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Apple responds to Australian 'price gouging' allegations, blames markup on content owners

post #1 of 49
Thread Starter 
In a hearing with Australia's Standing Committee on Infrastructure and Communications on Friday, Apple attempted to reconcile the huge price gap between digital goods sold in the country and those sold in the U.S., saying that the blame ultimately falls on content owners.

The Australian Parliamentary inquiry, which included executives from Microsoft and Adobe, was called to address alleged "price gouging" practices by the three companies. As noted by The Sydney Morning Herald, Aussie customers see software and digital content costs sometimes inflated by over 70 percent compared to U.S. pricing.

Tony King
Apple Vice President for Australia, New Zealand and South Asia Tony King. | Source: The Sydney Morning Herald


While targeting Microsoft and Adobe for the companies' software offerings, Apple was singled out for "gouging" the public with marked up movies and music. In response, Apple's Vice President for Australia, New Zealand and South Asia Tony King said content owners demand higher prices in Australia than in other countries like the U.S.

"The pricing of this digital content is based on the wholesale prices which are set through negotiated contracts with the record labels, movie studios and TV networks," King said. "The content industry still runs with perhaps old-fashioned notions of country borders or territories or markets."

He went on to say that Apple's prices as seen in iTunes are comparable to other Australian outlets, suggesting the company wasn't taking advantage of its customers. King noted that Apple has been pushing to lower costs for consumers as it "creates confusion for customers."

As for Microsoft, Australian managing director Pip Marlow said "customers will vote with their wallets," indicating that if the company sets too high a price, sales will suffer. Adobe's Paul Robson was also brought to task over the nearly 75 percent markup for the Adobe CS6 Design and Web Premium Suite, which costs AU$3,175 compared to $1,899 in America.
post #2 of 49
Vote with their wallets?! How exactly can we do that? Not use a computer? Pathetic... Australians are being gouged when it comes to technology. As for Apple, prices here are out of control, especially when it comes to iTunes. For example, a season of The Walking Dead costs 50 cents more per episode and $7 more person season. An album costs 90 cents more per song and $6 more for an album. Why? It's a digital file. Our dollar is better than the US. There's no reason for it. It may not seem like much, but it adds up after many downloads. The amount of people I know who refuses to use iTunes due to the price difference is huge. They seem to avoid the issue.
post #3 of 49
With regards to content I'd say that Apple has a point. They take a cut and the providers set the price.

But the markup on their hardware is inexcusable.
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post #4 of 49

The Australian government should amend their own legislation.  They have been allowing copyright to be used to restrict importing of products and allowing monopoly distributorships.  To blame Apple is disingenuous.

 

 

Quote:

In the 19th century, Australian booksellers could import books from anywhere. As a result, they got the best prices and best value for money. However, British colonial publishers pushed through a law that effectively required booksellers to buy directly from British publishers and no one else. In other words, an import monopoly was established.

This system had nothing to do with protecting Australian culture. It was for the protection of the profits of foreign publishers. To this day, foreign publishers are the main beneficiaries of this archaic import monopoly law. Only one-third of books sold here are Australian, yet all the publishers, foreign and local, hide behind Australian authors, who are sent out to defend the system.

Since 1989 there have been numerous independent professional studies by our top official agencies. All have concluded that on average our book prices are higher, often a great deal higher, than overseas.

The latest Productivity Commission report puts the matter beyond any doubt. Regarding ''like'' editions of books - that is, identical books - Australia's prices are on average 35 per cent more expensive than ''like'' editions in the US, even after taking into account GST. In many cases, the price differences were greater than 50 per cent.

Regarding the ''cheapest books'' that are available (even if their format may be different), the gap is even higher between Australian prices and those elsewhere. The recommended retail price of the cheapest Australian edition was on average 13 per cent higher than the recommended retail price of the cheapest edition of the title in Britain. It was 50 per cent higher on a recommended retail price basis than the cheapest edition of the titles in the US.

The studies confirm what we have all seen when overseas and known for years: Australians pay through the nose for books due to import restrictions. Let me give you a specific example: Dan Brown's The Lost Symbol has an Australian recommended retail price of $49.95, more than 50 per cent higher than the British recommended retail price of $33 and more than 50 per cent higher than the US recommended retail price of $32.87. The cause of these price differences is the import monopoly. If it was removed there would be a price fall, as there was after the 1998 CD reforms.

post #5 of 49

The Australian Dollar is stronger than the US Dollar, yet we pay more....for everything, i'm kind used to it tho. 

post #6 of 49
It's defiantly unfair for us Aussies. I think Apple is pretty fair with the prices of their products and Apps in Aus. It's not perfect, but it's far better than other companies.

