - the good old US of A. Usually sales to the US are on par with sales to all the other countries in the world COMBINED!
A strong US Dollar back in 2000 meant that an European shareware author selling, say, $2,000 worth of software per month actually received 2,423 Euros. But fast forward to 2007 and the same $2,000 in sales are now worth only 1,351 Euros!!! In just 5 years the shareware author lost over 1,000 Euros in revenue per month for the same amount of sales - add to that the higher cost of living because of inflation and you have a very uncomfortable situation.
And what can the shareware author do to solve the problem? Not much: if he prices the software in Euros, he will lose most of his US customers since they are not used to dealing in currencies other than the US Dollar (plus, over time, as the Dollar keeps losing its value, this would also result in a natural price increase). If he increases the price to cover up for the lost revenue, his US customers will balk at buying the software because, from their point of view, the product is now heavily over-priced, especially in comparison to its US-based competition!
The only real solutions are to either focus on the European market hoping it will grow in time (not likely) OR to swallow up the costs, try to increase global sales (not always possible), and pray for a reversal of the current Dollar vs Euro trend.
Obviously, the later is what most European shareware authors are doing, or trying to do. You might want to remember this the next time you think of complaining about the price of European shareware, or even shareware in general.
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