- Parliamentary Business
- Senators & Members
- News & Events
- About Parliament
- Visit Parliament
Standing Committee on Infrastructure and Communications
Information technology pricing
House of Reps
- Parl No.
- Committee Name
Standing Committee on Infrastructure and Communications
CHAIR (Mr Champion)
Husic, Ed, MP
Prentice, Jane, MP
Symon, Mike, MP
- System Id
Table Of ContentsDownload PDF
Content WindowStanding Committee on Infrastructure and Communications - 05/10/2012 - Information technology pricing
FISSE, Mr Warren Brent, Adviser, Australian Recording Industry Association
ROSEN, Mr Dan, Chief Executive Officer, Australian Recording Industry Association
Committee met at 11:41
CHAIR ( Mr Champion ): I declare open this public hearing of the House of Representatives Standing Committee on Infrastructure and Communications and welcome all the attendees here, as well as those listening online to the webcast. The committee is inquiring into IT pricing in Australia and is asking whether Australians pay more for IT software, hardware and downloads than consumers in overseas markets, and if so why. The inquiry has already generated a great deal of public interest judging by submissions and also comments on social media, including Twitter. It is an issue that has been in the news for many months, and it clearly affects many Australians, whether they are downloading their favourite music or buying a computer or are companies or organisations operating on a much larger scale. To date 92 submissions to the inquiry have been received, and all have been made available on the committee's website at www.aph.gov.au/itpricing.
Today we will be hearing from representatives of ARIA, the Australian Recording Industry Association. I would like to welcome Mr Dan Rosen and Mr Brent Fisse from ARIA. Although the committee does not require you to give evidence under oath, I should advise you that the hearings are legal proceedings of the parliament and warrant the same respect as proceedings of the House itself. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. Before I ask you to give an opening statement, I note that we have received a letter from you which I think has very similar evidence to your opening statement. Would you mind that being a submission for the committee?
Mr Rosen : We are more than happy for the letter to be a submission.
CHAIR: I might move that that be included as a submission to the committee. There being no objection, it is so ordered. I ask you to make an opening statement.
Mr Rosen : Thank you for the opportunity to appear before the standing committee. I think it might be helpful to explain a little about ARIA's role and the extent to which ARIA has access to the information relevant to the committee's inquiry. ARIA is an industry association. The role of ARIA is to assist the music industry, mainly by managing the ARIA charts, presenting the ARIA awards, collecting certain basic statistics—for example, on the overall volume and value of sales of recorded music by member record companies—supporting initiatives to combat piracy, and making submissions to government on issues such as copyright reform, piracy and other information where we have the information or the expertise to do so. The role of ARIA is not to set prices for recorded music that are charged by record companies or retailers, nor is it to monitor, supervise or intervene in the pricing or the other commercial decisions of our members. In that respect, ARIA does not have relevant information on how music prices are set in the Australian market and is not involved in the setting of wholesale or retail prices in the music industry. ARIA does not supply music to retailers or to consumers, nor does ARIA have access to the information on how record companies or music retailers set their prices. It would therefore be inappropriate for us to comment on price. In terms of international comparison of retail prices for digital music, we do not make an attempt to track those retail prices and we do not have the information needed to give an accurate explanation of those price differences. In particular, we do not have data comparing retail prices for recorded music in Australia with retail prices in the US, the UK, European countries such as France, Germany and Sweden or throughout Asia—Japan and Korea—or any other countries. Even if we did have access to data, we would not be able to explain possible differences in those retail prices, because, as indicated previously, we are not involved in the setting of wholesale or retail prices for recorded music and we do not have information as to how the wholesalers or the retailers set their prices.
We are able to make several general comments that may assist the committee, based on our experience as an industry body. First, Australian consumers have a considerable amount of choice in accessing music. In the digital sector of the retail segment there are over 30 services that supply legitimate recorded music in a range of methods, from downloads to, increasingly, streaming services. For example, Spotify, a major multinational corporation that supplies streaming services, offers a range of music to consumers for free.
Second, we believe Australian consumers' choice is even likely to increase in future years as more international services continue to come to the market. Given this situation and given also the abundance of free or near-free services, we do not believe there is any policy justification for governmental intervention by price regulation or by trying to prohibit differential pricing. In this respect we note and endorse the position taken by the Australian Treasury in its submission of 9 August 2012 to the committee that regulatory intervention is not necessary.