It is the 'other' companies that sell Apple their digital content that are %$^&ed!! lol... Apple's apps are priced similary to US prices, alongside their hardware.

I hope the AUS Government go after movie companies and record labels too.
post #7 of 49
According to the Big Mac index, the Australian dollar is overvalued by about 18%
http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-3
post #8 of 49
Even 'made in Australia' movies are cheaper in America... Go figure?
post #9 of 49
Quote:
Originally Posted by Plagen View Post

According to the Big Mac index, the Australian dollar is overvalued by about 18%
http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-3

... and you're saying this, because?

post #10 of 49
Minimum wage in Australia in 2013: $15.96

Minimum wage in the US in 2013: Federal $7.25, by state average is still below $8.

When you make twice as much per hour, products cost twice as much as well.
post #11 of 49
Quote:
Originally Posted by werdnanotroh View Post

... and you're saying this, because?

The exchange rate imbalance explains, at least partially, why things are more expensive in Australia. .  On the other hand, if you use, say a kangaroo, as a price unit, things will be much cheaper down there.  

post #12 of 49
Quote:
Originally Posted by saarek View Post

With regards to content I'd say that Apple has a point. They take a cut and the providers set the price.

The funny thing is that when someone thinks that Apple sets the prices (books), then Apple gets in trouble. Here, Apple doesn't set the prices and they're still in trouble.

No matter what Apple does, people are going to attack them. If they stood on the street corner handling out $50 bills, people would complain that they're not giving out $100 bills.
Quote:
Originally Posted by saarek View Post

But the markup on their hardware is inexcusable.

Really? EVERYTHING is more expensive in Australia. Their advertising costs more. Retail employees make a lot more. If Apple were the only one charging more, you might be able to call it 'inexcusable', but when everyone charges more, Apple is simply engaging in market pricing.

However, even if Apple were the only one charging more, 'inexcusable' would be silly. Maybe no one has explained how free markets work. Apple sets a price. The consumer either chooses to buy or not to buy. If the consumer thinks that Apple's price is too high, then they don't buy - and Apple either settles for lower sales or finds a way to lower the price. If the consumer thinks the price is OK, they buy it. No need to excuse anything.
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post #13 of 49
Quote:
Originally Posted by Bemmer View Post

Vote with their wallets?! How exactly can we do that? Not use a computer? Pathetic... Australians are being gouged when it comes to technology. As for Apple, prices here are out of control, especially when it comes to iTunes. For example, a season of The Walking Dead costs 50 cents more per episode and $7 more person season. An album costs 90 cents more per song and $6 more for an album. Why? It's a digital file. Our dollar is better than the US. There's no reason for it. It may not seem like much, but it adds up after many downloads. The amount of people I know who refuses to use iTunes due to the price difference is huge. They seem to avoid the issue.

 

Why?

 

ARIA and Australian industries.

 

Apps from the Appstore reached parity because App prices aren't as strictly controlled as music, movies and books.

 

Other Australian stores offer similar pricing.

 

CD's, DVD's and physical books are in exactly the same boat.

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post #14 of 49
Quote:
Originally Posted by Plagen View Post

The exchange rate imbalance explains, at least partially, why things are more expensive in Australia. .  On the other hand, if you use, say a kangaroo, as a price unit, things will be much cheaper down there.  


You don't seem to understand about exchange rates.  Actual exchange rates have a real bearing on the cost of items in the real world, notional values don't.  Currently, and as has been the case for some time, the Australian Dollar has had a higher value vs the US dollar in real terms, so all else being equal, a digitally conveyed item should be cheaper in Oz than in the US.

post #15 of 49
Quote:
Originally Posted by oddmyth View Post

Minimum wage in Australia in 2013: $15.96

Minimum wage in the US in 2013: Federal $7.25, by state average is still below $8.

When you make twice as much per hour, products cost twice as much as well.
 


Only if the goods you are buying were manufactured using Australian labour, which in this case they were not.  We are talking about goods imported into Australia that were manufactured where labour costs are lower.

post #16 of 49
Seems like the comments missed the point. Apple is being dissed for pricing on something they don't set the prices for. They should be going after the Studios etc to drop geographic restrictions and pricing and just release everything same day/date world wide and same price. Then the only issue is adjusting for currency value which Apple would likely then control cause they could out that control in the contracts. Do it say every three months for the moment with a deadline set for having a system up that can do it no less than once a week if not daily.

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post #17 of 49

It all comes down to two words.  

 

Monopoly & Capitalism.  

