Enterprise IT, News - Written by Renai LeMay on Monday, July 30, 2012 15:12 - 26 Comments
IT price comparisons not useful, says AIIA
news The IT industry’s peak lobby group today said it was “not useful” to directly compare prices on technology goods and services between Australia and other countries and that increased Australian prices on such goods reflected different conditions and protections locally compared with other countries.
In May, following a public campaign on the issue by Labor MP Ed Husic, the House of Representatives Standing Committee on Infrastructure and Communications called for submissions to help inform an inquiry into pricing of technology goods and services in Australia, publishing the terms of reference for the initiative on its web site. The results have so far demonstrated a strong groundswell of public anger about ongoing markups on technology goods sold in Australia.
Many of the submissions from users focused on the fact that online stores such as Apple’s iTunes, Valve’s Steam, Microsoft’s Xbox Live, Sony’s PlayStation Network, Amazon’s Kindle store and Adobe’s software store charged Australians higher prices for the exact same software and content than residents of other countries, particularly countries such as the US. Companies such as Microsoft have previously justified the charges based on the increased cost of doing business in Australia.
However, in a statement issued today associated with the group’s attendance at hearings on the issue kicked off this morning, the Australian Information Industry Association, which represents large companies such as Adobe and Microsoft, said the base for the complaints wasn’t valid. In the statement, AIIA chief executive Suzanne Campbell said “it was not useful to try to directly compare prices in one country with those in another”.
The AIIA said: “Price differentials between ICT product purchased in Australia and similar product bought overseas reflect, among other factors, the different operating environments of countries and also the more robust consumer protection given to consumers in Australia.”
In April this year, global software giant Adobe, which is represented at the hearings by the AIIA, continued a long-running tradition of extensively marking up its prices for the Australian market, revealing that locals would pay up to $1,400 more for the exact same software when they buy the new version 6 of its Creative Suite platform compared to residents of the United States. The price markups came despite the fact that the software in both cases is downloaded via the Internet to buyers.
Campbell said there were a range of vendor for downloadable goods costs that often were not initially obvious to consumers.
“Goods are not priced to reflect only the cost of producing and distributing them. Goods which are downloaded still have research and development, product development, advertising, marketing, and support costs,” the AIIA CEO said. “The online store is not an automated process without any staff. Staff are still required to build, manage, and maintain the backend systems – so local labour costs are relevant.”
“Often these people are more highly skilled and are therefore paid more than retail staff in bricks and mortar stores. There are costs involved in advertising and marketing services locally. Regardless of the distribution method of the product – the costs of providing support services remain and need to be accounted for. An additional cost associated with downloadable goods specially games relates to content developed by third parties with their own rights, licensing, wholesale and distribution models.”
Campbell said the ICT industry was not “homogenous”, and that IT hardware, software and professional services business models, cost models and pricing mode varied significantly across markets and geographical boundaries.
“Costs models reflect the specifics of each business model but in any event the cost of a good is only a small fraction of the investment the company has made in developing a product or service,” Campbell said. “The price also reflects the investment by the company in developing its underlying intellectual property.
In addition, Campbell added, the channel through which the product is sold would affect its price.
“AIIA members report they sell up to 100% of their goods via channels,” she said. “This might include volume licensing to third parties, through retailers like Harvey Norman as fully packaged product, through bundling by original equipment manufacturer or through online services. The variety of channels used introduces significant product differentiation and pricing tension between the different channels and also direct sales (where they occur) in both setting the recommended retail prices and discounting from the recommended retail prices.”
Campbell said taking into account all these factors, prices for some IT products in Australia may be incrementally more expensive than some overseas markets. IT consumers and regulators needed to understand and appreciate Australia’s higher operating cost environment. However, the executive did give some credit to the argument that technology prices in Australia were not fair.
“Notwithstanding these added cost pressure, there is a realisation that some issues need to be addressed,” Campbell said. “As the Australian market now faces a truly globalised trading environment it will need to adjust. AIIA members acknowledge that this will impact their business models and that market players will have a shared responsibility to balance their business imperatives, the costs that go with servicing a local market and the increasing pressure of global markets.”
Wow. Dozens of Australian consumers have filed hundreds of price comparisons to a Federal Government inquiry into local markups on technology goods and services, and dozens of media outlets have written hundreds of articles about this issue over the past several years. Probably about a dozen parliamentary speeches have been made about it. And every time Delimiter raises it, we get stacks of comments from angry readers frustrated by the behaviour of companies like Adobe, Microsoft, Lenovo and others.
But according to the AIIA, IT price comparisons are “not useful” and there’s no issue here — move along people, nothing to see. Wow. This is truly industry denialism at its best. Someone call the anti-climate change organisations — they may want their lobbying tactics back.
Image credit: AIIA
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