A tech price inquiry stalemate?

Consumers are praying that the government will find a remedy to Australia's IT price rip-offs but murky licencing costs imposed on digital content look set to create another hurdle in the quest for price point justice.

With submissions for the government’s inquiry into IT pricing fixing now in, the Department of Broadband Communications and Digital Economy has weighed in with what it thinks can be done to remedy the issue. However, as Ross Dawson points out this flurry of activity is unlikely to lead to a solution unless something is done about the licensing costs imposed on digital entertainment.

Australia’s Department of Broadband Communications and Digital Economy has provided a submission to the government’s Inquiry into IT pricing which runs through some examples of pricing disparities

I spoke  to ABC24 last week about the findings and more generally the reasons why Australians pay more for digital goods.

Fortunately the examples of pricing disparities highlighted in the report do have a silver lining. It looks like extortionate pricing experienced by Australians for a lot of hardware and software purchases has abated somewhat. However, the purchase of some software and more prominently digital entertainment including movies and music is still very expensive.

For example Australians pay $24.99 to buy Toy Story on iTunes compared to the $10.10 paid by Americans for exactly the same product. The Beatles Anthology costs $20.99 compared to $13.09.

The real difficulty here is that there is no transparency on how much of this disparity is due to different regional licensing costs imposed by movie studios and music companies, and how much by Apple’s pricing structures. It’s quite likely that most of the difference is from licensing.

For entertainment products, we are beholden to the copyright owners. Other movies and music are not substitutes for the ones we want to watch or listen to. While the shift to digital content opens up global markets, license holders would prefer to break down markets as far as possible, with the aim of maximising pricing in each one.

One of the primary ways of enforcing those barriers is to require a credit card from the country within which you are buying. For now, it is hard for most people to circumvent that.

So while globalisation affects almost every market, ironically it is impacting digital entertainment less than many product markets, with massive price disparities.

The final question in the interview on ABC was whether these prices would lead more Australians to piracy. My reply was that the unfairness of the pricing rather than the fact of having to pay would indeed draw some to illegal downloads.

There is little the government can reasonably do to legislate on pricing. Let us hope further forces of globalisation, including freer payment structures, give non-Americans fairer access to digital content.

Here is the conclusion of the government’s report:

There remains an ongoing role for the market in restoring the balance of costs across international borders. The digital economy offers consumers an unprecedented opportunity to act as independent rational agents on a global scale, with enormous potential to benefit from lower prices and a much larger market of goods than is available in Australia alone.

Australian consumer law protections serve a valuable purpose and should continue to be available to consumers when they purchase locally. There remains a role for Government in ensuring consumers are adequately protected against predatory and unethical commercial practices. However, the Government must also act within limits; some measures, such as requiring foreign retailers to apply Australian laws and taxation arrangements, are unlikely to prove benefits in balance with the required expenditure of resources.

Ross Dawson is globally recognised as a leading futurist, entrepreneur, keynote speaker, strategy advisor, and author. His Trends in the Living Networks blog is ranked as one of the top business blogs in the world.

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