Why do Aussies pay more for software?

Why do Aussies pay more for software?

Summary: When it comes to software prices, there have long been grumblings from those who, by accident of birth, happen to live outside the United States. Why should they be charged a premium when, increasingly, people are merely downloading software off the internet? And, more recently, where is the benefit consumers should be getting from the strong Australian dollar? Trend Micro is one of the worst culprits, but it's not the only one charging big mark-ups to Aussie consumers.

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When it comes to software prices, there have long been grumblings from those who, by accident of birth, happen to live outside the United States. Why should they be charged a premium when, increasingly, people are merely downloading software off the internet? And, more recently, where is the benefit consumers should be getting from the strong Australian dollar? Trend Micro is one of the worst culprits, but it's not the only one charging big mark-ups to Aussie consumers.

It's been a big month at Adobe. The latest release of the company's Creative Suite has been eagerly awaited by people in the media and design industries. Its software is powerful, but it's pricey.

In Australia, the full-blown Creative Suite 5.5 Master Collection will set you back AU$3949 (plus GST) for those who choose to download it off the internet — that's about US$4230. Yet in the States you can download the same files for just US$2599. In other words, there's a 62 per cent mark-up, then add GST on top of that. I fell foul of the difference myself when upgrading Audition, the sound editing tool I use for my podcasts on BNET and ZDNet Australia. If I was an unscrupulous consumer I would have registered myself as a US resident when I first downloaded the product, saving myself an ongoing history of price mark-ups (and avoiding GST in the process).

Trend Micro's new Titanium Maximum Security software is available for US$55.95 in the US, but costs AU$125 (+GST) here — that's 2.2 times the price. Microsoft's Office Professional (at AU$817 + GST) costs 75 per cent more in Australia. The list goes on.

Ironically, a strong market presence helps push the price up. Aussies wanting to download Vegas Pro, video production software from Sony Creative, are charged in US dollars and not charged GST — in effect, you're importing the software. In bigger markets Sony charges in local currencies, but, in those cases, the mark-up is nowhere as extreme as it is with the major software vendors.

Graph of relative prices

Adobe puts the difference down to "customer research that assesses the value of the product in the local market". In other words, dropping the price here won't pay off in terms of incremental sales. It's the old elasticity of demand argument. Put another way, they're all saying, "Let's charge those Aussies more because they'll grin and bear it".

There's also the excuse that costs are higher here. Microsoft says location-specific factors include the size of the market, local taxes, duties and in the case of physical retail, logistics. These don't apply, of course, when we're looking at downloadable products, except for the need for parity with indirect channels. Much as they'd love to, a software vendor can't be seen to undercut retailers when they sell direct.

Microsoft also says that consumers do not want to see frequent changes in recommended retail pricing, based on fluctuating exchange rates. It said consumers would not like to see retail prices constantly "move up or down in line with the international currency markets" and that tying local products too closely to the exchange rate would make pricing "unpredictable". There's a difference, of course, between introducing a new price each day, or even each month, based on how the dollar is performing, and recognising in your pricing that over time the dollar has continually strengthened. If we related the prices today to the exchange rate in early 2009 (when the US dollar was worth AU$1.40) Microsoft Office would be 17 per cent more here than it did over there. Perhaps that's a fair differential for the cost of doing business in a smaller economy, but what's the real reason for the 75 per cent difference we see today?

This has to be where the "local costs" argument falls apart. Software vendors survived in a market where the Aussie dollar was worth 40 per cent less than it is today, yet they managed to cover distribution and channel costs. What's changed?

As to price fluctuations, I'd take them any day in exchange for parity with US prices. If it's really all about what the customer wants, why not give us the choice to buy in the local currency, or in US dollars. I'm sure all business customers (and most consumers) would be with me on that.

If, for the mass market, retail margins are muddying the waters, then we must just count the days till they're cut out of the equation. I don't remember the last time I bought software in a store. In a world where more commerce is happening online you have to wonder what future they have. The same goes for geographic pricing. Consumers hate it and many will find ways to avoid paying more than they have to. It'd be nice if these cloud-focused companies recognised that the cloud is global and treated everyone the same.