Third, as you correctly pointed out, a major issue for the Australian music sector today is the impact of piracy. Australian consumers have access to a plethora of unchecked and unregulated web based suppliers that offer a very wide range of pirated music at no charge. Digitisation has enabled piracy on a massive scale, so much that wholesale revenues of record companies have been almost halved in the past 11 years, from $648 million in 2001 to $383 million in 2011, based on ARIA annual data. Piracy accounts for a significant amount of music consumed in Australia today. For instance, in 2009 IFPI, an international organisation, estimated that piracy accounts for 95 per cent of all downloads, or 19 out of 20 digital music downloads. Unlike in some other jurisdictions, there is no coherent industry or legislative framework in Australia to deal with this problem of unauthorised access to music.
Fourth, it is an incorrect assumption that the sale of digital goods imposes no physical or hard costs. Our members have significant marketing, labour and overhead costs.
Fifth, the contention made by some commentators that content that is digitally delivered by a local company with an international parent is identical and therefore should cost consumers the same in Australia as in the US or other countries is unfounded and misleading. In particular, there are significant costs in developing local artists in Australia, and I am sure the committee will agree that having Australian artists telling Australian stories with Australian voices is an incredibly important cultural value to Australia.
Sixth, the methodology required to make an informed and useful comparison of retail prices for recorded music in Australia and other countries raises significant design issues, and collecting the necessary data is a considerable challenge. Some of the difficulties of making valid comparisons and the danger of making superficial comparisons are noted in the Productivity Commission's inquiry report of November 2011. Given the fundamental importance of this methodology and relevant data to the committee's inquiry, we believe full transparency is essential. It would be good to see any further submissions on the methodology that is proposed.
We trust that the preceding information is useful to the committee in its inquiry, and we welcome any questions the committee may have. I have also tabled a copy of this statement for the committee. Thank you.
CHAIR: Thank you very much, Mr Rosen. We certainly welcome your evidence and greatly appreciate your attendance at today's hearing. We have had some evidence, which you may or may not be aware of, in submission No. 92 from Dr Rimmer of the ANU. He talks quite a bit about the intersection between copyright law and what is commonly known as geo-blocking. It relates to this issue of the local subsidiary and the parent company. We have received quite a bit of evidence saying that geo-blocking should not be allowed, and so this has been an issue of interest to the committee. I am wondering what your views are on it. There are essentially two views on it. One is that it protects local industry, local artists and local companies—they have different overheads. The other view is that many consumers see one price in one jurisdiction and another price in another jurisdiction but it is all one company. So they could buy it here but for the geo-blocking. I am wondering what your view is on that.
I should also tell you that Mrs Jane Prentice will be with us via teleconference. I put the sign there so that you would know. She will be asking some questions later on, no doubt.
Mr Rosen : No worries.
CHAIR: Have you any views on the intersection between this whole issue of subsidiaries, geo-blocking, copyright law and the frustration that consumers might feel?
Mr Rosen : ARIA does not have a formal position on geo-blocking as such, but I could probably make some comments that could assist. International price discrimination is common in relation to many goods and services and, to a large extent, it is inevitable. The reasons are summarised in the submission of the Australian Treasury to the standing committee. I will quote one of their comments:
To maximise profit, many businesses do not sell based simply on a mark-up of what the product cost to produce, but rather price according to what they consider the market can bear, that is, according to the consumers’ marginal willingness to pay. This allows businesses to maximise the profits earned in each respective market-something that should not be considered inherently ‘bad’, and which their shareholders would reasonably expect in order to maximise the return on their investment.
They also go on to talk about the intellectual property laws which provide various rights for protection of economic investment in innovation and creative efforts to the extent that these rights allow rights holders to control the marketing and distribution of goods and services should those rights holders continue to do so. The rights are different in different jurisdictions, and there might be different rights holders for the same song or the same album in different markets. So I think that needs to be taken into account when we are considering this issue.
The other point you raised was the concept that, because it is a digital good, there are no ongoing physical costs. I think that is a misconception because in Australia these businesses are running with local costs—wages, property and, importantly, marketing. There is also what we in the music industry call A&R. This is the R&D of the music industry which goes into sourcing local talent, investing in that local talent and trying to make careers for Australian artists and Australian musicians. This is an incredibly important part of what the label members do in Australia. It is a costly exercise and it is something that they are doing in this country. Obviously, we want to make sure that they continue do it.
Mr HUSIC: Mr Rosen, with respect, how do you know that?
Mr Rosen : How do I know?
Mr HUSIC: All the costs that are borne.
