Macroeconomics

I am not very fan to staring at General Offtopic forum but a couples of week ago I stumbled upon one interesting thread.
Marcelo S Martins wrote an apocalyptic title to catch everyone’s attention: The end of iRacing Brazil

“Hy,

My name is Marcelo and I have an account on iRacing more than three years. I live in Brazil and as you know, I paid in US dollars.
We are living in Brazil a very troubled time. Corruption absurd cases in the federal government, led our economy to bankruptcy. Our currency has suffered a huge devaluation front, mainly to the US dollar .

Today, 4.25 reais (our currency) worth $1 , making it completely impractical to my continuation in this wonderful simulator. I urge you to review our payment. We need to be done in REAL, otherwise I certainly abandon the iRacing.

You could create a discount coupon for Br, that would not change the system and it would be feasible for us with one US dollar, to all appearances until 2016, to R $ 5.00.
PS: we already have 50% discount on annual renewal for, but if you guys do this for a quarterly or monthly would be even better.

One suggestion would be to create a promo code with dollar from R $2 and R $2.50 so that it becomes viable for us.

Not only me, but a legion of players that perpetuate my line of economic reasoning.

Best regards,
Marcelo Martins”

These last months the political and economical situation on Brazil has gone mad and the currency is suffering a brutal devaluation, so everything rose at least 100%. My sympathies and I truly hope people there can solve it as soon as possible. Now, going back to the point.
Suddenly a few post after that, almost with an ignited bomb Tony Gardner wrote:

“Working on some things Marcelo. I know things are very tough in Brazil right now.”

Hm. This is funny because instantly I thought: I don’t understand this.

I made a comparison between Apple prices in Brazil (or any imported goods, like iRacing is) and Apple european prices. Great, they were the same. So Apple and probably every foreign brand (AMD, Nvidia, Intel, Asus, HP, Dell, Benq, LG, Sony, etc.) in the Brazilian market makes a direct conversion between dollars and reais (adjusting per week, month or whatever) and no discount offered.

Some brazilians users are requesting a similar policy as Steam does; using local currency to measure the value of an item according to the local environment. This is tricky, because as some of you may know, brazilian middle class is usually more powerful than its European or American counterpart. Not only that, even this year Europeans, Canadians and Russians have suffered a strong devaluation of their local currencies against the american value. I don’t even want to guess rest of the developing countries. You just have to think in the different incomes, salaries and wages between San Francisco and Detroit, Finland and Portugal, Moscow and Kazan.

“Of course iRacing is entitled to do whatever they want with their subscription scheme. Do they wanna cut 50% to Brazilians? Good for them. It won’t make me any faster (or slower hopefully). I will race just the same.
The discussion here revolves around the pleading to have a substantial discount for a service that is way way way far for primal human needs.

The tone of that plea sounded, uhm, really absurd (at last to me, and apparently to a lot of other iRacers). That simple really.”

There are many samples of luxury goods not changing prices nor adapting to a local economy situation. If iRacing try to split its users in different conditions, it would settle a dangerous precedent with unforeseen consequences.

But it is not a simple question. iRacing wants to keep as many users as they can and this could be considered as a warning/threat. As a company they are free to set the policies they want to achieve a user loyalty. Also users will be free to feel upset or pleased with those new policies.

I specially liked this one:

“Economist here. Charging lower prices to customers with less income for the same product is very common and generally raises revenue. iRacing already does it, with all those discount codes and promotions.
That said, for a company as small as iRacing, going beyond promotion codes/discounts which are the same for all, to price differentiate by country — is hard and possibly not worth it.

If there was some special pricing for customers in Brazil or Zimbabwe, it would be hard to police when all the enterprising Americans/Europeans/etc suddenly tried to sign-up as Brazilians or Zimbabweans due to prices for the same content being much-much lower at market exchange rates.”

And a couples of pages after:

“Regional pricing doesn’t subsidize or give out free stuff, it usually maximizes revenue.

Given how long this thread is now, however, I think there’s an obvious cost to doing so. iRacing is a community, and 99% of this community doesn’t care much about the business side of things, but has their own idea of fairness. Apparently giving discounts to everyone is okay, but giving targeted discounts to a country is not okay for a lot of people. I can see how this would vary according to political ideology, and, given the insane political divide of late, could backfire for iRacing in their U.S. user base.

So, I think by publicly requesting regional pricing, our Brazilian friends have shot themselves in the foot. If they’d written up a letter to iRacing in their own regional forum, maybe it would’ve worked. Now, I think the chances are nil”

Thread has already been locked and I look forward to see what staff has been working and if a decision is made.