back to article Microsoft's APAC president denies price gouging in Australia

Microsoft's president for the Asia Pacific, César Cernuda, has tried to explain why some of the company's products cost rather more in Australia than in other parts of the world. Cernuda spoke yesterday at the Canalys Channels Forum in Bangkok, an event at which each speaker's talk is followed by questions submitted by delegates …

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Translation

~Everyone eles is rorting the Australian market, so there is no incentive for us to do any differently. Slightly-less-overpriced from us is still cheaper than the overpriced from our competitors.~

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"the laws of supply and demand " . .

do not apply to the software industry because supply is effectively "infinite" because you can make infinite copies of your product for near zero cost.

This is just a smokescreen. The simple truth is that MS are just rorting the Australian market because they can. Just like every other company does here.

For consumers, the solution is simple. Just don't buy their stuff. It's a no brainer really.

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"That inquiry conducted public hearings in March 2013, at which Microsoft Australia's Pip Marlow appeared and said she was content that the laws of supply and demand would determine whether Australians are asked to pay too much for Redmond's wares. If Microsoft does overcharge, she said, customers would vote with their wallets and buy rivals' products."

If it were really about supply and demand they would vote by buying the same products from other channels around the World but they aren't allowed to. That is a form of price fixing.

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Market factors

Whenever this question comes up the response is either a mealy-mouthed evasion or an answer that amounts to "we will charge whatever the market will bear".

Indeed there are recorded instances of software vendors in Australia saying it in pretty much those actual words.

What gets me is that these companies then complain about software copyright violation. (Hereafter referred to as 'piracy', for simplicity, if not accuracy.)

Guess what MS/Adobe/Activision/EA/etc... - software piracy is the market showing that it will not bear those prices. The amusing/annoying/unsurprising thing is that in nations where cracking down on piracy is much harder (like China, the Philippines, India, and many second and third-world economies) Microsoft offer their products and lower prices and have been known to run promotions that offer a kind of amnesty - allowing users of pirated software to upgrade to legitimate versions VERY cheaply. A recent offer in India cut the price of Windows by over 80%.

In short, in those countries, MS does see piracy as a market factor, indicating that their products are priced too high and so it lowers them accordingly. In Australia, however, they refuse to make a similar connection.

Now, software copyright violation is against the law, but that does not mean it is not a useful indicator of other factors. Theft is also against the law but can be an indicator of socio-economic issues is certain area, sometimes related to closing of services and laying off large numbers of people. For example, increased youth crime has been linked to school closures.

The point is that if one region has higher crime - in this case, Australia having higher rates of piracy than the US - then we should try and understand why.

I suspect one reason why some people in Australia pirate software that they are well able to afford is out of spite. If you know that you can buy a piece of software online from the US for $100 but, due to geoblocking (via IP or payment details), you are forced to buy it locally for twice the cost, then that stings most people more than a little.

In the past, people paid local prices and that was that. Now, people have a good awareness of what other people around the world are paying and they are not impressed.

That got away from me a little there but my point is that Microsoft needs to understand that people don't like being ripped-off and, while 'piracy' is illegal, I believe it still represents people 'voting with their feet' and so should prompt Microsoft to re-examine their pricing structure.

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Happy

Litter ye not

As a guest - probably one of those that's starting to smell, like last week's fish - over here, I think you can't have it all ways.

http://www.telegraph.co.uk/property/propertypicturegalleries/9477990/The-worlds-10-best-cities-to-live-in.html (linked for the lovely pics)

4 of the top 10 lovely places to live are in Oz. But note: those rankings ignore cost of living! Here's a (sorry!) wikipedia link to the Mercier rankings ... which do include CoL ... meaning only 1 Aussie city makes their top 10

http://en.wikipedia.org/wiki/World%27s_most_livable_cities

So, as the rankings help show, you're going to have to pay to retain the sort of standards of loveliness that people in Oz enjoy. And that means paying over for the bread and milk, as well as for Office10 and iThings.

So I view this the other way around. I've lived in many (many) worse places than this; if the penalty for that is forking out a bit more cash - and earning a bit more too - then fair enough.

Even high powered software execs need to make a living ... So someone told me, anyway ...

Before I landed over here, I read the travel guide by the ace Bill Bryson - originally written at the turn of the century - in it he has a line which I found odd, before coming, but that makes me smile now I've been here a good while: "There is no litter on the streets of Australia".

And you know, he's not wrong.

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Re: Litter ye not

"And that means paying over for the bread and milk, as well as for Office10 and iThings."

Not to be rude but please tell me that you understand the difference between the following two purchases:

Cows grazing on Australian land, tended to and milked by Australian* farmers, the resulting milk being processed and bottled on equipment maintained by Australian mechanics, transported by trucks registered (and likely bought) in Australia, paying Australian road tax and Australian prices for petrol (that itself required transportation to Australia and payment of associated Australian taxes), driven by Australian truck drivers paid Australian wages, delivered to Australian supermarkets, unloaded by Australian back-dock workers, stacked by Australian perishables staff into fridges running on electricity bought at Australian rates and, finally, scanned and bagged by yet another Australian worker.

