Last week, the Australian government announced that they’d be making a formal parliamentary inquiry into the cost of digital pricing policies among large computer firms.
Major computer and software developers, including giants like Apple and Microsoft, are invited to defend their pricing policies which have been called into question considering the recent growing strength of the Australian dollar. Compared to US and international markets, Australia is treated to a relative mark-up of products from tech gadgets and software to videogames and apps that remains high, despite the dollar’s growth.
And yes, that inquiry will include the price of digital music – like iTunes.
It’s not often that the average consumer and the government see eye-to-eye on such issues, but in this case, it seems Australian parliament is just as curious as to why we’re consistently charged more for digital content than America.
From a political standpoint, The Age reported that “Labor MPs hope publicity generated by challenging the companies will result in lower prices and put an end to local consumers being ‘fleeced’.” With the Minister for Communications, Stephen Conroy throwing his support behind the inquiry, hoping it will bring an end to the pricing inequality of Australian digital content.
Also encouraging the investigation is Sydney MP Ed Husic who was quoted, ”people here scratch their heads trying to work out why they get fleeced on software downloads,” Mr. Husic further stated that when IT companies were pressed “why they charge so much for downloads, even they found the answers were not persuasive.” He also told The Australian that he “agreed there was no legal power to demand local IT prices drop, only a means to expose outrageous discrepancies in the hope companies would see the light and cut them.”
Another group who have been lobbying hard for this investigation are CHOICE. A leading advocate for consumer rights in Australia, they issued a statement claiming ‘CHOICE believes excuses used by multinational companies to justify higher prices, especially with regard to products downloaded from the internet, are largely unjustified. We will welcome the opportunity to be involved in the inquiry and hope it will pressure importers, distributors and retailers to pass on some of the savings they are enjoying thanks to the strong Australian dollar.”
What does this mean for music lovers? Hopefully, no more being overcharged for digital music.
The worlds’ largest digital shop regularly marks up its Australian store prices by 40%, on top of the 10% required by GST. For example, Adele’s all-conquering sophomore record, 21, currently a permanent fixture on the Albums Chart, sells for $US10.99 on the American site, which converts to $AU11.81 (including GST) and yet it sells for $AU16.99 on the Australian store, a notable mark-up. Even at a glance, the average single on the US store costs 99c, while here the same content costs $1.69.
So, who decides the pricing for foreign stores? Apple does.
And on what basis?
According to an exhaustive analysis that appeared on popular Apple blog Mac Stories, ”these price levels were converted using a very conservative prediction of the future value of a particular currency.” The pricing scheme has changed little since the Australian iTunes shop launched in October 2005. Which essentially means, Australians are paying more for the same content purely based on an inaccurate and outdated pricing system that now actively discriminates against our particular market.
Regular defences cited by digital distributors like Apple, are that the content is not delivered by a global agreement, deferring to the sticky web of music licensing and tax costs to justify their fees. But recent investigations, including a report from the Productivity Commission last year into retail, revealed that a hollow pretexts like the size of the Australian market “in most cases are not persuasive, especially in the case of downloaded music… where the costs of delivery to the customer are practically zero and uniform around the world”.
It will be interesting to see how Apple responds to the inquiry, given their track record for snubbing both media and consumer probing in the past, but with a full-scale, government-abetted inquisition, it’ll be harder to ignore the demands of the greater public. Apple has regularly responded that since their content is not delivered on a global agreement, that price conversion “is not relevant.” But perhaps it’s time it should be.
The immediacy of the internet and digital distribution is quickly making the idea of market territories an increasingly irrelevant model.
Again speaking on the issue, Sydney MP Ed Husic – who is a key member of the government’s inquiry committee – remarked, “the global digital economy is likely to make it increasingly difficult to sustain business models that are based on a geographic carve-up of markets.” In fairness, it should be based less on location and more on content, if there is a world-wide economic standard placed on the sales of digital distribution, the criteria that deems the price of content becomes that much more equitable.
More than anything, placing pressure on companies like Apple over their pricing policies can only aid in tackling the biggest issue still facing the industry: music piracy.
In an age where it’s harder to get people to pay for music, when less-than-legal means are so easily accessible, platforms like iTunes and their regular mark-up begin to look like price rorts, acting as a disincentive for those seeking to obtain their music through legitimate means.
Why should people be paying more for music when they know they’re essentially being ripped-off over false pretences like ‘marketing’ and ‘tax costs’ when even our government and consumer research disproves them?
If people become aware that the extra costs are simply lining the pockets of the distributors, and not the artists creating the music, the correlation between the line becoming ever more grey and the temptation to cross it, grows.
To put it bluntly, it’s in the best interest of Apple, iTunes and the record labels that fill their digital stores to promote fair pricing, otherwise their audience will find other ways to justify where – and more importantly how – they get their music fix.
Of course, there are other means besides iTunes to ‘support the artist,’ but as it remains the leading juggernaut in the digital music boom; while still functioning on a potentially outdated and unfair business model of pricing that is out of step with Australian’s growing economic presence, isn’t it about time we demand them to re-think their pricing policies?
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