That’s the question being asked in The Guardian today. They’ve just launched on online edition for Oz so obviously they’re majoring on stories of crucial importance to the Lucky Country. Why is it that Microsoft Microsoft‘s Xbox One and Sony Sony‘s PS4 will be so much more expensive in Australia than in other countries? There’s a very simple answer it’s just not one that people are going to like very much.
All that, and it cost $100 USD less, too, coming in at $399. It seemed like Sony could do no wrong. But for all this fanfare and literal standing ovation, there’s a problem for Australian gamers. The PS4 is set to retail at a tooth-grindingly expensive $549 because of… reasons? That’s too much. I’ve checked. You can too. Sony haven’t explained their unique pricing structure yet, but it seems like a fairly arbitrary dollop of Australian tax.
And with this, the excitement behind their “win†starts to fade. The Xbox One is projected to retail at $599 with a Kinect unit â€" you won’t be able to buy it without one â€" which means there’s only a $50 difference between the two consoles, and that’s dramatically reduced if you want to shell out for Sony’s equivalent of the Kinect, the Eye. With that, both consoles come in at around the $600 mark, with the PS4 at the higher end of the scale.
Why the higher prices for Australia? Simply because the companies can.
There are some complexities, this is true. The exchange rate today is US$ 1 to AUS $ 1.06 so we’d expect a difference in prices. Australian prices are traditionally quoted inclusive of the 10% GST while US prices are traditionally quoted exclusive of sales tax (the reason being that sales taxes are wildly different around the country, not just from State to State but even between towns and counties in the same State at times).
But this doesn’t explain all of the price differences. Indeed, there were Parliamentary hearings earlier in the year trying to look at why tech products of all kinds were significantly more expensive in Oz than they are in other countries. Unfortunately, none of those in said hearings provided the correct answer: companies price higher in Australia simply because they think they can.
Companies are, after all, supposed to be capitalist enterprises. They’re out to get as much money for their products as they can. If they think they can charge one group of consumers more and thus make greater profit (ie, they’ll lose fewer sales from a higher price with one group than another) then they will do so. This is what market segmentation is all about. There are those who will pay more money for a brand, or a choice, or a small extra service, and the game of business is to work out who those people are and how to get their money off them. Without losing sales from the people who don’t wish to pay that extra.
As an example, consider the VW line up of cars. There are a number of brands there and each brand has minor differences in level of trim, engine choice and so on. But a VW Touareg, a Porsche Cayenne and and the Audi Audi SUV are essentially the same car. Built on the same platforms using much the same technology and usually in the same factory. Yet there are significant price differences between them: this is VW’s way of taking more money off those who are willing to pay more for the brand or cachet of Porsche for example. Similarly, several of the VW brands offer an SUV based upon the Golf platform: certainly VW does and so does Skoda. Again, it’s an attempt to slice and dice the market so as to be able to take cash off the customers willing to pay more while still capturing the business of the price sensitive.
The console companies aren’t doing quite this in Australia. Rather, they’re looking at the whole market and concluding that as a geographical entity they can charge more there than they can in other markets. The calculation is that if the PS4 were $50 higher in the US it would lose more profit through smaller sales than the higher price would bring in. But not in Oz: thus the higher price.
These higher prices really are simply because the companies think they can get away with it. That’s capitalism folks.
As to why they think this that’s all rather more murky. My assumption is that it’s rather to do with the income levels in Australia. While Oz has a GDP per capita very similar to other advanced nation states, one of the oddities of the place is that the income distribution is very different. The minimum wage is much higher and this compresses said income distribution. There isn’t, in the way that the US or UK has, a large and badly paid end of the labour market. Thus leading, I imagine, those selling goods meant for the broad consumer market to think that they can charge more: as they do. But please do note that this last is speculation on my part. That they charge higher prices just because they can isn’t speculation.
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