Via BNET

Topics: Microsoft, Software, Software Development

About

Phil Dobbie has a wealth of radio and business experience. He started his career in commercial radio in the UK and, since coming to Australia in 1991, has held senior marketing and management roles with Telstra, OzEmail, the British Tourist Authority and other telecommunications, media, travel and advertising businesses.

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19 comments
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  • Dear X-Box games manufacturers. Let me buy games at US retail price and download them to my harddrive and play them from soft copy, and I'll be a lot more likely to pay for new games instead of refusing to buy any console game unless it's pre-owned.
    Scootah
  • Yeah - I did some comparisons of Software over on my Blog. Don't forget educational software - if you have kids in school they will qualify (even Primary). And some sites like Corel, Adobe etc will allow purchase of US$ version often cheaper than the AUS$.

    Check out some more tips:

    Tech Shopping – Bang for $ Part 2 | Sheeds' Blog http://bit.ly/lHpcpJ
    Sheeds_Blog
  • Windows InTune looks like a very nice cloud based product for managing a fleet of PCs.

    Except for the fact it is $15 AU per PC per month in Australia and $11 US per PC per month in US.

    When it is not hosted in Australia, what is the justification?
    Soundy-01b66
  • Not just software. iTunes would have to be one of the worst. $1.69 for a track in AU, $0.99 in the US. Apple has not changed this from day one when iTunes became available is Aus - 3 years ago? - when the $ was not as good as now.
    nomadtales
  • Oh Dear! So we are now noticing that there is a huge pricing disparity between the captive Australian market and the markets overseas. Gee, we wouldnt want the retail sector in this country missing out on their grossly over the wall profits for the sake of saving the average Aussie consumer a few bucks, after all we are supposed to respect the rights of the shareholders of these corporations to get their dividends regardless of the cost to the consumer. (Bow our heads and lets praise the almighty dividend, should we be lucky enough to get one). Excuse me I digress. The fact is that this one of most ripped off societies on the face of the planet because we are too complacent to oppose this. It works like this: Step one: Pay your employees the minimum legal salary in return for generating your companies wealth. Two: Charge the Maximum price for your dodgy products or services. What is wrong with this?. People who are employed in this country then are not able to pay the profit driven pricing that business requires, therefore they do not buy as much as they would like to do. Therefore, as the retail returns of said businesses drop, rather than address their business model just increase their prices further to bolster up and increase their profit margins. This will stop somewhere, unfortunately it will happen when the current business structure can least afford to do so. I guess this will be alright too as long as the shareholders have received their dividends up to that point, then after that of course they will be screaming blue murder about the scummy businesses they invested in ripping them off. Anyway, pardon me, I'now ranting so I had better shut up or the men in black from Harvey Norman will come and reposess me. Have a nice day Yáll
    BoomerMMW
    • Agree 100% BoomerMMW
      Rizz-cd230
  • We recently had a large retailer complaining about the amount of overseas internet sales due to the strength of the Aussie $. It seemed to suggest that whilst we could buy cheaper overseas for some reason they could not. If they were prepared to pass on their purchasing savings a lot of us would not bother making purchases overseas.
    infotran
    • Prices are set based on what people are prepared to pay and production costs are just the minimum baseline. What these marketing geniuses fail to see (or ignore) is that we are in an increasingly global marketplace. Complacency and conservatism in buyers will see people continue to pay a premium for a while but eventually they will get used to the idea that they can purchase overseas with the same or usually better levels of service as they recieve locally. Some might argue that there is little consumer protection with overseas protection but what support do we really recieve here from our toothless tiger consumer right bodies? By the time that Australian companies wake up to this it will be too late for them to stop the momentum.

      It is a joke when you can buy something from a large US retailer, with personal shipping costs and still end up much better off than sourcing it in Australia.
      xBeanie
  • It's nothing personal - just milking.
    cubeover
  • Micrsoft technet subscription $US199 ($AU185). Here $AU337. Nearly double for an online service!!
    xBeanie
  • Basically, its the local distribution arrangements that are a hangover from pre-internet days. They do not provide enough value for the amount they take on the transactions, though they make plenty or 'reasons' why they are entitled to the cut.

