Comics Economics, Part 5

Remember yesterday I was talking about how comics don't cost the same for everybody? Today, I'm going to extrapolate that globally and show how the recession is having a more direct impact on you.

Let's start with a look at exchange rates in general.

Despite the fact that we live in a global village, each region still has its own economy. That was one of the points I was trying to make yesterday. But while all the regions in the U.S. use the same currency with the same federal backing, folks living in other regions -- like, say, Canada or the U.K. -- use a different currency backed by a different federal government. Because those different federal governments often have significantly different priorities, any number of other factors come into play when you start comparing the economies against one another.

A little over a year ago, I bought a limited edition, hardbound copy of Garen Ewing's The Rainbow Orchid. Ewing lives and works in Great Britain, so he priced the book according to his local economy. Given the limited print run, and it being hardbound, he opted to charge £25.00 for each copy. At the time, though, the British economy was faring better than the United States' and I ended up paying $53.34 for the book. (To be fair, some of that went toward a currency conversion fee, but only a few bucks.)

As of this writing, though, a £25.00 book would cost me $37.53 -- a savings of $15.81, 30% cheaper than what I paid a year ago! (Not that I'm upset about it, mind you! Ewing's book sold out VERY quickly, and I doubt any of us who have a copy would be willing to give them up!) The reason, for those of you not paying attention to the world stage, is that the recession has hit Great Britain much harder than it's hit the U.S. Their regional economy has suffered quite a bit, causing the value of the British pound to fall more than the value of the U.S. dollar. So Americans can now buy more British goods for less money.

(On a side note, I did see David O'Connell bring up exactly this point briefly a couple weeks ago in an effort to sell more of his pamphlet comics to Americans. He put a decidedly positive spin on things by saying, "Hooray for the global recession!" Probably a bit overly cheery for the situation, but he's taking advantage of the deeper problems he's seeing at home by focusing on his not-quite-as-bad-off U.S. customers.)

Now, here's where things start to get tricky. Let's say you have $100. With that $100, you can exchange it for a certain amount of Euros. Let's say 100, for the sake of simplicity. Now you can exchange those Euros back into dollars any time you want. But if you wait until the Euro becomes more valuable, relative to the dollar, you will get more than $100 back in the exchange. If the Euro suddenly explodes in value, you might get $150 dollars back for your 100 Euros. It's a lot like trading stocks, only you're dealing with actual currency from governments instead of promissory notes from corporations.

Almost every American comic you buy has two prices on the cover: one for the U.S. and one for Canada. Both countries use a currency called the dollar but, because they're backed by different governments with different policies and different priorities, the value of each is different as well. While generally pretty close in value, a Canadian dollar (abbreviated CAD) is worth something different than a U.S. dollar (abbreviated USD). Because those fluctuations happen on a daily basis, we can track how much one is worth against the other over a fairly short period of time.

Yes, that means it's time for some charts.

First, we're going to take a look at the price of a comic book in U.S. dollars over the past 90 days. The red line represents the price of a comic here in the U.S. -- $2.99. As you can see, the line is flat. Last month, it cost $2.99 USD; this month it cost $2.99 USD. The blue line represents what Canadians pay for the same comic, but I'm highlighting here in U.S. dollars. A Canadian is still going to pay $3.05 CAD for their comic, but since the Canadian and American dollars' values fluctuate against each other, the blue line rises and falls.
As you can see, back in July, Canadians were paying just a bit over $3.00 USD for their comics. At the time, the Canadian and U.S. dollars were about equal, so the $3.05 CAD they paid was almost worth the same as $3.05 USD. As you get closer to now, though, that $3.05 CAD is worth around $2.50 USD. That means that it's cheaper to buy comics in the U.S. now than it is in Canada.

Let me put it another way. If a Canadian has $20 CAD to buy comics, they can buy 6 books in Canada. But if they exchange that $20 CAD, they'll get a $24.60 USD and can buy 8 comics here in the U.S.

Here's the same data from the reverse position...
You'll notice that the chart is listed in Canadian dollars this time. So the cover price of a comic is stable at $3.05 (the red line) but the U.S. dollar gets more valuable against the Canadian dollar over the time period we're looking at. So now, if I travel to Canada, my $3.05 USD can purchase $3.76 CAD worth of goods. The charts, it shouldn't surprise you, are mirror images of one another. Like I said, same data just from a different perspective.

(By the way, the breaks in the blue lines of both charts represent days that the markets were on holiday and did no trading. Essentially, the exchange rate during those periods would be whatever the rate was just prior to the markets closing.)

This ultimately leads to a bit of a conundrum for international audiences. Books are designed and lined up months in advance of their sale, so no one knows what the exchange rate will be when the books actually hit the stands. The publishers put two prices on their goods to provide a form of stability across countries. A Canadian knows, for example, that he's going to pay $3.05 for his comic every month. However, if the two countries' currency have a prolonged period of sizeable discrepancy, that can alienate their customers. "Why should I be paying $3.05 when Americans are paying the equivalent of $2.50?"

Although the exchange rates fluctuate on a daily basis, most people don't really need to worry much about it, unless they happen to live where two or more currencies are in active use. These charts, again, represent a 90 day period, and the fluctuations are pretty minimal prior to the middle of September. The exchange rate at the beginning of August is about the same as the exchange rate at the end of August. The problem has only become noticeably significant in recent weeks/months as all of the global economies have become more volatile.

Now, depending on what the U.S. and Canadian governments do, their currencies could (and likely will) improve at different rates. Indeed, the U.S. currency has held up better than the Canadian one, as indicated on these charts. But that effect can become more subtle or more pronounced in the coming weeks and months. That means American comics will likely continue to have a $3.05 CAD price tag until things begin to stabilize (it'd be realistically impossible for anyone to keep up with the rapidly changing rates as the comics are published). But after that stabilization occurs, publishers could well look at their pricing structures in whatever new economic environment we're in, and adjust the Canadian price up or down accordingly.

To be continued...

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