If you don’t live in the US, this is a pretty common source of irritation: US companies charging crazy markups on products sold in Europe, Asia, Australia, South America, and the rest of the world. The Australian government has had enough of this practice, and started an inquiry into the matter. Yesterday (or today? Timezones confuse me) Apple, Microsoft, and Adobe had to answer questions in a public hearing.
Let’s first get a feel for the scope of the problems our Australian friends are dealing with here. “Consumer group Choice looked at more than 200 hardware and software products and found Australians pay on average 50 per cent more,” The Sydney Morning Herald writes, “This includes a 70 per cent mark-up on AC/DC album Back in Black on iTunes, while a copy of Adobe’s CS6 Design and Web Premium suite costs $3175 in Australia versus $US1899 ($A1820).”
Graham Spencer at MacStories did a thorough comparison of the pricing of Apple products in the US and Australia (accounting for currency and tax differences), and came to the conclusion that while most hardware is priced pretty similar (with markups of 10% or less), there are standouts: 16GB iPhone 5 and 4S models have a markup of 16%, while the Mac Pro hits the 14%. Overall though, the price hike for Australians isn’t all that shocking here.
Where things fly off the rocker is for anything even remotely related to software or multimedia. Single songs have a 60% price hike, while albums range from anywhere between 35% to more than 70% as expensive in Australia as in the US. Movies have a markup from 30% to as high as 60%, while TV shows are a bit of a mixed bag – some are only 10% more expensive, while others are over 40% more expensive. App Store pricing – which is a bit more difficult to gauge because developers can’t set per-country prices – is about 10% more expensive in Australia.
“It’s pretty evident that the markup on media for Australian consumers is quite significant,” Spencer concludes, “To demonstrate the extent of the markup, I created a scenario where a US and Australian consumer purchase the same content from their respective stores and compare the difference. All up, I created the following selection of content which adds up to $152.11 of content from the US store with a mix of movies, music, TV shows and apps. An Australian purchasing the same content would have to spend $196.77 – a markup of $44.66.”
So, how do Apple, Adobe, and Microsoft defend their price hikes? Finger-pointing and side-stepping, mostly. Apple, for instance, blames the content industry. “The pricing of this digital content is based on the wholesale prices which are set through negotiated contracts with the record labels, movie studios and TV networks,” said Apple’s vice president for Australia, New Zealand, and South Asia, “In Australia, they have often set a higher wholesale price than the price of similar content in the United States.”
Microsoft and Adobe side-stepped the issue completely, and turned it into a bit of a marketing and PR opportunity: they both pointed towards more recent internet-based offerings such as Office 365 and Creative Cloud, stating that the Australian prices for those products are much more in line with US pricing. Australian Labor MP Stephen Jones zoned in on the marketing trick here, and stated that Microsoft and Adobe are placing “digital handcuffs” on consumers, because this way, the companies force consumers to keep paying in order to access their files.
According to The Sydney Morning Herald, the Australian MPs questioning the three companies were unimpressed, and called them “evasive” on the matter. The snippets we’ve seen indeed underline that impression, and it seems like there is little to no justification for these kinds of price hikes. It’s not just Australia either; other countries are facing the same high markups from US technology companies, and it mostly seems to be a case of pricing whatever they can get away with.
The elephant in the room here? There’s nothing illegal about that. While the price hikes are unfair and ridiculous from the point of view of a consumer, a company is free to price its products in whatever way it deems fit, and considering the success of companies like Apple, Microsoft, and Adobe, they apparently can get away with it.
It’s a good thing governments keep close tabs on these matters, but unless they plan to change laws, I don’t see how they can actually do anything about it.