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  • News - Written by on Wednesday, August 24, 2011 16:25 - 11 Comments

    We don’t set Australian pricing, says Microsoft

    Microsoft has responded to parliamentary pressure about Australian markups on its products by stating that it doesn’t set final prices to local customers — and stating that it was difficult to make direct pricing comparisons between countries, given differing local conditions in each jurisdiction.

    The comments from the company follow a speech made by Labor MP Ed Husic in Federal Parliament last week about price markups on a number of technology goods and services sold in Australia by multinational companies like Apple, Microsoft, Adobe and Lenovo.

    Husic specifically mentioned Microsoft as one of the “culprits” in the issue, drawing attention to the company’s pricing on its Office 365 software as a service platform. “Microsoft’s flagship cloud productivity suite costs 76 percent more here than in the US,” he said. When Microsoft released Office 365 in Australia in late June this year, it didn’t respond to a request for comment on the pricing issue.

    In a statement issued today — a week after Husic’s comments — Microsoft said that it wasn’t responsible for setting local prices.

    “While Microsoft provides guidance on recommended retail pricing, the company itself does not set the final ‘to-the-customer’ price,” it said. “The market, in the form of its channel and value-added partners who deliver those products to customers, ultimately determines retail pricing.”

    “There are many factors that impact pricing decisions, including, but not limited to, channels or partner specifics, the size of the market, taxes, government regulations and costs. It is difficult to make a straight pricing comparison between countries given that the conditions vary between markets. In Australia, we also go to market with partners who add significant value to our local customers, such as localised customer service and support.”

    Husic’s comments came several months after he first raised the issue of markups on technology goods and services sold in Australia back in March, at the time primarily discussing products sold by iconic technology giant Apple. After the MP’s second speech on the issue last week, Apple Australia managing director Tony King has finally agreed to meet with Husic on the issue.

    Microsoft noted it was happy to do the same. “We respect Australia’s parliamentary process and we are always happy to have a dialogue with any Member of Parliament to discuss any views and concerns that they have,” the company’s statement said. Adobe has responded to the issue by noting that the problem was also seen in other industries such as the automobile sector, and listing similar complex pricing issues as Microsoft.

    While many of Microsoft’s products are sold through channel partners, the company does also sell a number of products and services directly. For example, the company maintains an online Australian store where customers can directly buy software such as Microsoft Office and Windows. In addition, the company sells services such as access to its Microsoft Developer Network platform, and also subscriptions to its Xbox Live platform, for example. And price differences exist in these areas as well.

    Following Husic’s comments, it has emerged that Microsoft is currently charging Australian developers about 83 percent more than their US counterparts to access MSDN services, for example. The company has yet to comment specifically on the MSDN pricing issue.

    Image credit: Microsoft

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    1. Dean Harding
      Posted 24/08/2011 at 6:39 am | Permalink |

      “There are many factors that impact pricing decisions, including, but not limited to, channels or partner specifics, the size of the market, taxes, government regulations and costs. It is difficult to make a straight pricing comparison between countries given that the conditions vary between markets.”

      If that were true, then how do Google get away with charging US$50 per user per year for Google Apps, regardless of which country you’re in? These are all excuses as far as I can see, and not very good ones at that.

    2. SMEMatt
      Posted 24/08/2011 at 6:48 am | Permalink |

      This affects Technet as well and last invoice I got for that was from Microsoft so are we to believe Microsoft don’t set their own pricing.

      Technet professional $AU618 renew $AU437.
      Or for $US349 renew $249.

      This is for the download service the shipping involved is that they mail out a paper invoice so add a $1 for the stamp and a 10% GST and get at least an extra $250 per a new sub to run those 24hour Indian call centres to deal with extra load created in Australian business hours, of course it’s not like Australia doesn’t share time zones with bits of a Asia.

    3. Posted 24/08/2011 at 7:06 am | Permalink |

      So Microsoft’s argument is essentially identical to Adobe’s. The channel. Strangely enough, though, other companies somehow manage to dictate what their channel partners can charge. Not to mention in the US this isn’t even an issue.

    4. Posted 24/08/2011 at 7:16 am | Permalink |

      At least Adobe let you buy from their US Digital Download Store…. MS need to protect their DIstribution channel into Asia Pacific – which means setting RRP that allows their Distributors to make (estimate) double digit margins on top of MS’s wholesale markup.

      Take Expression Studio Ultimate 4 as an example – How can MS resonably expect that for a Digital Download product (no box or mailed out materials) we pay as follows:

      US Store http://www.microsoftstore.com/store/msstore/en_US/pd/productID.216451500/search.true $599.95 –> $AU = $575 + intl transaction fee from your bank – lets say $590. GST Free – or $649 GST adjusted.

      AUS Store http://www.microsoftstore.com.au/shop/en-AU/Microsoft/Expression-Studio-4-Ultimate $969. Shipping = $0, Packaging = $0

      Cost to distribute from ASEAN servers vs US servers – bugger all. Final Details:

      $590 vs $969 = 64.5% Markup. Even split 50/50, that’s a massive Distribution + Microsoft Wholesale over US price profit margin.

      Aussies = Getting Ripped.

    5. Marcus
      Posted 24/08/2011 at 7:32 am | Permalink |

      Whole article can be refined down to “We charge what the market will pay provided it covers our costs, as does everyone else”

    6. Anonymous
      Posted 24/08/2011 at 10:04 am | Permalink |

      Wouldn’t mind so much if they actually paid tax in Australia.

    7. Geoff
      Posted 24/08/2011 at 12:07 pm | Permalink |

      You can’t really say the market determines retail pricing when you have a exclusive distribution relationship with a single retail provider.

    8. SAPaleAle
      Posted 24/08/2011 at 10:48 pm | Permalink |

      If I go to Microsoft’s own online stores in the US and the Australian store and price a download version of Visual Studio 2010 Pro (Full)
      US Pricing $US799 (approx $AU765)
      AUS Pricing $AU1387 (approx $US1450)

      Who is setting the prices here Microsoft ?

    9. Anonymous
      Posted 25/08/2011 at 2:02 am | Permalink |

      and that is why I will continue to pirate software.

      Hell if i could steal a car and get away with it I would. Bloody overpriced pieces of metal.

    10. Anonymous
      Posted 25/08/2011 at 1:58 pm | Permalink |

      I’ve said it before and I’ll say it again.

      There is NO excuse for companies to charge more for goods and services delivered online.

      They should charge a flat fee (whether this is in USD, AUD, or whatever depends on the country the company is based in – it doesn’t matter where the customer is located). Let the customer’s bank take care of the “conversion fee.”

      That is the whole point of the Internet. Its a global economy. Stop putting up artificial barriers to validate ridiculous pricing schemes.

      If they want piracy to stop that will be a big step. If they insist on trying to milk people unfairly then piracy will not stop.

      Why do these companies find that so hard to understand? Sigh.

    11. Jack33
      Posted 27/10/2012 at 2:53 pm | Permalink |

      Does the Microsoft US online store require a US based credit card or just a local postal address?

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