September 30, 2007

ITunes Gift Card’s Resale Phenomenon Revealed

In the previous posting on Sept. 14, 2007, we first noticed a strange distribution in ITunes gift card’s resale value. Examination of the resale value distribution graph indicated that there was a significant split between the average and median resale value. In addition, over 27% of the ITunes gift cards were resold at over 100% of the cards’ face value. After some extensive investigation we have uncovered why this is occurring.

The phenomenon behind this occurrence is due to consumers outside the United States willing to pay more for US ITunes gift card, because it is cheaper than what they would pay for in their home country. This is especially true for people living in the UK and European Union (Germany, France, etc). For example, in the US it costs $0.99 USD to download a song. The current exchange rate for $1 USD is £0.49 GBP (or £0.48 GBP for $0.99 USD). In comparison, ITunes’ UK price is £0.79 GBP. This is a difference of £0.31 or a 40% savings. Even if someone in England pays 50% over the face value of a US ITunes gift card, each download song would cost them £0.67 GBP, which is less than the £0.79 that Apple charges them.

Now you would think that Apple would put a system in place to prevent European consumers from using US ITunes gift cards. Actually, Apple does have a mechanism in place that prevents this from happening. However, the mechanism can easily be circumvented by registering ITunes with a physical US address. Due to this loophole, there is an active and healthy gray market for US ITunes gift cards.

Therefore, the odd distribution of ITunes gift card’s resale value is a direct result of the weak US dollar. British and European consumers can buy more US goods, including US ITunes gift cards, for less. If you look at the latest ITunes gift card resale value distribution graph from GiftCardNexus.com, you’ll see that there are actually two distributions. The left hand side of the graph up to the first peak and down to the 100% resale percentage indicates the main US secondary market. While the hand drawn green distribution (approximation) indicates the foreign secondary (gray) market for the gift cards. This is only an assumption.

ITunes Gift Card Resale Value - 09/28/2007

Strange Distribution of ITunes Gift Card’s Resale Value [AllThingsGiftCard.com]

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