 

Capitalist ideology says that you should "get as much as you can" for a product instead of trying to figure out a "fair" price, and and that morals are of no consequence.  The Monopoly they enjoy says that they can charge anything they want and no one can stop them.  The mistake this guy is making is in assuming that they should be "fair."  Fairness goes against everything Capitalism stands for.  

post #18 of 49
Quote:
Originally Posted by cnocbui View Post


Only if the goods you are buying were manufactured using Australian labour, which in this case they were not.  We are talking about goods imported into Australia that were manufactured where labour costs are lower.

 

Unless you follow the "Big Mac" index, where McDonalds uses Australian child labour to cut costs.*

 

*Child labour - 14 years and 9 months to 17 year olds, which is acceptable in Australia but causes an outcry when said children are in China.

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post #19 of 49
Quote:
Originally Posted by Bemmer View Post

Vote with their wallets?! How exactly can we do that? Not use a computer? Pathetic... Australians are being gouged when it comes to technology. As for Apple, prices here are out of control, especially when it comes to iTunes. For example, a season of The Walking Dead costs 50 cents more per episode and $7 more person season. An album costs 90 cents more per song and $6 more for an album. Why? It's a digital file. Our dollar is better than the US. There's no reason for it. It may not seem like much, but it adds up after many downloads. The amount of people I know who refuses to use iTunes due to the price difference is huge. They seem to avoid the issue.

 

 
People have twisted views of what is fair. The price of goods only take into account one aspect. Apple's prices are closely aligned to the cost of living differences between the u.s. and australia.
 
Or are you also blaming Apple for the high cost of food and housing in your country?
 
post #20 of 49
Quote:
Originally Posted by Tenfingers View Post

 

 
People have twisted views of what is fair. The price of goods only take into account one aspect. Apple's prices are closely aligned to the cost of living differences between the u.s. and australia.
 
Or are you also blaming Apple for the high cost of food and housing in your country?
 


What a very polite way to describe gouging.

post #21 of 49
Quote:
Originally Posted by cnocbui View Post


You don't seem to understand about exchange rates.  Actual exchange rates have a real bearing on the cost of items in the real world, notional values don't.  Currently, and as has been the case for some time, the Australian Dollar has had a higher value vs the US dollar in real terms, so all else being equal, a digitally conveyed item should be cheaper in Oz than in the US.

 

What part of 'overvalued  " don't you understand?

 

See here: "The Australian dollar is the most overvalued currency in the world, but there is little will to intervene, according to a global valuation"


http://www.smh.com.au/business/markets/dollar-the-most-overvalued-currency-20130215-2eho2.html

post #22 of 49
Quote:
Originally Posted by saarek View Post

With regards to content I'd say that Apple has a point. They take a cut and the providers set the price.

But the markup on their hardware is inexcusable.

Really? Are you sure? Have you ever even been to Australia? The cost of living there is considerably higher than the US. Apples 6-8% difference is the lowest you see from any company. By far.
post #23 of 49
Quote:
Originally Posted by cnocbui View Post

Quote:
Originally Posted by Tenfingers View Post

 
People have twisted views of what is fair. The price of goods only take into account one aspect. Apple's prices are closely aligned to the cost of living differences between the u.s. and australia.
 
Or are you also blaming Apple for the high cost of food and housing in your country?
 
[URL=http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=Australia


What a very polite way to describe gouging.

It is not really Gouging, it is just more expensive to do things in Australia. Some of it is government regulation, some of it is transportation difficulty, some is the high cost of fuel, none of it is gouging. It is bizzare your government would go after Apple. Apple's margins are likely lower in Australia than in the US.
post #24 of 49
Quote:
Originally Posted by Gazoobee View Post

It all comes down to two words.  

 

Monopoly & Capitalism.  

I think that you need to explore the actual meaning of these two words a bit deeper.

post #25 of 49
Quote:
Originally Posted by saarek View Post

But the markup on their hardware is inexcusable.

1) Is anyone holding a gun to anyone's head asking them to buy Apple?

 

2) What is the typical markup for other manufacturers' hardware? Is Apple's the same? Lower? Higher? Evidence?

post #26 of 49
Quote:
Originally Posted by cnocbui View Post

Quote:
Originally Posted by oddmyth View Post

Minimum wage in Australia in 2013: $15.96


Minimum wage in the US in 2013: Federal $7.25, by state average is still below $8.


When you make twice as much per hour, products cost twice as much as well.

 


Only if the goods you are buying were manufactured using Australian labour, which in this case they were not.  We are talking about goods imported into Australia that were manufactured where labour costs are lower.

