In Real Life

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.

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