    Try buying anything from the Corel site. US$80 or AU$150. Can only be distributor cut.

    Unless distributors wake up to the fact of the internet, they will find themselves bypassed. Buy software instruments from EastWest in the US and they sell worldwide at the same prices, with very economical freight. These generally cannot use downloads because of the 10s or 100s of GBs in some libraries, though they do sell a $100 HDD with all their software loaded and you just buy the licenses as required. Some US music instrument companies are selling direct to retailers here now.

    If it weren't for the fact that a lot of US companies haven't cottoned on to how cheap freight can be obtained, instead of relying on the expensive USPS, local companies would be bypassed much more often.
    Patanjali
  • If you want to add to the list of companies - add Microsoft and Apple (again), VMware, Nero, Roxio.
    I've had dealings with all of them, both through my work situation and at home as well.
    I have posed the question of who to complain about these matters to DFAT (Department of Foreign Affairs and Trade) as these items appear to lie under the Free Trade Agreement between Australia and the US. Their reply for this portion is listed here:
    With regards to your second query, the issue of differential selling practices (including locational selling and pricing) between the US and Australia has attracted attention over the past year. The complaint is that Australian consumers such as yourself have, either directly or via the internet, found products (such as software) available in the US that are sold to US residents, but not sold to Australian residents directly, or are sold at a price considerably cheaper than that offered to Australian residents.

    While sometimes frustrating for consumers, such practices are commercial decisions made by private entities on how they want to conduct their business. Unfortunately, therefore, it is not something that can be dealt with under the Australia-United States Free Trade Agreement (AUSFTA). The provisions of AUSFTA only cover measures introduced by the Parties (ie: the governments of Australia and the US) and do not extend to regulating the behaviour of private, commercial enterprises. As your matter relates to the behaviour of US-based businesses, we suggest you contact the relevant consumer affairs body within the United States. The US Federal Trade Commission might be a good place to start (information on how to contact the Commission can be found at: http://www.ftc.gov/ftc/contact.shtm).

    Kind regards

    United States Trade Section
    Australian Government Department of Foreign Affairs and Trade
    I made a formal complaint to the US Federal Trade Commission.
    If you want something done, this appears to be the only place that can take action.
    Happy complaining.
    tgreenfield
  • I did some of my own research, looking at Corel and Adobe products, and on average, it's a 60% markup on US price... and that's AFTER taking out the GST of 10%.

    It's disgraceful. NONE of these products were boxed either - so digital downloads that cost nothing to package or ship.
    itsfridayfriday
  • Try Runescape.com, for my kids, AU pricing is $9.50 per month but if you choose to register as a US member it is $5.95 per month (AU$5.58) so that makes it nearly AU$4 I save each month times two.
    I'm sure there are other subscriptions with similar discrepancies. The thing is most US companies don't see themselves as International companies i.e. competitions that only apply to US ppl, their market is all they can see.

    TonyE
    texhead
  • I agree its about time that average Australian buyers of hardware and software demanded a better deal.
    I have been buying just about anything I can (software, music, clothing) direct from the US for several years.
    Even when the Australian dollar was at only 80 cents US, it was still cheaper to buy direct from the US in nearly all cases.
    Yoda7
  • When everything is made in Asia and seeing that we are closer to that place then the US, we should be paying less anyway.
    amckern-b0f83
  • Add MYOB to that list.
    Free Trade Agreement is a complete joke.
    I also agree with BoomerMMW & tgreenfield comments
    subscription5
  • I hate the gouging as much as anyone, but have a slightly different take: as long as Australia is just a consumer of these sorts of top shelf products, rather than a producer, we have no right to complain if it's cheaper in the country of origin. Time to stop being proud of the stump-jump-plough, the hills-hoist and the minerals that are accidentally under Western Australia, and show the creativity necessary to build software that the rest of the world wants to use.

    Then, we can charge them extra.
    Coprica
  • Could always just go on a holiday to America where you buy your company, friends and family legal copies of software mentioned above. Then return to Australia charging 30% less then Aussie RRP. And make a decent profit.

    1 Adobe Creative Suite would cover you flight :).
    deach5