Ther are transported in Australlian trucks, with Australlian drivers using Australlian fuel. That is just the beginning. It is more expensive to live in Australlia. Deal.
post #27 of 49
Originally Posted by Bemmer View Post
Vote with their wallets?! How exactly can we do that? Not use a computer? Pathetic...

 

Uh… not buy from Apple. Cut out the FUD.


As for Apple, prices here are out of control, especially when it comes to iTunes.

 

So don't buy from Apple.


 For example, a season of The Walking Dead costs 50 cents more per episode and $7 more person season. An album costs 90 cents more per song and $6 more for an album. Why? It's a digital file. Our dollar is better than the US. There's no reason for it.

 

International licensing. Oops, I found a reason.


It may not seem like much, but it adds up after many downloads. The amount of people I know who refuses to use iTunes due to the price difference is huge. They seem to avoid the issue.

 

No, that's called voting with your wallet.

post #28 of 49

Doesn't VAT also come into play here?  Australian VAT is 10%.   There is no Federal VAT tax in the United States (although there are State and local sales taxes which are generally from 7% to 9%, but if you're ordering online, you only pay them if "shipping" to a State where the company also has a physical location.     That's considered "nexus".    However many States consider you to have nexus if you have any affiliates in the State.   That's how New York State forced Amazon to charge sales tax in New York even though Amazon has no physical facility there.

 

Furthermore, the fact that it's a "digital file" and therefore should be the same price is not relevant.   Local distributors decide upon the price just the same as a music CD sold in Australia is usually manufactured locally and is distributed by a local label.      Apple would "love" to acquire content from one source and then distribute it worldwide, but there are laws preventing that.    Some of those laws are in flux, but generally, most countries have traditionally made "parallel imports" illegal in order to protect local publishers and distributors.

post #29 of 49
Quote:
Originally Posted by Wovel View Post


It is not really Gouging, it is just more expensive to do things in Australia. Some of it is government regulation, some of it is transportation difficulty, some is the high cost of fuel, none of it is gouging. It is bizzare your government would go after Apple. Apple's margins are likely lower in Australia than in the US.


The topic under discussion is digitally delivered goods - try again.

post #30 of 49
Quote:
Originally Posted by Tenfingers View Post

 
People have twisted views of what is fair. The price of goods only take into account one aspect. Apple's prices are closely aligned to the cost of living differences between the u.s. and australia.
 
Or are you also blaming Apple for the high cost of food and housing in your country?
Native Americans were wiped out by Smallpox when Apple shipped an container of computers that had an infected stowaway.

And Apple caused the eruption at Pompeii when their secret underground skunkworks blew up.

And Apple caused the ice ages by...., well, I just don't know how they did it, but they did.
Quote:
Originally Posted by hill60 View Post

Unless you follow the "Big Mac" index, where McDonalds uses Australian child labour to cut costs.*

*Child labour - 14 years and 9 months to 17 year olds, which is acceptable in Australia but causes an outcry when said children are in China.

Of course. It's OK to give underpaid jobs to Australian kids from middle class families, but don't dare give jobs to kids of legal age in China who are happy with the amount of money they receive.

See above for the explanation.
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post #31 of 49
Quote:
Originally Posted by Plagen View Post

What part of 'overvalued  " don't you understand?

 

See here: "The Australian dollar is the most overvalued currency in the world, but there is little will to intervene, according to a global valuation"


http://www.smh.com.au/business/markets/dollar-the-most-overvalued-currency-20130215-2eho2.html


You obviously don't have much experience with international currency conversion.  When you purchase or sell a foreign currency, you do so at the actual real world applicable exchange rate at the time - not using some 'theoretical' notion of value.

 

You go into a shop and they are selling iPhones at $1,053.98.  Just for fun, that happens to be Apple's price for one sim free in the UK.  You tell the store owner you have read an opinion that states they are seriously over priced and that he should therefore sell it to you for $600.  Care to guess what the store owner will likely tell you what you can do with your 'theoretical' value price?

 

Go to a currency dealer and tell them you want to buy Australian dollars at US$ 0.70 and she/he will likely laugh at you and say 'so would I'.

post #32 of 49
Quote:
Originally Posted by anantksundaram View Post

I think that you need to explore the actual meaning of these two words a bit deeper.

 

I might be tempted to if you actually replied with anything of substance.  

 

On the other hand I probably wouldn't because ... "you just don't understand."  (see how easy it is to do that?)  1wink.gif

post #33 of 49
Quote:
Originally Posted by Gazoobee View Post

Quote:
Originally Posted by anantksundaram View Post

I think that you need to explore the actual meaning of these two words a bit deeper.

