Apple is the first big name off the rank to appear before the IT pricing inquiry in Federal Parliament today. Apple’s local MD Tony King blames the pricing difference on what Apple gets charged by record companies, but he’s not comfortable with acknowledging Apple’s dominant role in music and doesn’t seem to want to do anything about it.
We’ve pointed out before that Apple’s hardware prices aren’t hugely different to the US. Where there is a visible difference is in the prices of music, TV and entertainment, and that’s what King needed to defend.
Apple must pay the rights holders to distribute content in each of the territories in which the iTunes store exist. The pricing of this digital content is based on the wholesale prices. They have often set a higher wholesale price than the price of similar content in the US . . . The retail pricing of digital content is based on many factors and foreign exchange is not a major factor The main differentiator is the wholesale price . . . We would urge the committee to discuss this with the folks that own the content.
King says Apple would be happy to lower those costs: “We would love to see lower content prices available for Australian consumers, for songs, movies or TV shows. That would drive a wonderful use of our products within the Australian market.”
However, King wouldn’t be drawn on whether Apple would prefer a single, global market, which would ensure identical pricing and access (and which would keep most local buyers happier). “It’s really a question for the rights holders. We’re a retailer of the music, and so the conditions we have to respect are the current IP conditions. Speculating on what may or may not exist in the future is not something that I’m qualified to do.”
King was less happy with the suggestion that Apple occupies a similar position to Woolworths: as the dominant player in the sector, it must have some influence on pricing when it negotiates with music labels. I’d be surprised if music wholesalers aren’t in a similar position when it comes to Apple,” member for Throsby Stephen Jones suggested. “If you’re not selling to Apple, you’re not in the game.”
“Mr Jones, we’re not Woolworths,” was King’s ultimate response. (The fact the two companies have been involved in a trademark dispute over the Woolworths logo won’t have helped, I suspect.)
The lesson for consumers. Apple is blaming higher music prices on music labels, but doesn’t seem keen to negotiate for change. I suspect that means local pricing will stay high for quite a while.