How Bad Is The Apple Tax In Australia?

As Apple faces the IT Pricing Inquiry — and the inquiry's instigator Ed Husic resigns as Government Whip — one Aussie blogger has crunched the numbers on Apple's pricing strategy down under.

Graham Spencer from MacStories has done the analysis, and it makes for interesting reading, although relatively few of the conclusions are all that surprising if you've been following Apple's hardware and software pricing strategies over the past few years.

Image: macstories

From Spencer's analysis, Mac hardware is 6.6 per cent more costly here, iPads are 3.6 per cent, iPhones 10.3 per cent and iPods 5.2 per cent. That's with the GST taken out, which dodges one of the most common mistakes made when comparing US and Australian prices, although conversely Spencer hasn't applied any US sales taxes. That makes a certain amount of sense because they vary state by state. Some US states have no sales tax, while others tip the scales above the GST. As such, that does make the exact percentage difference a little rubbery, but essentially points out something that's been known for some time, namely that Apple doesn't (essentially) charge an "Apple Tax" for its hardware products down under to any excessive degree.

The one hardware statistic I find interesting is the iPhone pricing, if only because they're quite wildly different markets, and not just in the size of the customer base. Another common mistake (not one that Spencer makes, I should add) is to look at the US "price" for an iPhone at launch (typically $99-$199 or thereabouts) and then complain of the Australian price being in the $600-$1000 price range. That's confusing a contract downpayment for an outright purchase price, however. When you get an iPhone on contract in Australia the mobile payments are typically built right into the contract, same as with any other smartphone. Australia's one of the rare countries where Apple has offered outright iPhone sales for some time, whereas in the States it took a long time for that option to emerge. As such, the fact that outright iPhone prices here — where it's been a factor for a much longer time — are higher is worrying.

What about on the software and apps side? There, the picture is significantly less rosy. Spencer doesn't remove the GST from his app store calculations on the basis that developers can't adjust prices regionally, so they have to suck the price up. I do take his point, but that's a developer-centric view; if it's fair to include it for developers who have to pay it, why not include it for Apple who also have to pay it? If it is removed there's near parity across his data sample. The same simply isn't true for movies, TV shows or music, where the markups are just brutal, although it's very tough to say what part of that is Apple seeking more profit and which part is Apple paying the rights holders whatever has been negotiated for local access. Whichever it is, it's still disheartening to look at (for the worst cases within his data) a 72 per cent music markup or 57 per cent SD new release movie markup and not feel ripped off. Although that 72 per cent figure is for a Justin Timberlake album. I might have just kept my money in my pocket in that case.

[Macstories]


Comments

    See the hardware side of things while its BS that we pay more in Aus, i can see why, they can claim its because of like shipping, warranty and packaging. (all normal business costs)

    Its the downloadable software i dont understand, for somthing that costs them nothing to ship or package, why such a huge price disparity? thats the main thing im wanting out of these IT priceing BS, if they have a legitimate reason and they can provide that then fair enough, but most if not all people are sick of the circle jerk we get when we ask the question as consumers.

    Last edited 22/03/13 10:34 am

      How is shipping and warranty not a business cost?

        I think he means downloaded software. If the backend is the same (ie the same servers, and they're not shipping physical product) why does it cost them so more to sell the same bunch of digital bits downunder as opposed to overseas?

        Granted, wages are higher here for support, but what about when the support is located overseas?

          I agree that the markup on music is crazy, but their is more to this than they are letting on; as someone who works in the IT Hosting industry let me lay it out:

          - They would have their own Australian servers set up in Australia, and the wages for the people to maintain and support these systems would be higher.
          - Bandwidth costs in Australia are nowhere near as cheap as they are in the US.
          - Their market in Australia is also nowhere near the size as their market over in the US, which means they have to markup the price on their digital downloads more in order to combat their bandwidth/hardware/wage costs.

            Unlikely they have Australian data centres. It's more likely the record labels' fault in the case of music. Apple can only sell it at prices the recording industry allows them too, and they have different licensing agreements in different countries.

              Unlikely they have Australian data centres.

              They're paying Akamai for overseas content mirroring.

    @Alexkidman I may not have been clear in my first post, i've edited it to make more sense, i agree that normal business costs on hardware we should expect a higher mark up price (not huge mind you).

    Last edited 22/03/13 10:37 am

    The major issue with Music etc is the cost put to them by the publishers... Its always the publishers... We are speaking to the wrong companies sometimes :/

    it's nothing compared to cars.
    the basic bmw m3 coupe
    in Australia - $132,954 ($167,891.57 drive away)
    in USA - $60,100 ($AUD 57,571.37)
    in Germany - 68,750 euro ($AUD 84,985.60)
    in UK - 54,945 pounds ($AUD 79,910.75)

    the govt needs to allow parallel imports for new cars. this shit is ridiculous.

    Last edited 22/03/13 10:58 am

      News flash - cars are expensive in Australia specifically because the government WANTS them to be far more expensive here (for protectionism and other stupid reasons).

