The Productivity Commission And The Price Of Video Games In Australia

The Productivity Commission is an independent research and advisory body that focuses on the "economic, social and environmental issues affecting the welfare of Australians". It has now reported on the "Economic Structure and Performance of the Australian Retail Industry", and much of the report refers to issues Australians face when it comes to the cost of games in this country.

The practice that publishers regularly participate in - artificially increasing the price of games, such as Skyrim and RAGE , in order to encourage retail buy in of stock - is roundly condemned. Despite the fact that the ACCC has told us in the past the there is literally nothing it can do about it.

The Commission is aware of the longstanding practice by which some international suppliers set differential regional prices. This effectively treats consumers in one region as willing, or able, to tolerate significantly higher prices than those in other countries. Australian consumers have an increasing awareness of such price differences and are now able, in many cases, to circumvent them by direct online imports — by ‘parallel importing’. Some international suppliers have attempted to defend such price discrimination as due to the cost of supplying a remote and relatively small market like Australia, which in some cases has its own unique requirements. These arguments in most cases are not persuasive, especially in the case of downloaded music, software and videos, for example, where the costs of delivery to the customer are practically zero and uniform around the world.

At Kotaku we've discussed extensively the source of the increased price of video game prices in Australia. Retailers are often keen to call out publishers for the cost price of video games in this country. The report acknowledged this situation, but claimed that some retailers are happy with the status quo, and happy to pass these expenses on to consumers.

It is clear that international price discrimination is being practised against some Australian retailers and, as a result, to the detriment of Australian consumers. Some Australian retailers have the option of altering their supply arrangements — either by putting pressure on international suppliers and distributors or else changing their supply channels. While some retailers state they are restricted in changing their supply channels, their willingness to do so would also depend on consumers’ demand for their relatively higher priced goods. Without consumer pressure on their prices, retailers face little incentive to alter their sources of supply. With growing competitive pressure from online and overseas retailer competition, however, this may change[.]

The report was also keen to reinforce the fact that consumer power lay in their ability to choose where they spent their money. In this regard the customer is still King.

However, price differences in retail are not a new phenomenon. The internet has made price disparities more transparent, but the role of the consumer has not changed. There will often be price differences in goods from one retailer to the next, and it is up to consumers to search out the best price and shop around — irrespective of whether it is across bricks and mortar or online retailers — given their individual preferences. Further, the Commission agrees with the comments made by Woolworths, Westfield and CHOICE among others, that Australian consumers will buy products where they feel they get the best deal regardless of retail format and that retailers that do not, or are unable to, respond effectively to such pressures will face serious challenges.

The report is broad, and doesn't focus on one specific area of retail, but it's clear that the issues faced by the local games industry are part of a large set of problems faced by all retailers and all distributors.

You can read the full report here.


Comments

    You're probably the only games journalist I would consider an actual journalist, Mark. I see Kotaku US posts posting rubbish for hits, and I see Kotaku AUS posts posting interesting, well written articles about stuff we actually care about.

    For every press-release rehash that's posted on Joystiq, IGN or Kotaku US, there's a full-featured, interesting post on here. Thanks dude, keep it up! I've deleted almost every other gaming site from my RSS feed except Kotaku AU because of posts like this.

      My thoughts exactly. You are an amazing journalist Mr Serrels, and also a wonderful, wonderful man (I'm sure).

      Ditto, Kotaku AU and RPS (and sometimes Eurogamer) are my go-to sites. I liked David Wildgoose as well but Mr Serrels is doing an excellent job!

        The three best sites for interesting game news. Really hope that Kotaku AU doesn't go the same way as Kotaku US (i.e. the shitter).

        Yep I just goto Kotaku AU and Eurogamer, (and Gamesradar for the funny lists), everyone else just seems to recycle press releases without much insight.

        Keep up the great work Mark. :D

      Yeah +1. RockPaperShotgun is really good as well tbh.

      Can't find Kotaku US for some reason :S Keeps redirecting me to kotaku au

        But going by the comments, I have to wonder if that's a bad thing :P

        blog.us.kotaku.com should get you to the US site. But, as stated above, there aren't many reasons to go there any more.

        Kudos Mark for the story. Keep up the good work!