Mr Rosen : I do not know the specific costs that are borne but I do see the results of that investment when I see Australian artists having careers and Australian artists appearing on the charts.
Mr HUSIC: I understand the last part of your statement. My question is more to do with the costs that you spoke about at length earlier in response to a question about overheads, labour and all of that. I am just trying to get a sense of where you know that from.
Mr Rosen : Know what, sorry?
Mr HUSIC: How do you speak with, for want of a better term, expertise about the costs that are borne by your members?
Mr Rosen : I cannot speak specifically on the costs of members but I do know that they employ a certain number of people and I know that in order to employ people in Australia they have employment costs—so they therefore incur the labour costs of employing people. I know that. I have been to their offices so I know that they have property costs. I see their marketing so I know that they have marketing costs. And I see the result of their A&R when Australian artists have careers and appear on the charts. They are investing in those artists in order to make those careers happen.
Mr HUSIC: So you speak with authority on that. I know in the letter that has been sent to us it says that ARIA is not involved in the setting of the wholesale or retail prices—on the other side of the equation—and neither do you have access to how those companies or music retailers set their prices. I am just trying to reconcile this. On the one hand, you are speaking on outlining costs. But it would also be good to know how the prices are set.
Mr Rosen : Sure, I appreciate that. We, for good reasons—for competition law reasons—do not get involved in any price setting. As you are aware, the ACCC price cartel provisions are pretty strong on these things. So certainly our members cannot be involved in collaborating or colluding on prices and we, as an industry body, are not involved in any way in the setting of prices.
Mrs PRENTICE: Can you then give us a profile on how the cost is divided? You have the base cost, which goes to the artist—then who adds what on top?
Mr Rosen : Sorry, I missed the first part of your question.
Mrs PRENTICE: Can you just give us a breakdown of the cost. Say we download something like Gotye at $16.99, there is a price that goes to the artist and then there is a price that goes—what?—to the label? How does that price break down?
Mr Rosen : I do not have that specific information. That is something where the retailer has a direct relationship with the rights holder. So that would be information that they should be able to provide to you. I am glad you raised Gotye, because his is a great album, just nominated for ARIA album of the year.
Mrs PRENTICE: I saw that. Is he going to win?
Mr Rosen : It is up to the voting academy.
Mrs PRENTICE: I am not asking for specific cost breakdowns but just a list of who gets a bite of the money, if you know what mean.
Mr Rosen : Again, I think that is something that is split between the retailer and wholesaler. I do not know the details of that split. Then, within that, I do not know how they split that up. I would assume each artist has their own relationship and have a contract with their label on how that gets divided.
Mrs PRENTICE: Who do you think would be the best person to give us that information in the industry?
Mr Rosen : I think you would need to speak to a range of retailers, because there is an enormous number of different retailers in Australia, and a range of rights holders. Some of those rights holders would be in Australia and some of them would be overseas.
Mrs PRENTICE: Could we get a couple of recommended names from you?
Mr Rosen : There are a whole range of them.
Mrs PRENTICE: It just seems like we are going down a dead end, so if you could suggest some who you believe would have that information—
Mr HUSIC: Who would constitute a rights holder?
Mr Rosen : Rights holders could be record companies or labels themselves—
Mr HUSIC: Like Universal or Sony—those types?
Mr Rosen : Yes. There are hundreds of labels in Australia, and artists could own their rights directly.
Mr HUSIC: I just want to read a quote from Richard Mallett at APRA, who you may be familiar with.
Mr Rosen : Yes.
Mr HUSIC: He appeared before our inquiry in late July. He said:
I believe it is public knowledge that out of each sale of a single track download the DSPs will generally keep up to 30 per cent, the record labels will receive between 60 and 70 per cent and APRA-AMCOS receives nine per cent. APRA-AMCOS's rate in Australia is similar to tariffs in operation in other territories.
And he did provide that across jurisdictions. Does ARIA represent those record labels?
Mr Rosen : We represent a number of record labels.
Mr HUSIC: How many would you say you represent?
Mr Rosen : We represent around 100 record labels, and that is from large to medium to small.
Mr HUSIC: How is it that Apple charge in Australia or the US three price points? Off the top of my head for a single—and I am happy to stand corrected—they are 99c, $1.99 and $2.19. How is it then that they can charge at that uniform rate, from your understanding? If you are saying that the record labels cannot engage in cartel behaviour and you cannot be aware of the strategies employed, how do you figure that you could get a smoothed out price point on those three levels?
