One of the beautiful things about Eve Online is the complexity of its virtual world. New Eden is so complex that sometimes real world economic events intrude upon a place players go to escape their every day worries. Take for example the recent decision to allow players in the U.K. to
pay for their subscriptions in pounds instead of euros. Starting on 1 May players living in the U.K. not only began paying for their game time in pounds but at a reduced rate as well.
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| Subscription prices converted to U.S. dollars |
Why would CCP reduce the rate that much? The price in euros does
include a VAT. Is the amount of the VAT so much lower in the U.K. than in the rest of the EU countries? Looking at the amount collected by CCP for a month's subscription after removing the VAT was illuminating.
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| Some surprising numbers |
The first is that right now the money collected by CCP after taxes are deducted for those living in the European Union is not that much higher than that collected from players paying with U.S. currency. Right now the swing is plus or minus 4% of the U.S. amount. That's right, CCP gets less money from those playing in Sweden and Denmark than it does from players in the U.S.
The second is really remarkable. Even after the pricing change CCP collects more after taxes from U.K. players than from any other country. How can this be? The European Union has a regulation called
low value consignment relief. While for most of Europe the amount is
€10, in the U.K. any import from a non-EU country like Iceland with a value of £15 or less is exempt from the normal 20% VAT that domestic companies must pay.
Having determined that CCP isn't that altruistic, I also believe that CCP looked at the financial situation in Europe and decided that the euro will collapse in the next year or two. An Icelandic game developer/publisher like CCP is probably more sensitive to the possibility of currency collapses than other companies in the industry due to living through the
Icelandic financial crisis of 2008, the effects of which are felt to this day. Indeed, CCP was a lot closer to the collapse than most as its largest investor,
Björgólfur Thor Björgólfsson, was a major player in the crisis as a major owner of
Landsbanki and chairman of
Straumur Investment bank. Björgólfur went from Iceland's first dollar billionaire to being heavily in debt. Recent stories about CCP going public and issuing an IPO could indicate Björgólfur is attempting to
cash out his position in CCP.
CCP would not be the only Icelanders looking to distance itself from the euro. When I was in Reykjavik for Fanfest in March, I overheard some Canadian players joking how next year they may not have to exchange their Canadian dollars for ISK. According to a Gallup poll,
seven out of 10 Icelanders want to see ISK replaced with another currency. The favorite replacement? The Canadian dollar. So while the official government position is to continue trying to become a member of the European Union, the majority of Icelanders apparently are looking toward the New World for a better economic future. After all, the process to become an EU member could take another ten years and the euro may not last that long.
Turning back to our favorite group of Icelanders, how does giving U.K. players a seemingly sweet deal help hedge against the threats to the euro caused by events like the runs on banks in
Greece and
Spain? Back in March CCP Diagras
posted some subscription numbers by country in connection with the CSM 7 elections that indicated approximately 32% of accounts are from countries whose players pay using euros. With the switch for U.K. players to pay in pounds, that number decreases down to 22%. Five of the top six countries now do not pay using euros. The lone holdout, Germany, will likely continue to do so until Germany pulls the plug on the whole euro experiment. So CCP's holdings in the troubled currency potentially decreases by over 30%.
The acceptance of the pound as payment also serves as a backup plan for when the euro implodes. CCP will already have the system in place to switch customers to a new European currency and will just need to adjust its systems to recognize that a player from a former Eurozone country should receive the option to pay in pounds instead of euros. I'm assuming that CCP will not allow people from countries that leave the Eurozone to pay in euros as the company will not want the damaged currency on its books. Also, the lower rate will allow players from countries with collapsing currencies a better opportunity to afford to pay the subscription.
One additional fact argues strongly that CCP is preparing for the collapse, or at least a severe weakening, of the euro vs the pound. While U.K. law now sets the value of goods eligible for low value consignment relief at £15, the EU regulation states that goods imported from non-EU countries valued higher than
€22 must be charged a VAT. By lowering the cost of a month's subscription to £9.99, the pound can gain another 75% in value against the euro before the regulation no longer takes effect. Of course, that is assuming by that time events get that bad that the U.K. cares to stay in the EU.
As always, the possibility exists that I'm wrong. Perhaps the low value consignment relief regulation doesn't apply to Eve in the U.K. and CCP is happy making 15% less than the make off of U.S. players. Perhaps CCP is just having players pay in local currencies as a marketing move to attract more players. And maybe CCP has conducted some market research telling them they can attact a lot more business by decreasing their prices. But I'm an Eve player. Looking for conspiracies is something CCP has taught us to do.