      +1 again. Keep up the good work!

      +1! I love how this is being followed here, always interesting to read more about it and any developments. I hope importing is putting on some pressure dangit!

      not to take anything away from Mark, but i think its a genuine Kotaku AU thing as the Goose did this stuff as well. and Least Mark and Goose never sound condesending to us readers over what games people play "cough"Luke Plunketts massive hateon for MMOs"cough"

      +pirate flag and skull

      It's more awesome that way

      What Simon Says. ;)

      On topic though it really does pay to shop around, and encourage your freinds and family to do so as well. Untill they feel the competitive preasure the major retailers and publishers will continue to rip us off.

      Maybe its time for Coles to start a price war on video games...

      Late, but another +1

      There's a reason he's an Award Winning Journalist™

    Good read mark.

    Good article.

    The only thing I would add is the comments by the PC about the costs faced by all retailers (i.e. including B&M games retailers) in Australia which drive up prices - i.e. wages and high rents.

    People rage at EB prices (with justification, don't get me wrong) but for a shop to have convenient locations in busy centres/streets, and be open late nights, weekends, then costs are incurred. That should be kept in mind for any sensible discussion about price disparities IMO.

      While you have a point, the problem is that these kinds of costs are all incured by shops in countries that don't get price raped as well.

        Not to the same extent, that's what the PC is saying. E.g. the wages in the US v wages here, even before you get to penalty rates etc. Plus our shop rents are very high by international standards (when looking at % of turnover etc).

          Dungeon Crawl is located in the Melbourne CBD, less than a block from an EB Games outlet, one of three in the area, which nonetheless manages to supply games at a $20-$30 discount on average and, while only open after 11am most days, is open later in the evening than most other CBD chain game retailers.

            You've actually agreed with attila with the dungeon crawl example, not countered it.

            Dungeon Crawl aren't exactly easy to find - through a almost hidden door and then upstairs to the shop proper. There's no way they would pay the same rent as EB Elizabeth Street.

            They also don't pay their employees as much as EB, with the store manager only being offered $38,000pa in their latest employment advertisement.

            Yeah, but the last time I visited Dungeon Crawl (release week of the Orange Box) I noticed that what they were selling weren't the Australian versions of things. They'd parallel imported some stock, say eg english language versions of AAA titles from England, India or other south-east asia country, skipping the local distribution chain.

    Interesting and important article, the more press coverage this ridiculous phenomenon gets, the better.

    +∞

    There, done.

    I understand that things are inevitably going to cost more over here cause we have a smaller population spread out over a massive country. But that shouldn't be so for digital content.

    I just payed $16.50 for 1000 MS points. In America this would cost $12.50. This is puzzling since $1 Australian currently buys $1.04 American.

    What is the excuse for this one? Surely it doesn't cost an extra $4 to move that digital content through the internet all the way over to Australia.

    Thanks for this, Mark. I haven't bought a game at bricks and mortar store for months now. It doesn't make sense when online retailers offer games ar dramatically lower prices. Some sites don't even charge postage.

    In June I purchased F.3.A.R and Shadows of the Damned from Play-Asia for $110 AUD. That included FedEx postage. Those games each retail in Australia for the total cost of said transaction. Something has to give.

    I posted this the last time Kotaku brought up how we're getting shafted on prices.

    For physical copies use places like ozgameshop.com that allow for easy importing of games from PAL regions that have pricing equal or close to US ones.

    Or circumvent Steam pricing by opening http://store.steampowered.com/?cc=US in the browser or your choice. This will take you to the US Steam store, this technique is a little dodgy as it requires using a fake US billing address.

    I'm a PC gamer so I don't know of any easy ways to get past pricing BS on console online stores.

      The only issue with your Steam Suggestion is that you commiting Fraud even though youd would be paying for the game with your own money and when caught, you can kiss your steam account goodbye

      Unlike using a proxy to play a game you have already paid for but some fuck head decides you should wait an extra 3 days to 6months to play it.

        I'm aware of this. But it's not something Steam cares about, if they did all they'd need to do is have a quick IP check on checkout to verify where you are.