      Foreign exporters have to;
      - Pay very expensive licensing fees to sell cars in Australia
      - Pay very high taxes for selling cars in Australia
      - Pay the "luxury" car tax on top of all those

        There's also the requirement to comply with local design requirements, in Australia, is the Australian Design Requirements (ADR). While the cost to perform and submit assessments may be similar to other market, the cost is more per is greater vehicle in Australia than other markets such (as the US) because of our relatively small market.

          Have to disagree with you here, BMW motorcycles are nearly dollar for dollar the same as North America, YET all BMWs are built and shipped from the same factories.

          Compliance with ADR has little if nothing to do with the higher prices in Aus, it's got more to do with the Feds trying to keep Aussies buying shyte built holdens and fords

            Actually local car manufacturers are not price protected like they were 20 years ago.

          What garbage, ADR requirements add little to the cost of a vehicle. ADR is now largely aligned with the world ECE requirements anyway, ADR compliance is NOT a major cost element. If you can point out an error in my statement by identifiying a major Australia unique specific element of ADR that adds significant cost to a car, go ahead.

            I never stated that the cost of compliance with local regulations was the sole attributing factor to the price difference that Australia pays.

        it is the government who is conducting this inquiry. THAT is the point of what i'm saying genius. you are straight out wrong to say that the price of cars is what it is simply because of government taxes. car makers, especially for prestige brands price gouge the shit out of their cars.

        licensing fees to sell a car are not 120% of the RETAIL price of every car sold. taxes for selling cars is called stamp duty and is part of the on road costs. luxury car tax is also in the on road costs.

        bmw just sells them for the price because you can't parallel import. meanwhile the focus on the government inquiry on software prices is a joke.

          First of all, software is more important than cars.

          Second of all, the #1 reason cars are more expensive is the government. I don't think 99.99% of people care about actual luxury cars.

        Yep, Gillard government need to help protect jobs at Holden, Ford and Toyota (good Aussie companies those) by ensuring that their M3 coupe competititors sell on a level playing field against those nasty (but rather efficient) Germans. What's that? Ford, Holdend and Toyota don't compete with BMW M3's? Gosh that would mean that the government is just ripping us off blind with a massive Australia tax, surely Julia wouldn't be doing that? Would she? Speak up now Ed Husic, you have plenty of time from the back bench on your hands.

          and howard didnt do the same thing did he...

      Parallel importing has not worked in any country in which it has been introduced. It has devasted the new car business in NZ by demolishing resale values, making cars effectively more expensive by increasing the difference between the trade-in value of your current car and the price of a new one.

      You should also note that it is cheaper in both the US and UK than in the country where it is made. That should tell you that you cannot directly compare prices across different markets. For a start, Luxury Car Tax accounts for something like $20,000 of the cost of an M3 here. Then, if you look at the relative sizes of the markets, the US is probably about 3 times as big as Germany and that allows for a price reduction of $25,000. Our market is probably about a third the size of Germany so it would be reasonable to expect another $25k premium here, particularly as it has to be engineered for ADRs. That gets us to $110k (German price + $25,000). LCT on this would be another $20k or so, which gives us $130,000. These are just rough figures but they show that the price of an M3 here is probably a reasonable reflection of the cost of selling it, even though it looks absurdly more expensive if you only look at it from the point of view of your own self-interest.

      Last edited 22/03/13 1:47 pm

        Yep, parallel importing didn't work in NZ because it devastated the new car business there. We shall ignore the non-devastation (in fact, the delight) of hundreds of thousands of ordinary Kiwis who could now drive something a bit better than a Morris Minor for their $15,000, because, like, who cares about the people eh Motormouth? The Auckland Holden dealer's profit is soooo much more important as measure as the determinant of the success or otherwise of parallel importing.

          What are you talking about? Kiwis all now drive 10 year old Japanese imports instead of 10 year old CKDs. New cars are just as far out of reach as they've always been. I found a really interesting piece from the NZ Dept of Finance about it a couple of years ago (that I couldn't find just now) that laid it all out. Prior to that it seemed like a perfectly decent idea to me, too, but this article basically pulled it all to pieces. If you can dig it up it is an interesting read.

            Have been travelling to NZ about 10 times a year (work for a Kiwi company) since 1988, over that time I have seen the transistion from the majority driving clapped out cars from up to two decades behind current (the Morris Minor comment wasn't a joke) to driving modern, reliable and safe, primarily Japanese cars at reasonable prices. All the Kiwis I work with are very happy, especially the blue collar guys in the factories for whom a relatively new car was completely out of reach even 10 years ago. Couldn't give a toss about the report you mention written by know nothing shiny seated bureaucrats on taxpayer funded gravy train payrolls, wouldn't waste my time reading it and forming any judgement (as you have) on a Government lie sheet. My own eyes and discussions with real Kiwis are sufficient to make informed judgement. Guess you'd be happy for Kiwis to be driving their families in Morris Minors again. Lots of airbags and stability control to keep the kids safe in those eh?

