Choice undertook some research and found that Australians are paying on average 34% more for software, 51% more for iTunes music, 88% more for Wii games and 41% more for computer hardware than US consumers. Sadly, Valve’s software distribution channel was the winner in this race to gouge the Australian market with Choice finding a whopping 232 per cent price difference on games downloaded from Steam: That’s simply ridiculous.
No real surprises there, although it is great to see it set out in detail. What the Choice report does particularly well is debunk the spurious reasons given by retailers for the price differential.
Industry groups have proposed a number of local causes for digital price disparities, such as rental, labour and transportation costs, GST and profit margins.
However, CHOICE’s analysis suggests that all these five factors combined account for only 22-27% of retail prices in both Australia and the US. The remaining 78-73% comes from the wholesale cost of the goods to the retailer.
It seems most likely that wholesale costs are higher in Australia due to international price discrimination from large companies. The result is higher retail prices which hurt consumers and retailers alike.
It does not matter how you approach this, there is simply no excuse for a significant price differential with digital goods. And yet it continues because we continue to accept it.
Choice suggests the Government needs to educate local buyers about their rights to buy legitimate parallel imports and also to look at whether technological measures allowing regional discrimination, such as region-coding, should be allowed to continue.
Kudos to Choice for such an excellent report and submission to the Government inquiry.