        The first time I used it was to get a uncensored copy of L4D2. Since then I've used it multiple times. The only time this has caused any problems is when Steam briefly suspended my ability to purchase games because they thought I had been hacked. But a quick message to customer support and 12 hours later it was all sorted.

        But you're absolutely right and people should use this method at their own discretion.

          They do actually care about it. A friend who bought L4D2 for a group of us that way had his account locked. He had a few hundred games on there too, which he was quite pissed about.

      regarding the steam regional pricing, if possible to do so I recommend having a 'friend' with a US account purchase and gift the game to your account.

      note: if that friend has a name other than Milo you should probably reimburse them ;)

      What I've been doing for a while now is getting a friend of mine to gift me copies and then I route some money his way to cover the cost. It's inconvenient but it works if you don't have a US billing address, although you instead need somebody you trust and who trusts you to be on the level.

      Paypal will charge you a dollar or so for these transactions but you end out ahead by $30-40 in most cases anyway.

    What I simply cannot understand is why we pay $90 for a game digitally distributed and our US counterparts pay $60. Fair enough physical stores must pay wages etc - but this just does not make any sense.

      Because the people in charge of retail publishing (i.e. the big name distributors like EA, Activision, Ubisoft, Namco, THQ etc.) are also in charge or the digital pricing and are fully aware that if they charged us 30% less for digital purchases no one would buy retail.

      The closest we've seen behind this ruse is when CD Projeckt (who have their own online store www.gog.com) were contractually forced by Namco Bandai (who they had outsourced retail distribution in the Australasia region)to increase the price of the Witcher 2 in the online Aus stores. Namcos reasoning was "licensing costs" which is legalise for "cause we f***ing say so."

        Yeah thats understandable mate - but DD is at this stage exclusive to the PC platform and what percentage of physical sales is PC? Very little I would say and I think its a pretty weak argument from the publishers to be honest.

          I'm sorry if the point got lost in that mess of text.

          I never meant to imply that the publishers arguments are strong, fair or honest. In the end it boils down to because we can do it and because most of you will put up with it.

          When ever they are pressed directly for proper excuses the best they can muster is that the retail distributors are incapable of competing with DD pricing and they're just looking out for these hard working members of society (forgetting to mention that the reason they can't compete is because they're also having to deal with the same artificial price hikes). Some times they'll actually imply they're forced by the retailers to rise the DD price or that retailer won't stock the product.

          We may see a decrease in DD pricing when PC retail dies completely (it's shelf space is getting smaller but it's no where near gone yet). And that may only be for PC exclusives, with multi-platform titles they may very well hike the PC price to avoid cutting into console sales.

          And I've made another wall of text. If I don't they confiscate my username.

        They also had to distribute the censored version of witcher 2 rather than the proper version.

        Of course what with GOG being awesome, they actually came out & dropped their region identifier system and said in a news post that the only way they knew where you lived was from the info you entered on your profile which might as well have been saying "Yeah fuck namco bandai, just pretend you're from america and you can get the game cheaper and uncensored"

      Pun aside. I was outRAGEd when Rage went on Steam for $90. What. The. Fuck. Ozgameshop, $39 for me.

        The ones that always get me are the CoD/MW series that actually cost $10-$20 more on Steam than they do at places like EB or JB-HiFi.

        Much fairer prices there. Steam is a joke for new releases!

    A good article.

    I am amazed that people still buy games locally given the savings to be made thru sites such as ozgameshop.com, zavvi or playasia.

    Wondering how much you're overpaying? Checkout the link.

    http://www.steamprices.com/au/topripoffs

    I pre-ordered MW3 and BF3(limited ed) on Xbox for $130 from Ozgameshop, instead of the $226 from EB or what I estimate to be $180-200 from JB Hi-Fi.

    Yup, that's why I've been buying my games from overseas. It might take an extra week, but I'll save $50-70 between the two games, (ie for the same price I can get an extra game)

    There's only one thing that concerns me about parallel importing to get a fair price, it might make distributors think that almost noone in australia is buying games which will drive the price up even more for the poor people who don't know any better

    Thanks for a great article, this hits the nail on the head. Working in retail it is so frustrating to see the exorbitant amounts of money the company has to pay for games before they even mark them up to sell. Considering we pay more to stock them than the consumer pays to order them overseas is disgusting. I'm all for the veil of publisher discrimination and greed being lifted to show that publishers are laughing at us and are single-handedly destroying Aussie games retailers. Even if we sell at cost (which we are doing more now than ever), online stores can undercut, and the only way to make it a level playing field is to make the cost prices for retailers the same lower cost as other countries.

