When users of Windows Phone 7 devices open up the marketplace application in the US, they are greeted by an Apple’esque pricing model that start at $0.99 cents – but what if you don’t live in the United States? Why aren’t we charged the equivalent US$0.99? As i discovered recently this disparity in pricing is beyond ridiculous. So is this just currency conversion or is it a bad joke that users are getting sick and tired of – let’s take a look.

With the ever evolving foreign markets changing all the time, suppliers of cross-currency items for sale such as smart phone applications, books or MP3s can be understandably forced to work hard to reflect the real market prices of things when charging at foreign rates.

However hard this may be for a company, in large companies such Microsoft and Apples case, users on their platforms who pay in foreign currency are starting to smell something fishy. The question is: Are they feebly unable to keep up with the market prices, or are they trying to rip us off by making something on the side? Why does a $0.99c app cost me $1.30?

What does a bad deal look like?

When a developer fills out the application form to submit an application for testing in the Windows Phone 7 marketplace they see a form that looks like the image below. It allows you to select your main currency, set your price and then see how this reflects around the world in each local currency version of the marketplace:

When i first saw the above, i just assumed that Microsoft had done the maths and this was simply how things panned out. The second time i submitted my app’s update in late 2010, i did however take notice of the difference between the US dollar and my local currency - the Aussie dollar. The reason i noticed was because at the time, the Aussie dollar was doing really well and was nearing parity with the greenback – while i understood at the time that this was most probably a short term thing, it did get me thinking.

Below is a chart of the Aussie vs. US dollar over the last 12 months thanks to xe.com:

You’ll notice a few things – first the Aussie dollar hasn’t always been at parity with the US dollar. Before the US decided to devalue their own currency in late 2010, we sat quite comfortably around the $0.85c mark for a long time.

However when the Windows Phone 7 marketplace first started to mean anything in October of last year, the Aussie dollar was already at parity. So why devalue it so much? Why devalue any of the marketplace currencies so much?

Increase Breakdown

So lets take a look at the price list i showed you from the marketplace above and run it down against a currency converter using current day prices - again from from xe.com. I have raised the US$0.99 price of comparison to a clean US$1.00 to make thing easier to compare.

Below i have the price of a US$1.00 in each currency, the price that the Microsoft Windows Phone 7 marketplace charges for this currency, and the increase that Microsoft is charging for this “paying in a local currency” privilege.

So what does this mean?

This means really simply that Microsoft is making a pre-tty penny off everyone who isn’t in the US. In the instance of our European friends who pay for thing in the Euro, it is pretty extraordinary how much they are being charged for what is essentially the same product with only virtual distribution costs (read: basically none over a large scale).

This distribution cost is important to note as it is basically the only difference outside of currency conversion costs between selling a Windows Phone 7 app to a European customer, an Aussie customer or a Canadian customer is the fact that the bits have to go a little further to get there

What about the cost of currency conversion?

So by this point you are probably sitting there thinking:

“… But wait Doug, you haven’t taken into account the cost good-ol M$ is paying to convert the currency into a nice easy to spend local Pound/Rupee/Swiss Franc…”

Oh but dear reader i have, and that’s why I'm just a little bit peeved. The average amount that it costs to convert currency from my research is considered to be 3-10% depending on the destination currency (i have searched high and low on the interwebseses and figures in this range seem to be always discussed). This is to cover all sorts of stuffing around (these days money transfer is mostly digital so not much “stuffing around” actually happens) that the banks have to do on your part to pay in the foreign currency on your behalf, while at the still time making some money on the service.

I honestly have always thought that this figure of 3-10% that a credit card or Bank charges is a complete a**-raping, but Microsoft makes the evil minions at my bank look like saints in comparison.

Obviously this rate would be totally different if you were looking to do this in the millions of dollars and millions of transactions a year – which Microsoft, with its long serving Xbox live and Zune services would definitely be trading in the realm of.

So Why?

What makes this situation sad if that we have no choice. If you are a member of the Marketplace in any of these countries you have to pay for your apps in your local currency. In my case here in Australia this is a complete rip off when compared above to the rest of the world (The price difference should actually be inverted for the Aussie Dollar).

Alternatively, if i was to pay for my apps using my credit card in US dollars, my credit card company would charge me 3.5% for the currency conversion – when looking at the money I'd save this would be well worth it, and I'm not the only one in the world with a credit card that does multicurrency. This would mean I'd still be paying less than $0.99c for my apps and I'd be getting ripped for it by my bank, which in this case is definitely the lesser of two evils.

So answer me this Microsoft/Apple/Google – how dumb do you think we are?