This article is by Matthew Hatton, a disgruntled consumer and opinionated writer based in Newcastle. You can find him on Twitter at @bernietb. This opinion piece was originally published on his blog, The Rant-O-Matic, and is re-published here with his permission.

opinion The creation of the internet has ushered in the era of the true global marketplace. It has expanded the reach of business beyond what anyone in history could have imagined. It has given consumers the opportunity to not only shop locally or nationally but also now globally.

The opportunities are there for business as well. Just as consumers can shop from any number of online stores, businesses can also sell their products and services to a person regardless of which corner of the world they reside in. The ability for a business to be able to compete, and potentially profit — from a global marketplace has never been greater.

Sadly, what we’re seeing is that this 21st century opportunity is being crippled by 20th century protectionism. The problem stems from the fact that instead of treating the internet like the single, global market that it is, many organisations continue to try and force people into their geography-based regional markets.

The two biggest culprits in this practice is Apple with its iTunes store and Valve with its Steam platform for digital video game distribution. Both of these services are prime examples of old thinking ruining the prospects for new business models.

For Steam, the crux of the problem relates to its pricing structure. What happens when a product is listed on Steam is that the price is set on a per-region basis. This means that depending on where you are the world, the cost of a particular game varies when you compare it across all the places where Steam purchases are available.

In Australia, what tends to happen is that the cost of a digital download ends up having the same cost as you would see inside a retail store. Such pricing reeks of protectionism and does nothing but help to try and prop up what is the slowly dying business that is retail computer game sales.

Add into that the fact that prices of video games in Australia are significably higher than those overseas — even for physical sales — and it’s very easy to see just why piracy rates are so high in this country. It’s all well and good to see developers profit from the fruits of their work, but to have publishers so blatantly gouge Australian consumers for no good reason isn’t exactly going to convince people not to illegally download games.

For Apple, iTunes has proven to be a monumental success. It’s easily the largest online store for music, television and (probably) movies. But that doesn’t mean it’s perfect. In fact, it’s far from it.

Apple has managed, for the most part, to get its iTunes pricing nailed down. Across the world prices are largely similar — save for some minor differences in balancing out currency fluctuations. Apple’s problems relate more to what you can buy, rather than how much it costs.

Within iTunes, content can be restricted so that it is only available for sale (or rent in the case of movies) to people within a certain country. So, for Americans this means that they can get the latest episode of off iTunes the day after it airs there, while Australian customers have to wait until has aired on television here before we can purchase it.

This sort of behaviour is only of benefit to our local TV broadcasters, who rely on having exclusive first run rights to popular programs so they can sell high-priced advertising against it. It would be better for Apple and better for the content producers themselves to have their programming (which if it’s popular will have an audience around the world already) available globally as soon as possible.

Having it restricted only encourages people to download these programs illegally, because they do not wish to wait some arbitrarily determined time before they’re shown on TV locally. Again, this is something that is of particular prevalence in Australia. Many studies have shown that we have some of the highest TV piracy rates in the world. Any why? Because in our global, interconnected lives we don’t want to wait up to six months for a TV show we want to see to be shown here. It just doesn’t work like that anymore.

All these problems are brought about by two main reasons.

Firstly, the creators of these digital platforms are not pushing game publishers and TV/movie creators into realising that accessibility is the key to creating a profitable online business. That they have to consider the way to distribute their work most effectively isn’t through the traditional broadcasters or brick and mortar retail stores.

Secondly, it’s the creators themselves who are so stuck in their ways and so blind that they just don’t realise the possibilities that the internet provides to their business.

The internet is a global marketplace. If you want to truly take advantage of it you need to treat it as such. Attempting to shoe-horn old ways of doing business into it isn’t going to work. It needs to be approached from outside the traditional ways of selling to consumers. The first person to start doing that right is going to win. Big.

Image credit: Vince Varga, royalty free

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1. Darryl Adams
   Posted 22/09/2010 at 2:51 pm | Permalink | Reply

   One of the big issues with digital delivery is that the old distrobution system is well connected with way things work, which allows them to threaten or seek protection from the new deliver system.