    Do not listen to publishers who try to use any excuse for price differentiation. There is no excuse apart from greed and like I said before, willing or not, they are solely responsible for the massive price difference between stores and online shops. The fact is it costs them the same to press discs no matter where they go, and shipping rates are so marginally different as to not be a pricing factor.

    I wouldn't be surprised if, like Nintendo and their ridiculous region locking, publishers designed their business to prevent a global economy. We're evolving into a global game retail economy and publishers will try and prevent this to control prices. I think I might sound like a conspiracy theorist nutter a bit here but now we see EA becoming more like an Apple-style business model designed to try and lock you into the brand, other businesses will try to prevent more price awareness and transparency by forcing a monopoly onto you through you game purchases.

    I dunno, I'm not sure what kind of pressure should be applied where to try and fix that. Purely shopping online just kills the industry, but paying for games here to keep it alive still doesn't get attention to the actual problem of publishers orchestrating the prices. Public shame? Could it be called profiteering?

    I'm so glad that we have the government using taxpayer dollars to tell us things that anyone on the right side of the bell curve sees plain as day.

      Perhaps it's worth the tax payer dollars since our opinions seem to be otherwise mute ;)

      Freedom of speech, but being "understood" or listened to requires a "monetary donation" nowadays.

        We do not have freedom of speech in Australia.

    This is a nice summary - the end result is that consumers need to be the ones doing the pressuring.

    There might be relative imbalances in power (retailers have a lobby group and bucketloads of PR people, say) - but the sum of consumers switching stores to cheaper prices, and going online, will hopefully start to generate some change in prices.

    thing that pisses me off the most is the fact that they say they are bowing to B&M retailer pressure.

    yet if i actually wanted to go and buy a PC game from any of these so called retailers if i want anything that isn't a top 4 game. They essentially say F' Off.

    I know the last time i went into an EB. The guy actively tried to persuade my mate into buying a console and the game instead. Spouting a bunch of ridiculous cliches and misinformed thought that he would fit right at home with the ACL

      What you're seeing when you walk to the almost non-existent PC section of a game store is the effects of online purchasing. Since the early 2000's PC gamers have been buying more and more of their products online, and now with casual games so profitable a lot of companies changed their hard copy to digital copy ratio around to reflect that. Starcraft 2 was a good example of how many people preferred to buy online rather than buy the hard copies. I know a lot of people prefer hard copies, I do too, but we're outnumbered 10 to 1 on that and when demand goes down, so does supply.

      What you see then is the effects PC gamers buying through Steam and D2D etc as well as ozgameshop and the like have done to demand for PC games. The only reason console owners haven't followed suit already is the vast majority are only scratching the surface in terms of product and price awareness.

      As a retail worker and PC gamer I find it annoying as well to look at the PC wall and see the lack of range, but that's what happens when I'm asked to pay $75 for a box copy yet UK/US sites like ozgameshop pay no more than $30. As a consumer it's no competition who I'm buying from and as a retailer I feel like we're being held hostage by import laws, otherwise we'd get our stock from the same places gametraders and ozgameshop do.

        There are no import laws against parallel importing.

        Start sourcing from international distributors/wholesalers.

    OzGameShop 100% of the way until Australian retailers and DD publishers get the clue.

    The Productivity Commission speaks the truth - that retailers and distributors can charge what they like. It is up to the consumer to try and snag the best deal. The brilliant thing about free markets is that by choosing to buy overseas (as I do), I am sending a price signal to the retailers/distributors/creators of games that their pricing structure is no good.

    The worst thing would be for the government to intervene and force companies to change their prices as there are always unintended consequences.

      Wrong.

      Price fixing and collusion between retailers is illegal.

      Price maintenance = manufacturers/publishers telling every retail outlet they must sell at one price across the board and cannot discount is also illegal.

Join the discussion!

Trending Stories Right Now