The Parliamentary inquiry into digital IT pricing, investigating why Australian consumers are paying up to 50% more for digital music and software, has taken an interesting turn that will see Australian record labels brought before the Canberra committee to illuminate the reasoning behind the pricing disparity between Australia and the US.
The move was prompted by comments made at last Friday’s public hearing by Apple’s Vice President for Apple Australia, New Zealand and South Asia, Tony King, who blamed the record labels and rights holders for the inflated pricing on the Australian iTunes store.
“We would love to see lower content prices available for Australian consumers… I want to make it absolutely clear that it is in our best interests to see that take place,” Mr King told the committee hearing, but deflected that the pricing was a rights holder issue, which they had little control over.
“We urge the committee to discuss this with the folks who own the content. That would be the record labels… because they are the parties who control the rights and understand where those rights are available,” he said.
King told the hearing that , “Apple must pay the rights holders of the digital content, being the record labels, movie studios and TV networks to distribute content in each of the territories in which the iTunes store exists. The pricing of this digital content is based on the wholesale prices which are set through negotiated contracts with the record labels… In Australia they [often] set a higher wholesale price than the price of similar content in the United States,” he told the committee.
The VP also pointed towards higher prices for Apple software and hardware being due to distribution costs. “Apple must consider differences between countries in product costs, freight charges, local sales taxes, levies, import duties, channel economics, competition and local laws regarding advertised prices.”
King noted that iTunes pricing for digital content is similar to the retail pricing of CDs, DVDs, and other physical media, urging the committee to ask rights holders, and not companies like Apple, why they charge more in Australia.
As iT News reports, the IT inquiry is now doing just that, with the committee’s defacto leader Sydney Labor MP Ed Husic saying they are set to hold public hearings with Australian divisions of international record labels, likely to include majors like Universal, Sony, Warner, and EMI.
Mr Husic has been spearheading the digital pricing inquiry, spending several months pursuing IT giants Apple, Microsoft, and Adobe after they ignored invitations to submit their case and were eventually subpoenaed after refusing multiple requests to appear before the committee.
Mr Husic says that he was impressed with Apple’s openness, but was frustrated that little information had been provided to illuminate the subject of pricing policies and structure, a sentiment felt throughout the committee. “A number of us felt we hadn’t had our questions answered, particularly around how prices are set,” he tells iT News. “There’s no clear or comprehendible way that any of them were able to demonstrate the way they set prices.”
He added that it “seemed hard to believe” that representatives from Apple, Microsoft, and Adobe were not aware of pricing and revenue structures or regions other than America, “given they’d all be internally very competitive against each other, which means we can’t get a handle on how prices are set,” said Mr Husic.
The committee already sought the opinion of ARIA, Australia’s record label body, as part of the IT pricing inquiry in October 2012, as ARIA Chief Executive Officer Dan Rosen pointed out when Tone Deaf reached out to him for comment in response to the Apple VP’s comments blaming the record labels for the inflated prices.
Mr Rosen noted that “ARIA is unable to comment on the pricing methodologies of any of its label members as, for competition law reasons, it is our longstanding policy and practice not to engage in any discussions with members (either collectively or individually) in regard to their pricing;” but also directed us toward ARIA’s Public Submission to the inquiry, as well as the transcript of the public hearing featuring Mr Rosen from October 2012.
During that October hearing, Mr Rosen was asked by the committee to breakdown the cost of a download:
Jane Prentice (Member For Ryan, QLD Liberal Party of Australia): ”Say we download something like Gotye at $16.99, there is a price that goes to the artist and then there is a price that goes—what?—to the label? How does that price break down?” asked Mr Husic.
Mr Rosen : I do not have that specific information. That is something where the retailer has a direct relationship with the rights holder. So that would be information that they should be able to provide to you.
Rosen continued with some vague responses saying he wasn’t aware of how the costs were broken down between retailers, wholesalers, labels, and rights holders, and that they were the ones to speak to about the inflated pricing.
“Some of those rights holders would be in Australia and some of them would be overseas… Rights holders could be record companies or labels themselves,” adding that “There are hundreds of labels in Australia, and artists could own their rights directly.”
While consumers may be wondering why they’re being ripped off, and who to blame, Australian Independent Record Labels Association (AIR) General Manager Nick O’Byrne says that government intervention on pricing polices as a result of the inquiry would “be extremely unwelcome for the small businesses that we represent,” adding that, ”owners of recordings (artists and labels) should be able to choose their own price-points for music.”
Director of Rubber Records and Media Arts Lawyers representative David Vodicka agrees, stating that currently “indies have no ability to affect price on the major digital service providers.”
Mr Vodicka also tells Tone Deaf that, “Apple in particular is, from my experience as a label owner, totally inflexible on terms – there’s simply no negotiation, you’re given a series of price points (and the ability to differentiate any pricing at all is only recent) and you fit your titles into those slots. So for Apple to suggest the content owners dictate the terms on their service is absolute nonsense.”
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