In Germany, the lowest-priced Netflix subscription is CHF 8,30 (EUR 7.99) a month. The same subscription in Switzerland costs CHF 11.90, a price 43% higher than in Germany.
Given the large difference between German VAT(19%) and Swiss VAT (7.7%), all other things being equal, Swiss subscribers should expect to pay 10% less than German subscribers. After accounting for the VAT difference the Swiss price premium widens from 43% to 58%.
According to Beebom, Switzerland has the world’s highest standard Netflix subscription price.
Why is there such a large difference?
According to André Bähler, a spokesperson for the Swiss consumer association SKS, there is no reason, reported Le Matin. Global streaming services like Netflix incur practically no local costs because they are delivered digitally, Bähler explained. So Swiss salaries and prices should not influence the price of the services they deliver in Switzerland.
However, there is likely to be a hidden cost difference. Content owners often set country-based prices. So Netflix may pay more to show the same content in Switzerland as it does in Germany. The problem of course is that the consumers getting price gouged cannot see the deals signed between streamers and content owners. They are left in the dark wondering who is fleecing them.
And prices can be difficult to shift. A key lever is competition. However, for competition to work its magic, competing services such as Disney+ and Amazon Prime Video would need to compete for Swiss viewers by lowering their prices and they in turn would need to negotiate keener prices with content owners.
But these competing services show little sign of doing so. Like Netflix, Disney+ and Amazon Prime Video are charging large Swiss hefty price premiums.
A basic Disney+ subscription in Germany is CHF 5.95 (Euro 5.75). In Switzerland the same package costs CHF 12.90, a whopping 117% more, which rises to 140% when the VAT differential is taken into account. A basic Amazon Prime Video subscription in Germany costs CHF 8.30 (EUR 7.99) a month. In Switzerland the same package costs CHF 9.99, 55% more, a percentage which rises to 72% when the VAT differential is taken into account.
In desperation, some turn to Virtual Private Networks (VPN). Some VPNs allow the user to choose their geographic location. They also provide additional security when using free WiFi services. When a user connects to a free network, their device connects to their VPN service, which encrypts all communications.
However there is a catch. Using a VPN to pretend you’re in a cheaper country is usually prohibited by the Terms and Conditions of streaming providers. In addition, streamers have been known to block traffic associated with some VPN services. And there is the cost of a VPN service to consider.
Some countries such as Hong Kong, China, Singapore, Australia and New Zealand interpret laws that allow region-blocking and geographic price discrimination differently to most. They argue that the practice is the digital equivalent of a ban on parallel importation, a practice seen as a way of making markets more efficient. This interpretation allowed them to get rid of zone locking on DVDs (remember those?). However, it has not stopped streaming services imposing geo-blocking.
Interestingly, some of these streaming services have been accused of turning a blind eye to geo-blocking hacks when it suits them. When investors are looking for user growth in saturated markets such as the US it might be tempting to ignore a load of foreign users pretending to be in the US when they are not.
Opaque business-to-business deals between product owners and distributers are notoriously resistant to retail competition. Sadly, they are found in many corners of many markets. Tradespeople typically hide fat margins in the products they install, insurance brokers routinely collect an undisclosed percentage of premiums charged, and banks love to hide fees in exchange rate spreads.
Sometimes the only way to gain transparency is to ask. So the next time you employ a plumber why not just ask them how much of the price of that new toilet is going into their pocket and whether they negotiated with toilet makers to get the best price.
So Amazon, Disney and Netflix, how high are your Swiss margins (compared to German ones), and how well did you negotiate prices with content owners?