 

I might be tempted to if you actually replied with anything of substance.  

 

On the other hand I probably wouldn't because ... "you just don't understand."  (see how easy it is to do that?)  1wink.gif

How difficult is it to search for these two terms, and read the descriptions/definitions from sites that you might trust?! Are you really that dependent on some link that some guy you don't know provides you on the internet?

 

Since you asked: 

 

Monopoly: http://legal-dictionary.thefreedictionary.com/monopoly

 

Capitalism: http://www.merriam-webster.com/dictionary/capitalism

post #34 of 49
Quote:
Originally Posted by cnocbui View Post


You obviously don't have much experience with international currency conversion.  When you purchase or sell a foreign currency, you do so at the actual real world applicable exchange rate at the time - not using some 'theoretical' notion of value.

 

 

Oh, please, just don't pretend you are such a hot currency dealer. As a matter of fact, it looks like you don't even comprehend simple  terms so just stop right there. Unbelievable! End of discussion.

post #35 of 49
And they wonder why people pirate music, movies, software, etc.

Hypothetically, if an Apple user doesn't want to subscribe to Spotify, Rdio, etc, all one has to do is subscribe to iTunes Match and torrent their music, ~$35/year is nothing when someone is pirating $100 worth of music.

And for movies, people can download 1080p quality for free, and half the bandwidth.

Obviously I don't need to explain the software, people have been pirating Adobe's Creative Suite for years. Personally I use Pixelmator, why would I pay ~$1000 for Photoshop when I can get something that does almost the same stuff for ~$16?

I'd like to see an explanation as to why Apple overcharge for stuff on the app store, I mean $14 in the US and $16 here. That's completely Apple there.
post #36 of 49
Originally Posted by ViciousKoala View Post
And they wonder why people pirate music, movies, software, etc.

 

Having what to do with this? Piracy happens in the US, too.


And for movies, people can download 1080p quality for free, and half the bandwidth.

 

Apple 1080p movies are ~4GB. That seems to be the common size for pirated copies, though 1GB, 8GB, and 25GB are also common.

 

Of course people can steal for free. That people will pay for convenience and quality shows why iTunes is so successful. 


Personally I use Pixelmator, why would I pay ~$1000 for Photoshop when I can get something that does almost the same stuff for ~$16?

 

Because this. Also for reasons of compatibility-based monopoly. In some cases, "it's purchased because that's what everyone else purchased" applies to everyone. Same with Windows, but that's coming crashing down.


I'd like to see an explanation as to why Apple overcharge for stuff on the app store…

 

Because they don't. There isn't "One World Store". The cost of operating in different countries is, surprise, different. Therefore different prices are warranted.

post #37 of 49
That seems like an incomplete view of capitalism. I would argue that Apples own reports on the labor practices of its suppliers, its efforts to reduce toxic chemicals during the manufacture of their products and their use of renewable energy sources for their server farms and corporate facilities indicates that they view fairness as a valuable commodity.
Edit: this post was supposed to quote Gazoobe. Not sure why it didn't. Although I notice this is post number 666 for me so I guess it must be the devil.
post #38 of 49
Originally Posted by Doctor David View Post
That seems like an incomplete view of capitalism. I would argue that Apples own reports… …indicates that they view fairness as a valuable commodity.

 

Replying to me? Then why have they never had equal international prices at any stage in their existence? I don't really see how 'fairness' in that regard and on the back end has anything to do with taking a bath on increased international costs for the purpose of offering "USD-equivalent" prices worldwide.

post #39 of 49
Quote:
Originally Posted by charlituna View Post

Seems like the comments missed the point. Apple is being dissed for pricing on something they don't set the prices for. They should be going after the Studios etc to drop geographic restrictions and pricing and just release everything same day/date world wide and same price. Then the only issue is adjusting for currency value which Apple would likely then control cause they could out that control in the contracts. Do it say every three months for the moment with a deadline set for having a system up that can do it no less than once a week if not daily.

 

It seems like that rather fundamental point should really be the end of the discussion, but for some reason it barely even gets a look in.

post #40 of 49
Oops, I wasn't referring to you. I was speaking strictly about the concept of fairness as being of value in capitalism. Although I have little knowledge of the specifics of this issue in Australia I'm not at all convinced that Apple is guilty of price gouging.
I really would appreciate it if you wouldn't edit my posts when you reply. Quoting part of what I wrote can change the context and doesn't seem very (wait for it)... Fair. 1cool.gif

Edit: and again I'm not smart enough to get a quote in my response.
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