A collection of 1s and 0s stored on a set of hard drive spindles, streamed via an Internet connection to a user's PC and then installed whilst still in pyjamas and drinking a cup of tea.

Now, I realise that there is more involved in it than that, but the point is that from a technical standpoint, a customer can download a piece of software from the US without any extra costs being incurred that might need to be recouped, save the <1c for international bandwidth that they would pay.

If you have to deliberately and artificially prevent Australian users from purchasing software from the US then the message is clear: you are rorting them. (And trying to prevent them taking advantage of the same 'free trade' conventions that have pushed down wages for the company.)

* - when I refer to 'Australian' workers, it's irrelevant whether they are Australian citizens or not - just that they live in Australia, paying Australian taxes and Australian rents or Australian mortgages on Australian homes and subject to Australian living expenses.

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Re: Litter ye not

Dan1980. You do not have a clue. Best you keep quiet from now on.

Would be interested to hear how a journalists salary in Australia compares to a journalists salary in the US. Simon Sharwood - perhaps you can comment??

Strikes me that there are a lot of, say, graphics designers in Aus, moaning about how adobe stuff costs twice as much in Aus as it does in the us. However, these graphic designers expect to be paid at least twice as much as they would for a comparable role in the us.

Go figure....

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Re: Litter ye not

If you have to deliberately and artificially prevent Australian users from purchasing software from the US then the message is clear: you are rorting them.

Bingo.

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Re: Litter ye not

@AC

Sorry - you're saying that I am wrong when I point out that the supply chain involving milk is not the same as the supply chain involving downloading software?

@cracked's conjecture was:

Milk and bread costs more so we should expect MS Office to cost more.

That is only a sound argument if the factors contributing to the cost of milk and bread are the same as those contributing to software. I was pointing out that those factors are not the same and so the argument is not valid.

With regards to graphic designers, have you actually got any information to back that up? I suspect not because designers in Australia have a median wage of around $50K, which is pretty much the same as in the US - certainly within the margin of error for the surveys and stats data.

What's perhaps more relevant is that Microsoft are trying to force users to purchase software in their own country but at the same time are outsourcing jobs - e.g. help center - to India and the Philippines to save costs. If the support for my Microsoft product is provided from outside Australia, why can't I purchase that product from outside Australia?

Let's not forget either that when you download MS software in Australia, you actually ARE getting it from overseas as those files are hosting in Singapore*. So, the AU price I am paying is for a localised web page and payment interface. Awesome - that totally justifies the 50% markup!

* - Though they are building an AU datacentre for their Azure platform.

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Re: Litter ye not

(As an aside - What about the prices of boxed copies available in Hardly Normal or Megabuy?)

No where in the Globalisation For Dummies book do I remember reading that it would bring the same benefits to consumers as it does/can for business?

Until - and unless - the world wide socialist dream is realised, that is - Then everything, everywhere, will cost 10p and everyone will be paid 5p (whether they design graphics, or milk cows). And I'll be the first person behind you, manning the barracades, comrade - Just let me know when ;-)

Someone (it's impossible to use this "forum" software correctly, so I can't go back and look at all replies while replying to this thread ... not with NoScript anyway ...) made the point that comparible salaries in Oz are higher than in the US. And my experience is that said notioin is true. But there is also definately a lower cost of living in the US than in Oz, to offset that (software included).

Yes I guess it could be annoying that it is possible to purchase products online, at lower cost, from countries outside Oz. Maybe I am more used to this, with my experience of living in the UK and having Europe on the doorstep?**

With all of the moaning about Global Business paying it's fair share in taxes (on a local level) you would think consumers/politicians would be happy that companies like Adobe/MS choose to sell via Oz domains and - PRESUMABLY - pay over the relevant in taxes to each locality?

Any business exclusively selling via US Domains - to anywhere in the world - would, I think, be entitled to keep all of those lovely taxes "at home" (regardless of where the consumer lived)?

Like I wrote, I don't think you can - realistically - have it all ways. Annoying as that can sometimes be.

** That said: My personal opinion is that it is worth citizens paying a premium to Buy Australian, where those products can be shown to be produced using Australian-based labour ... Back "home" that was often referred to as protectionist, by many politicians, and frowned on to the extent that the majority of Europeans believe buying cheap stuff from Sri Lanka is/was a good idea.

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Re: Litter ye not

That's the thing - you aren't 'buying Australian'. You are buying software:

* Designed and 'made' in the US;

* Downloaded from servers in Singapore;

* Supported by call centres in the Philippines, and;

* With profits routed through Ireland, Bermuda and the Netherlands!

I fully agree with you that higher prices in Australia can in certain cases be attributed to (and justified by) the increased cost of living and therefore doing business in Australia. I just don't see how purchasing and then downloading software via the Internet qualifies for that scenario.

If anyone can show me where exactly that extra money goes and how it benefits Australians - through either salaries for Australian workers or Australian taxes - then great. But let's face it, there won't be any such revelation.

The argument about it costing more to do business in Australia is valid, but simply cannot justify the massive mark-ups. I have seen several independent studies and they all showed that for BOXED, retail software, sold on a shelf in a store, the additional cost amounts to about 10-15% over US prices.