2. Rich
   Posted 22/09/2010 at 7:14 pm | Permalink | Reply

   …And Amazon sell some products for delivery in the US only. They also only allow some books to Australian kindles, and ironically do not allow some Australian books to US kindles.

   This isn’t a market place issue. I.e Apple, Steam, Amazon aren’t at fault here, it’s the legal rights system.

   As you note, when content is sold from a production company to a distribution company, it is generally split into rights covering a limited territory. There is nothing different for rights to electronic content, hence we have the problems you describe. Apple legally can’t distribute content between regions. I’m sure that they’d love to if they could.

   Justifying piracy on the basis that it’s cheaper somewhere else is also not a valid argument, if things are cheaper overseas, get them shipped here and stop complaining. Maybe I should shoplift jeans because they’re cheaper in the US? What garbage!

   You mention ‘Such pricing reeks of protectionism and does nothing but help to try and prop up what is the slowly dying business that is retail computer game sales.”

   Slowly dying? Check the news mate. Here what reuters reported in June:

   “Global [gaming] revenue $60.4 billion in 2009, seen rising to $70.1 billion in 2015 (DFC Intelligence)”

   http://www.reuters.com/article/idUSTRE65D4Y020100614

   • Matthew Hatton
     Posted 22/09/2010 at 8:01 pm | Permalink | Reply

     >>And Amazon sell some products for delivery in the US only

     This is true, as has already been pointed out to me elsewhere. It’s a problem, but generally not one that’s as obvious as the ones associated with iTunes and Steam.

     >>I’m sure that they’d love to if they could.

     But this is exactly my point. There’s no push from within these platforms back onto distributers to start re-thinking how they get this stuff out into the public’s hands. Which, to me, doesn’t seem right. Surely it’s in the best interest of Apple, Valve, etc to have as much for sale as possible in order to maximise the potential audience that can purchase their wares.

     >>Justifying piracy on the basis that it’s cheaper somewhere else is also not a valid argument

     I never “justified” piracy. My point was to highlight that, really, this works both ways. It’s very easy for any consumer to do their own price comparison on a product across various markets. As a result it’s become increasingly apparent that we are paying significantly higher prices for things that people overseas for no good reason other than these distributers and retailers think that we are not going notice. It’s unacceptable. I’m not saying that piracy is the correct response to this, but it certainly is easy to see why people would choose this option. Especially when it relates to purely digital products.

     >>Slowly dying? Check the news mate. Here what reuters reported in June:
     “Global [gaming] revenue $60.4 billion in 2009, seen rising to $70.1 billion in 2015 (DFC Intelligence)”

     My bad. In hindsight that’s probably not a completely crash-hot sentence. I was referring to sales from physical stores (people buying disks from a shop), not the sector as a whole.

     • Rich
       Posted 22/09/2010 at 8:27 pm | Permalink | Reply

       I’m struggling to understand you.

       Apple helped create a legal online marketplace for music distribution. They have pressed content owners to allow their music to be sold electronically. They have also advocated strongly for DRM-free music (which allows you to copy iTunes purchased content to non apple devices).

       Have a quick read:

       http://www.apple.com/hotnews/thoughtsonmusic/

       So, what exactly do you mean when you say “There’s no push from within these platforms back onto distributers to start re-thinking how they get this stuff out into the public’s hands” ?

       It’s no secret that the music labels and Apple have argued bitterly about content ownership and distribution.

3. David Banes
   Posted 23/09/2010 at 10:40 am | Permalink | Reply

   There are a whole lot of political and legal issues that influence the ‘global internet market’ that Matthew doesn’t touch on here, it’s not just about the technology and the rights owners attitudes. There are differing copyright laws, lobby groups and free trade agreements that all contribute to the bigger picture.

   A good place to start to get a handle on the bigger issues is to join something like the Internet Industry Association(IIA) who work through these issues with all parties at the table.