Today representatives from Apple, Adobe and Microsoft faced a government panel for an ICT enquiry into local pricing. After many complaints of inequity between Australian and international software prices, the federal government launched an enquiry. The goal of which was to find out how these non-Australian companies justified the price differences.
Often people rush to compare US to Australian pricing without realising that advertised prices here have to include the 10% GST tax, whereas overseas prices are labelled pre-tax. Taking the current currency conversion into account and tacking on 10% still leaves large gaps between domestic and international pricing.
While it’s a valid question to ask, most of us knew the answer before today. These companies are all publicly traded and have an obligation to share holders to return as much revenue as possible each quarter. This means they will engage in business practices like enforcing regional pricing to maximise profits. While developed nations may not like it, there’s nothing illegal about it.
As we heard today during the enquiry, all of these companies implement geoblocks to prevent Australian’s from purchasing internationally through the internet from non-Australian sites. There’s ways around it if you know what your doing, but the majority have little choice than to wear the inflated cost.
With a strong, competitive landscape in software development, essentially it boils down to the companies relying on sales figures to drive prices down. If companies are struggling to hit sales figures, that’s much more likely to drive a price reduction that complaints from consumers and business wishing it was cheaper.
As I watched the lived stream today it was stunning to see the complete incompetence of the panel selected to lead the enquiry. It seemed panellists had little or know knowledge of actually using software. Adobe for example faced continued accusations that their Creative Cloud subscription model was handcuffing customers to their software. If any of the panel members had actually used Adobe multimedia development software, they’d know that the applications are used to create completely transferrable files like web, images and video. Also questioners were suggesting that every file created was stored in Adobe’s online storage and that it would be deleted if the subscription ended. Just patently incorrect and embarrassing that these questions were even asked.
The biggest problem of all is that the enquiry into ICT pricing into Australia is that it’s a toothless tiger. Just like the enquiry into fuel pricing, the government is powerless to stop inflated prices as these companies are operated outside Australian borders.
The insanity reached a high point when analogies of the international price of McDonald burgers was used. The labour and R&D costs of producing software are dramatically different to that of flipping burgers, so this example falls apart quickly. Given the right, educated panellists, we may have had a hope at appealing to these companies to lower prices and shift volume, rather than margins on smaller numbers. Instead we had an costly embarrassment that resulted in absolutely nothing.
Both Adobe and Microsoft both suggested the best hope for consumers is to engage with software as a service. The economies of scale that can be achieved when selling software digital to a world-wide market far exceed that of any region-specific traditional model. Both Office and Adobe’s Creative Suite can be purchased for a monthly fee which is priced at a far more affordable rate than the upfront cost of traditional software purchases.
In terms of Apple, every day they that passes without a subscription offering is more customers lost. Purchasing individual tracks or albums through iTunes is a dying model and the likes of Spotify are amazingly affordable at just $12.99 pm, less than the cost of an album.
If the goal of the enquiry really was better value for money for consumers, then where was the question about device limits. Adobe Creative Cloud subscribers are currently limited to 2 machines. This means if you have a desktop, laptop and a work machine, you’re out of luck and need another subscription. There should be more focus on getting this number up to 5, making one purchase then viable for a family of creatives.