Why do Australians pay more for digital music?
- 30 July, 2012 14:15
Australian licensing fees are not the reason for high music download prices compared to other nations, according to the Australasian Performing Rights Association (APRA) and Australasian Mechanical Copyright Owners Society (AMCOS).
The final sale price is a result of a negotiation between the digital seller and the record label, APRA and AMCOS director of revenue, Richard Mallett, said in an inquiry hearing on Monday of the House Standing Committee on Infrastructure and Communication.
The House committee was seeking information on why Australians pay more for music downloads and IT products than other countries, particularly the US. For example, the Apple iTunes store in the US sells most albums between $9.99 and $12.99, while in Australia albums are frequently sold for $16.99 and higher.
“The price difference I don’t believe is caused by our license fee,” Mallett said. “Our license fee… is the same or around about the same as it is in overseas territories. There are a range of differences why the prices could be different, but I don’t know why they are.”
The APRA/AMCOS takes 9 per cent of the price of a download in Australia, while the recording label takes about 60 per cent and the digital seller — for example, Apple iTunes — takes 30 per cent, said Mallett. The split of percentages is similar in other countries, he said. The license fee is 9 per cent in Australia, New Zealand and Canada and 8 per cent in the UK and Europe, he said, with the US levying a 9.1 cent flat fee regardless of the download’s sale price.
MP Jane Prentice asked why then a Gotye album costs $16.99 in Australia but $9.99 in the US on iTunes. Mallett replied, “The prices are different, yes, but the same split in my belief would be occurring in each of those territories.”
Exchange rates could have something to do with the price differences, Mallett said. “The comparative price changes with exchange rates,” he said. “Back in 2009 when you compare the price in Australia with the US, it was effectively [the same] because of the effect of the exchange rate at that particular time.”
However, under the current exchange rate, the value of the Australian and US dollars are close. One US dollar was about 95 cents in Australia at the time this article was written.
Consumer group Choice believes that “international price discrimination” is the main reason for the differences, said its head of campaigns, Matthew Levey. Australians pay 52 per cent more than US consumers on iTunes for the Top 50 songs, among other disparities found by Choice, Levey told the House committee.
“We think these are significant price differences” that can’t be “fully explained, let alone justified” by the GST, warranties or other factors cited by the digital sellers and record labels, Levey said. “We found no evidence to suggest that GST could explain the price differences we found.”
“The price margins of these goods are simply not that much higher in Australia, even cumulatively, to account for the price differences that we have identified,” Levey said. Labour costs can be higher in the US than Australia, and selling digital downloads does not require a physical storefront, he said.
The Federal Government should “play a greater role in educating consumers in the protections and rights they enjoy when shopping online," Levey said. “We think it is one way of increasing access to legitimate parallel imports from foreign markets, thereby putting pressure on international businesses to reduce their prices in Australia.”
He added the government should consider whether region-encoding and similar measures may be anticompetitive. “We believe that certain measures of this type are [analogous] to a kind of privatised tariff or privatised protectionism, and they have no place in the globalised market we’re seeing for these goods.”
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