The parliamentary committee investigating the price of computers, software, games and digital content has summonsed Microsoft, Apple and Adobe to appear before a public hearing on the 22nd of March.
Australians pay a tonne more for technology products than countries such as the US and UK. ?In its submission to the inquiry, Choice described that Australians pay on average, 34% more for software, 52% more for music via iTunes, 88% more for Wii games and 41% more for hardware than consumers do in the US.
The price that companies charge are set through a handful of different mechanisms. ?Firstly the laws you learn on day one of an economics degree are in play, laws of things like simple supply and demand and what?s called elasticity (how quickly people stop buying if the price rises), but there?s an overlay on top in technology that affects things too. ?Different populations in different countries and different regions of the world have different tolerances for?different?prices, so technology companies often isolate the markets that have historically tolerated very high prices, like Australia, from markets that don?t, like the US, using a range of methods and tricks. ?Tricks include technological methods stopping one country?s edition of a piece of software from working in another such as region coding on DVDs, and licensing agreements that try to segregate one group from the rest like?academic?editions of software sold only to purchasers with a .edu email address.
Effectively the way you become a very wealthy technology company is you identify the different groups of people you want to sell things to, and you charge them the maximum amount they will pay, and you keep them apart from the other groups so you can keep control of the rules about who buys what for how much. ? Sell for $4 to the folks with $10, but sell for $46 to the folks with $88. ?Simple.
The vendors are approaching scrutiny about this in two ways. ?Firstly they don?t comment on pricing. ?They?ve been sullen in response to questions from the inquiry and the community, advising they don?t comment on pricing policy and also that pricing is very complicated. ?Secondly there?s a water-muddying exercise where a spokesperson goes into a quite colourful story about how expensive it is to sell things to Australians. ?Australians earn higher retail wages than Americans do. ?Rent for shops in malls is higher too. ?These things, along with differences in taxes and duties as well as the cost of physically transporting goods from where they are made to the Australians who want to buy them, accounts for the difference in price.
This makes a marginal amount of sense in some marginal cases. ?Tax differences almost account for the price of an iPad in the US versus here. ?Apple blame the remainder on higher costs (like retail rent and wages) which is thin at the volume they sell but in the ballpark enough to let slide. ?The real howlers happen with software and online content.
Steam Prices.com?compares the prices?of a range of software titles distributed over the Internet in the complete absence of manufacturing costs, shipping container space, customs fees, warehouse storage, retail rents and shop assistant wages. ?Its ?Top Rip-offs? page shows the biggest differences with customisable regions to compare. ?The image here shows Call of Duty, Modern Warfare 2 ? the penultimate in the most popular series of war games, with a 77.79% price difference between regions. ?Adobe products are notorious for enormous regional?dissimilarities charging in some cases thousands of dollars more out of the US for a piece of software versus its price?state-side? ? In these instances the vendors are stone mute as to the reasons behind their pricing strategies.
The bottom line is that Australians pay higher, sometimes enormously higher, prices for technology driven products than Americans. ?In truth we pay more for a range of goods, but technology and media content differs greatly from many other goods in that they are poorly substitutable. ?A similar game to Call of Duty from a local publisher at a lower price isn?t considered to be a useful substitute at all for Call of Duty, but a pair of jeans in a similar cut and colour from a less expensive label is much more acceptable, and makeup of a similar shade and texture from a cheaper producer is more popular because it achieves a much more similar result to a more expensive version. ?Nobody has ever said ?Have you seen my new iOS-based tablet? ?I got it from a local Australian company that does them?? but plenty of people support cheaper or more niche local product markets for various fashion or household items, and second-hand markets exist too. ?A lot of technology products are similar to luxury goods in peoples? rhetoric, but the economics is much more typical of essential goods.
Tech giant justifications for this disparity fail either a little bit or entirely, and it?s going to be fairly amusing to see them go to extraordinary lengths to avoid providing the one truthful reason they have for the disparity ? it?s more profitable to charge Australians more. ?Fans of the various companies will chime in that it?s normal,?meritorious?even, to charge customers what they are willing to pay, all the while missing that a parliamentary inquiry into prices is not really indicative of a customer base that?s ?willing to pay?.
An inquiry just inquires rather than regulates, so there is no risk of market interference by Australian regulatory bodies just yet, but the amusement of black magic pricing strategies laid out in the sunlight for consumers to examine will contain a lot of amusement, and may lead to a fairer deal for Aussie technophiles.
Source: http://www.geordieguy.com/2013/02/technology-price-inquiry/
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