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News - Written by Renai LeMay on Thursday, August 18, 2011 14:10 - 24 Comments
Markups a wider issue for Aussie industry: Adobe
news Global software giant Adobe has responded to criticism in Federal Parliament of markups on its products in Australia by stating the issue wasn’t one for the technology industry alone — claiming it was a wider problem affecting other areas such as the automotive sector as well.
Last night in Parliament, Labor MP Ed Husic widened his earlier complaint about price markups on Apple products in Australia to include other vendors, specifically calling out companies like Adobe, Microsoft and Lenovo and raising the possibility that an enquiry could be held into the matter by the Australian Competition and Consumer Commission.
Despite the relative parity of the US and Australian currencies, Adobe currently charges significantly more for its products in Australia than it does in its home country of the US. For example, its Australian store currently lists the Master Collection version of its Creative Suite 5.5 software for AU$3908.25, while the same software in the US costs US$2,599 (AU$2,469) — a difference of more than $1,300 for the exact same software download.
Speaking in an interview this morning, senior director of APAC marketing at Adobe, Mark Phibbs, declined to comment on whether Adobe would welcome an investigation by the ACCC into software pricing, although he did note that Adobe would “obviously cooperate” with such an initiative.
However, the executive said the issue was one which wasn’t solely facing the IT industry. “I don’t think it’s an issue unique to the software industry — I think it’s an overall issue across the economy,” he said. “Look at cars in Australia — they’re far more expensive than elsewhere in the world … I don’t think you can single out one industry and do an investigation there.”
The executive added that there were a number of issues specifically related to the Australian market as a whole which impacted on pricing. For example, he noted that Australia didn’t have a large and dominant online retailer such as Amazon.com in the US, which competed strongly with existing retail channels and helped change thinking around price. If there was such an online giant in Australia, it would likely “change the market” locally, Phibbs said.
The lack of such a strong online player may have the potential to allow local retailers to charge prices which stronger competition would obviate in markets such as the US.
Phibbs pointed out that the majority of Adobe’s software in Australia was sold through channel partners — and so the prices listed on its online store may not reflect competitive pricing in the market. In fact, the price through its own online store would reflect a price towards the upper end of the range which its channel partners were charging.
“We don’t want to undercut the entire channel in Australia,” the executive said, noting that if price parity in Adobe’s online store existed between Australia and the US, it would destroy the company’s local channel market. “The fact is, the channel is not as efficient in Australia as it is in the US,” he said.
Asked what potential there was for Adobe to avoid selling through the channel and provide a more equal price direct to consumers, Phibbs said there was “some scope” for that, but stated also that many consumers wanted more of a complete package than could be bought through Adobe’s own store, which only sells its own software.
As for the channel itself, Phibbs said Adobe couldn’t dictate to its channel partners what prices they charged, with margins on products sold through retailers varying around the world.
The issue of price markups has come to the fore over the past year especially, with the Australian dollar reaching parity with the US. Phibbs acknowledged this but said pricing was “a complex topic”, and Adobe wouldn’t want to change its prices multiple times during the lifecycle of a product — as it would get confusing. Prices could therefore lag currency fluctuations, he said.
In general, the company sets its prices based on a number of different factors, such as the cost of doing business and research into customers. “Our view is that we deliver mission-critical software — prices appropriately for the value that’s delivered,” he said.
Phibbs is right — the issue is a wider one for Australian industry — and I’ve heard complaints about other imported products, ranging from bicycles to clothes to a heap of other things. In addition, he’s right in that a more competitive retail market in Australia would solve some of these problems.
However, the argument he’s making is an attempt to divert attention from the real issue here. The fact remains that today, customers are paying up to $1,300 more for some Adobe products if they choose to buy them from Adobe in Australia, compared to if they buy them in the US. That difference may be smaller if they buy Adobe software from one of its channel partners. But it will still exist, and Adobe has a prime role in shaping it.
As a leader in the software industry and a significant online retailer in its own right, Adobe would generate a lot of goodwill from its customers by harmonising prices across different regions, and updating them maybe once every couple of months to take into account currency fluctuations. Apple appears to have started down this path with its own store.
It is possible, of course, to argue that Adobe doesn’t need that goodwill. With a virtual monopoly on the market for creative design software … right now, unless a regulator like the ACCC intervenes, Adobe can virtually do as it likes with regard to pricing. There’s simply not that much to stop it.
Image credit: Adobe
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