Suzanne Campbell, CEO of the Australian Information Industry Association (AIIA), has told a Federal Government inquiry into IT pricing that vendors do not set retail prices. Instead, channel partners and content and rights owners are responsible for setting prices, she said.
The inquiry is looking at why Australians pay more for digital software, hardware and downloads than overseas consumers.
Representing the ICT industry, such as vendors, which have stated that market conditions and distribution costs in Australia are higher than in the US, resulting in higher prices, Campbell today gave several reasons as to why Australian consumers pay more than overseas counterparts.
For example, Australia’s expensive warranty environment is the most expensive in the world, she cited one member as stating.
Australia also has higher labour costs concerning particular jobs, Campbell said. For example, a product manager in Australia costs around $120,000 to $160,000 to employ, while in the US, that same role costs $90,000 to $120,000.
Campbell also insisted that other organisations are responsible for setting prices and not vendors, stating AIIA members have suggested that prices are set by content and rights owners.
“…the investment in developing and innovation for a new product or service is sometimes measured in years and … the intellectual property that underpins that is an investment which I think is generally not well regarded in Australia and an evidence of that is the fact that we have such relatively low numbers of patents or other artefacts to support our pride in intellectual property creation as a nation," she said.
“...In relation to rents, I observe that the rents aren’t usually directly related to my members’ expenses because many of them have up to 100 per cent of their services being sold in the marketplace through channel partners, but it does have a profound effect on each of their channel partners and specifically for the bricks and mortar channel partners."
However, a member of the inquiry refuted this claim, stating government entities are able to procure savings through channel partners.
“Why is that what the channel partners are experiencing translates into once thing in terms of small businesses and general consumers and not the same when a large entity is able to exercise its procurement to get a better outcome?” a member asked.
Different business models, according to Campbell.
“The cost models that flow from these different business models are all distinctly different and reflect the specifics of the business model. But in any event, the cost of a good is only a small fraction of the investment of a company,” she told the inquiry.
“Pricing strategies are complex and varied. They reflect demand, they reflect supply [and] they reflect product positioning as well as geography.”
However, a member suggested the AIIA was shifting the blame for price setting.
“It seems like the channel is being used as a convenient excuse by the industry to be able to point fingers at someone else when in actual fact what it really comes down to is the fact that your members – the vendors themselves – they can charge what they want here because of the lack of the purchasing power that exists in Australia compared to the size of a market like the US,” a member stated.
“Is the channel just a bureaucratic cover by … your members to justify the prices that they set here?”
Vendors such as Apple have previously been lambasted for not appearing at the inquiry, with MP Ed Husic stating: “If Apple can appear before US Congressional hearings they can certainly appear before Australian parliamentary inquiries”, according to the <i>Australian Financial Review</i>.
“My issue is that the industry has set up a really neat edifice for the purpose of this inquiry,” a member stated at the inquiry.
“It has the AIIA come here and make a representation on behalf of the industry – and I understand the position that you’re in – but they don’t engage themselves in the actual process of the public back and forth as to why people are facing these differences.
Organisations such as consumer advocacy group Choice have been highly critical of vendors, with a submission to the inquiry by Choice detailing research that found Australian consumers are paying around 50 per cent more than US consumers for music downloads, computer software, hardware and games and console games.
"It’s more expensive to download Australian artists in Australia than it is in America. Can you shed any light on why that should be?" a member of the inquiry asked Campbell.
While Campbell declined to comment on specific Australian artists, she stated Australian consumers are able to access music outside other channels than iTunes, such as Telstra’s MOG, Spotify and Microsoft’s Zune, "so you’re not restricted in respect to access to one supplier only".
However, services such as Spotify and MOG only stream music and consumers are unable to download tracks, which iTunes allows.
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