And remember, you can't say: "retail rent costs 20% more in Australia" and then bang 20% onto the price. It doesn't work that way. If you are selling a copy of MS Office at a US store for $250 then rent might add (using an unrealistically high figure to make the point) $10 to that cost. If rents in Australia are 20% higher, that means you need to add 20% x $10 = $2 to the cost, not 20% x $250 = $50. Likewise for all the other costs that are claimed as supposedly justifying these massive mark-ups.

And again, almost NONE of those factors can be applied to downloaded software.

When someone in Singapore buys MS Office 2013 Professional online, it is downloaded from a server in Singapore, supported by a call centre in the Philippines and costs AUD $461. When someone in Australia buys MS Office 2013 Professional online, it is downloaded from a server in Singapore, supported by a call centre in the Philippines and costs AUD $599.

That's a difference of $138 and no one can tell us where that extra money goes to and what Australian costs justify it.

p.s. - I approve of your liberal use of parenthetical statements. (As you can probably see.)

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Re: Litter ye not

So AC, when Australian dollars get converted in to US dollars, even after exchange rate differences they're worth far less in profits by your logic?

I see why you'd want to hide your identity...

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Re: Litter ye not

I do appreciate that some/all of the additional revenue earned from Australian purchases will end up in Bill's back pocket. It almost must be the case that global business adds on more than it would really need to, to sell in foriegn lands. But then that's also true of its home market and/or the market(s) the prodiuct is made in. Even shareholders need to make a living.

However, there undoubtly is a foriegn trading cost - as you have pointed out, a call center operating in the APAC timezone, and so forth - but you are trying to do away with all of that, by saying, "I only want to buy the product, so I'll be OK importing it from the US".

Mainly because that US pricing is made at a level that the US market will support. Including calculations of competing software (OK, if any) and cost of living etc. All companies that survive do so, in part, by charging the same or less than the price the market will bare. Everyone else goes quickly bust.

This is where I don't think you can - realistically - have the best of both worlds. You want to import X because - unlike cowherds - you can't buy Windows/Office/Photoshop/X from a true Australian manufacturer (i.e. you cannot support local business).

But you could support (at least) APAC business, by purchasing the Australian version and so supporting the call center in Singapore (or wherever) and paying the salary of the APAC CEO (who maybe lives in Sydney/Singapore?) and/or the local retail chain you puchased at (think of poor, old Harvey!).

There is also the question of where the tax goes, on that additional profit. If it does stay local, then that is a further incentive. If, I know ...

Another thought: local council (etc) maintenance crews; should they be driving around in Great Wall utes?

Australia - like most countries - isn't in a position to buy local 100% of the time. Twenty-odd million doesn't give a population that choice. But you do have the choice to support as much of the local chain as possible - and I agree, probably by overpaying for that choice. Indeed, in many cases, suppliers force you to use that choice (and yes, because you are indeed overpaying them for it).

If the Australian market could only stand $100 as the price of MS Office, then $99.95 is what you would be paying. I reckon it's much better that it can stand far more (though sometimes annoying, at the same time).

(and sorry about the brackets ... It's a bad habit I'm not struggling with hard enough)

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The Real Reason is...

It really is historical. Microsoft run what amounts to an internal exchange rate for each country. This applies both a real-world exchange factor, as well as allowing for adjustment to suit market conditions - for instance providing deep discounts in developing markets.

Many years ago, Microsoft set a rate of aroun 0.60 for the Australian market based on the currency at that time. Since then, thye have simply not adjusted it as the Aussie $ moved upwards in value. Why? Well to do so would massively affect the APJ budgets - quite simply the same amount of revenue would need to be made up for in another market to meet their quarterly / yearly numbers. Nobody wants to have to find a 40% increase in revenue as well as their yearly 10% quota increase, so it's simply in nobodies interest internally to make it happen

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Anonymous Coward

Why not make all vendors accountable to what they hedge the AU price at

rumour has it that VMware has its price book at 65 cents Au compared to the US dollar even at the highs of above parity.

All vendors extort Australians, just some are worse than others

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Anonymous Coward

another example of price fixing

check out VMware's pricing model for Service Providers. Not only do they gauge the Service provider but the customer pays through the nose too. Cant wait tip Openstack forces these vendors to stop ripping everyone off

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I remember when Microsoft & others used to POST you updates & upgrades to their software in the mail, these included a thing called a manual ( LARGE book) usually, which came in same PARCEL.

Now higher price gets more it's a epheral download & PDF, dont even get a CD to think you are safe to reinstall from, but as always WE will pay .... I swapped to Linux so its only the bundled copy or a USB iso of Recovery OS, I throw in a box ....

What really annoys me is things like STEAM that chews your bandwidth with advertising, downloading things u dont ask for, if you go fishing, dont use lappy for a couple weeks, when yobu do, your game will not function without net, till u get a connection, even if you use their "offline" instructions, Why cant I play the games I payed FOR !!!!!!!! ....

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The great Australian rip

These asholes charge more to be an Australian, they are only jealous we don,t have to doge bullets on the way to work every day. It cost more to be as good as we are.

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