Brexit’s Influence On Exchange Rates May Increase The Price Of Consoles

In case you hadn’t been watching the financial news, today has a been rather bad on the markets. Share prices have tumbled, everyone from Easyjet to Greggs the Baker have had millions wiped off their value, and the pound has plummeted against the dollar.

pound

Piers Harding-Rolls, director at analyst IHS Technology, has been speaking to Eurogamer and said “The impact of Brexit on pricing depends on whether the exchange rate impact is sustained for a long period of time and whether it moderates after this initial shock.”

“There has been at least one example in the past where UK pricing has been increased, specifically for console hardware, in response to a weak pound. Any currency exchange rate swing is more likely to impact console hardware pricing over software, as margins on hardware are generally tighter than on software.”

It’s pretty easy to understand if we look at the price of an Xbox One S which will set you back £249. If we remove the 20% VAT that takes the price down to a smidgen under £209, and last Thursday the exchange rate was about $1.45 for every pound, so in dollars that is $302, close to the sales price (without tax) in America of $299.

Today, £209 will only get you $272, which means Microsoft are losing $29 on each console compared to last week. That’s a huge cost, just by selling 34 consoles at today’s rate they are losing $1000, and with the price cuts the Xbox One will be flying out the door and Microsoft’s profits along with them.

The question is, will the markets and currencies recover? Well at the moment there’s not much movement, there’s a big meeting of EU leaders tomorrow which may give the markets some better news, but at present things are looking rather grim.

Oh, and as mentioned, Greggs share price is also tumbling, so it is conceivable they could want to boost their profits (and thereby, share price) by increasing the price of a steak bake.

Source: Eurogamer

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29 Comments

  1. All depends on stock and account payments. Stock that is already paid for will not (should not) increase, stock paid for at the lower exchange rate (ie GPUS about to be released) will be hit by a 10% higher price than they would have been had the rate not plummeted, and 10% is only if retailers are confident and don’t want to add a little bit of insurance cost on top.

  2. Worth it.

    Can’t put a price on democracy.

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