Why is digital music more expensive in Australia?

Bruce's digital didgeridoo
turned out to be quite a paw-full

Why is digital music more expensive in Australia? This question is currently being considered by the House of Representatives Standing Committee on Infrastructure and Communications. On 24 May 2012 the Committee resolved to inquire into IT price discrimination, following a request from the Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy. The often given example is that the Apple iTunes store in the United States sells most albums at between US$9.99 and US$12.99, whereas in Australia those same albums are sold for AU$16.99 or higher. In recent times, under the currency exchange rates, the value of the US and Australian dollars has almost been equal.

Eighty-one written submissions were received by the due date of 6 July 2012. The first public hearing was held in Sydney on 30 July 2012, with the following organisations were invited to make oral submissions: Australian Information Industry Association (AIIA), Australian Publishers Association (APA), Australian Performing Rights Association (APRA), the Australasian Mechanical Copyright Owners Society (AMCOS), Choice (consumer group), the Australian Retail Association (ARA) and the Communications Alliance.

Some of the more interesting comments were as follows:

The AIIA, represented by Suzanne Chambers, suggested the discrepancy could be due to the cost of doing business in Australia. She stated ‘where operating costs are higher, and the market is smaller, it would naturally follow that prices may need to be higher in order for the subsidiary of a multinational company to provide a reasonable return on investment’.

If you're working in the field
of 'hit' music, having a name
like Mallet is a great asset

Richard Mallet, Director of Revenue at APRA and AMCOS believed that it was ‘public knowledge that out of each sale of a single track download the DSPs [digital seller] will generally keep up to 30%, the record labels will receive between 60-70% and APRA-AMCOS receives 9%’. He further added that the ‘APRA-AMCOS's rate in Australia is similar to tariffs in operation in other territories. For example, in the UK and Europe it is 8%, in Canada it is 9% and in the USA it is US9.1c, which is a fixed rate irrespective of sale price’. When asked by the Chair for his view on what would be the reasons for price differentials between Australian and US markets, he responded that there were a range of reasons why the prices could be different, but he did not know why they are. However, he was adamant that the price difference was not caused by the APRA-AMCOS licence fee as this was the same or around about the same as it is in overseas territories.

Consumer group Choice, represented by Head of Campaigns Matthew Levey, provided details of research the organisation had conducted across a range of IT hardware and software products (including music downloads from iTunes, PC games, software, console games and computer hardware). That research identified an approximate 50% price difference between what Australian consumers and US consumers pay for more or less identical products. Compared to US consumers, Australians pay: approximately 52% more on iTunes for the equivalent top 50 songs; 88% more for Nintendo Wii console games for a selection of the 20 most recently released games; 34% more across a selection of 44 popular home and business software titles and 41% more for a selection of 12 Dell computers. To Mr Levey, the most likely cause of the price disparities in IT hardware and software products was international price discrimination—that is, the practice of international brand owners, suppliers and manufacturers setting the wholesale cost of their products for particular markets such as Australia. He called upon the government to investigate whether certain technological measures that sustained international price discrimination against Australian consumers were anti-competitive and should continue to be allowed. He further added that certain measures of this type are now to point of a kind of privatised tariff or privatised protectionism and that they had no place in the globalised market for these goods.

Russell Zimmerman, Executive Director of the Australian Retail Association, stated that it was ‘probably in the interests of all retailers to be able to supply consumers at close to or equivalent prices as their overseas competitors or equivalent prices as their overseas competitors’. In Mr Zimmerman’s view, much of what we had seen in Australia in pricing was due to the high value of the dollar. He suggested that in respect of downloads, that because there was no physical product there was ‘some prices that seem to be artificially set high because it is Australia’ and further speculated that perhaps suppliers felt ‘that there is a reason that Australians should or can pay more for those products’.

The IPKat recalls Europe being at the wrong end of music price differentials some time ago and still wonders why the European Commission, having been pointed in the right direction, never quite seemed to get to the bottom of the reason for it.   Merpel just wants to know why Australian wine costs so much more in England than it does in Australia ...