              So you're saying Kiwis are easily duped? Is that a surprise? Most of the Kiwis I know in NZ (I also used to travel there regularly on business) still drive old cars, except for a few who qualify for company cars.

        Lct accounts for approx $20k of the $35k on road costs quoted over and above the $132k price of the car. You pay 3.5k dealer delivery too in those on road costs. The car costs 2.5 times the amount here than the U.S. and you guys think that it's due to the market size? Who has been feeding u this crap?

          Well, if it is $25,000 more expensive in the country where it is made than in the US, how would you account for the price difference? Economies of scale would seem a reasonable culprit, wouldn't it? But if you have a better idea, I'd love to hear it.

        Motormouth so you account for the 130k, how do you account for the gap to $167k you're still a bit short there mate. (I'll give u a clue, *cough* BMW *cough* price gouging *cough*)

          Why would BMW price gouge when they have the potential to build a very strong market? Their main rival, Mercedes-Benz/AMG, sell more V8s per capita in Australia than in any other market in the world and Australia is one of AMGs biggest markets outright. Are you seriously suggesting BMW aren't interested in getting a bigger slice of that action? It's a ridiculous notion.

      the worst thing is that at least 30k of that aus drive away price is government taxes and fees...
      luxury car tax... most BS thing ever, like only the rich buy nice cars... like there is no such thing as a car enthusiast who would scrimp and save for years to get his dream car... its even charged on used cars i'm pretty sure.

        I have no problem at all with taxes like LCT. If you can afford to spend $60,000 on a car, you can easily afford to pay a bit more tax. As you point out, it is a "want", not a "need". I wouldn't even mind if they applied it to boats and other big ticket luxury items.

    I listened to a radio discussion of the same topic.
    Briefly it was outlined that the world is segmented into regions. A B C whatever. Each region has its specific markup.
    So essentially they charge us more.. because they can.
    ACCC is apparently looking into this I've heard more specifically with the adobe products.
    But yeah total BS, if the mums of australia knew this type of info then there would be a ACA / TT outrage stories run non stop. They dont know any better so they just accept it as the norm, when its totally not the norm.

    Also food. Has anyone ever eaten overseas. Every time I travel I am blown away whether it's the US, or Europe everywhere I have been food is ridiculously cheaper. Take the good ole classic aussie steak and chips at the pub, anywhere between $28 and $40 in Australia. In Germany 15 euros. Even after exchange rates are taken into account it's still considerably cheap.

    Also where's Sony in this enquiry. On the PS3 store full games to buy and download actually cost more than if you buy it at a bricks and mortar store, even though online distribution is cheaper.

    Thanks I love a good graph.

    Publishers aside (would be great to see an article on the role of pubslishers Gizmodo), I guess this may also relate to which item sells most unit?

      D'Oh. Cousin Lifehacker just did it....

      http://www.lifehacker.com.au/2013/03/apple-music-prices-not-our-fault-and-please-dont-compare-us-to-woolworths/

    All companies is the same not just Apple.
    Why not research Microsoft or Samsung then let us know and compare.

      Actually "they" ARE talking to MS as well as Adobe.
      Read the real news websites, not just tech blogs.
      Even this site's editor does.
      http://www.abc.net.au/news/2013-03-22/apple-microsoft-grilled-over-high-prices/4587900

    I'm going to start pirating music 61.4% more then I used to

    I find DELL one of the worst...

    27" AIO - Non-Touch for instance...
    US price - $1399 for a 6gb version - http://www.dell.com/us/p/xps-one-27-2710-aio-t/fs
    AU price $1599 for a 4gb version - http://www.dell.com/au/p/xps-one-27-2710-aio/fs

    Both shipped to end users, in their respective countries, from Malaysia.
    There are some better examples, but this one is relevant..
    GC

    I love how people continually pick on Apple! Look at the graphs.. There's no question apple have done a lot of work in regards to the pricing they have control over, but movies, TV shows and music is out of their control.

    All you need to do is look at digital download pricing for these items across Apple, Sony, Microsoft and Google, and it shows this ISN'T an Apple-tax. Publishers/copyright owners had the cheek to blame Apple last year... Yet prices are consistent across all services, indicating that this isn't a problem with any one of the companies mentioned.

    We need to be a) targetting the publishers & copyright owners so we have price changes across the board and b) asking the likes of Microsoft & Sony why THEIR pricing for digital games are 80-100% higher than the US. Apple's app pricing is nowhere near as out of whack as those guys, yet they don't get a mention.

    It is interesting to see the comments on an article on this story at engadget. Those with no investment in the situation have a much more realistic, objective view that you idiots.

      Most of the posters on Giz still have to ask mum or dad's permission to buy stuff anyway, are you surprised by the comments?

      This one?
      http://www.engadget.com/2013/03/22/apple-microsoft-and-adobe-give-reasons-for-higher-prices-in-aus/
      Not sure that sample is very different at all.

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