Perhaps you have heard the anecdote that it is cheaper to jump in a plane, fly to the United States and buy a copy of Adobe Creative Suite 6 than to buy it online. This mark-up for digital goods when purchased online is referred to as the Australia Tax, and it is such a problem for Australian consumers that last year the House of Representatives formed the IT Pricing Inquiry. This inquiry received 133 submissions from Australians who were upset about the increased cost to consumers, in what they saw as deliberate price gouging. This inquiry focused mostly on commercial software, with representatives from Microsoft, Apple, Adobe and other software giants giving evidence on why they feel the need to charge extra to consumers in the Land Down Under.
Companies use a technology known as geo-blocking. The purpose of geo-blocks is to limit access to websites based on the user’s geographic location (determined by their originating IP address). Often companies will drop users into a “walled garden” website, which in Australian consumers case, includes an increase in price.
For Australian musicians who use software coming from overseas, the mark-ups can be quite spectacular. German company Native Instruments have recently instigated a tiered pricing structure. For European customers, prices are in Euros, Australians the Aussie dollar, and all other users the US dollar. Unfortunately the prices do not align after taking into account differences in exchange rates.
A quick browse of their US web store shows their flagship Komplete Ultimate 9 (currently on sale) at US$699.00. Compare that to their Australian web store where it is listed at AU$949.00 (a 35% increase). This isn’t the biggest price difference however. Expansions for their Maschine product are US$49 in the US web store, versus U$79 in the Australian. (An incredible 61% increase) A response from Native Instruments public relations was requested for this article, however none was received.
Not only are Australian customers charged more for digital goods, sometimes they cannot even be purchased online. Steinberg, who make the popular digital audio workstation Cubase, will not even sell copies of their software online if you are on an Australian IP address. Instead there are options to purchase updates. This limitation is not in place for Americans or Europeans.
Australian consumers should be up in arms about these increased costs. Digital goods do not have the associated costs of their physical counterparts, such as import duties, freight or the building of complex logistics networks. Australian web stores are hosted in the same servers as their European and American counterparts, so there is not even additional cost in the delivery of the software itself.
As it stands, the only way Australians can continue to purchase software from foreign companies without the mark up is through accessing websites by bypassing their geo-blocks using VPNs or web proxies. (which Australian government officials claim is still technically legal). This will allow consumers to purchase software at the reduced US prices. Unfortunately if you want to purchase software of the Apple App Store, or iTunes, further steps are being taken where purchases made with credit cards from Australia are not permitted on non-Australian versions of the site.
So if you are an Australian musician or purchaser of digital software and upset with the Australian government setting up Free Trade agreements which don’t stop this price gouging to end users, your best option is to contact your MP and voice your feelings. The more who do this, then there is the possibility that laws can be enacted to stop foreign companies passing on the Australian Tax.