Mr Rosen : Apple is a commercial company that sets its own pricing. You should probably speak to them about how they set their pricing. The other thing is that there is a huge range of options available to music consumers. A music fan in Australia has more opportunity to purchase music in different ways than at any time throughout history. We still have a big physical market in Australia. Last year, according to our wholesale figures, 63 per cent of music sold was still in the physical format. You can go to a record store and buy a CD. Vinyl is even increasing in volume. We have over 30 digital retailers. You mentioned iTunes, but there are 30 others.
In the last 12 months probably the most interesting thing has been the rise in the market for streaming services. If this inquiry had been held 12 months ago, we would not have been able to talk about a single streaming service in Australia. Eight or nine have been launched in the last 12 months. I think I mentioned Spotify in my opening statement. That is one of them. But a couple of domestic ones have launched, such as JB Hi Fi. About eight or nine have launched. That is a different model to the iTunes download model. That is an all-you-can-eat model. They have pretty compelling prices. Spotify offers a free subscription service, which is ad supported. There is a range of ways by which people can get their music. iTunes is a great service, but they are one of a number of different ways by which people can get their music.
Mr HUSIC: I do not think that anyone would disagree with your statement that Australians want to be able to hear Australian voices. But my colleague Mrs Prentice has often raised the example of Gotye. Comparing their work on price, why should Australian consumers pay more to hear an Australian voice here than what a US consumer would pay? Do you think that that is fair?
Mr Rosen : If you are looking at this issue, you need to look at it with a robust methodology. Using isolated examples is dangerous. If you are going to look at this issue, you need to look at a range of services—all the different digital services and streaming services—and look at a range of markets. Comparing Australia to the US alone is dangerous. The Treasury report said:
… in addition to the varying cost drivers … it is important to keep in mind that the US market is much larger and more competitive than the Australian market.
It is a market of 310 million people as opposed to 22 million people. The report went on:
The importance of size in this context translates into lower cost structures for US retailers, but most importantly, the intensity of competition is much higher in the United States and there are many alternative choices that consumers have on offer.
If we are going to look at this—and I referred to this in my opening statement—the methodology used is very important. We should look at a range of retailers and at these new streaming services as well as the download models. We also need to look at a range of markets that might be more similar to Australia.
CHAIR: You have talked about this intersection, I suppose, between the rights holders and the retailers and the like. It seems to me that you are exactly right when you say that price discrimination has probably always occurred in Australia. But what these technological innovations are doing is highlighting that exact issue for consumers. What the committee is trying to assess, I guess, is whether this price differential justified on a cost and reasonable profit basis or is it gouging of the consumer for no better reason other than to derive a profit. We have had some issues in getting this information. Some of it or a great deal of it, I imagine, would be commercially sensitive. One thing that would help the committee is if we actually heard, either publicly or in camera, evidence from some of the labels about some of these cost structures, because it is very hard to assess. We take your evidence as you give it, but it is very hard for us to make a judgement about what is going on here. So perhaps you could communicate to your labels that we are most happy to receive evidence from them as well, if they are inclined to give it.
Mr SYMON: I just want to follow on from where the chair was going. Mr Rosen, you spoke about recording industry profits dropping in Australia over the past 11 years by nearly half. You have sort of pointed the finger at piracy for that. How much of that loss is ascribed to importation of product by legitimate means from other countries, either in hard copy or in digital download form? Is that something that the Australian industry keeps track of? In many cases these labels would have a local subsidiary that may not make the money from that sale but would have a parent or another subsidiary of the company that possibly could.
Mr Rosen : I was talking about revenue, not profit, with those figures. The sort of drop I was ascribing in Australia seems fairly consistent around the world when we talk to similar bodies. It would seem, if your proposition were correct, that there would be some territory where that is being made up. We have not seen the evidence for that. I am not saying piracy has been the entire reason for that, but it certainly has been a major factor—that seems to be the evidence.
Mr SYMON: From the consumer's point of view, if they can buy a new release for, let's say, $10 less in the US than they can locally, via legitimate means, does that not drive some of that? And there comes my second question: how many local artists under your labels are actually produced here? In other words, is there still production of vinyl, CDs and DVDs in Australia by the major record companies? Or are they all imported items these days?
Mr Rosen : I do not know the answer to that. I am more than happy to come back to you with an answer on whether physical production is still done in Australia.
Mr SYMON: There is another issue I want to ask you about. You speak about digitally delivered content, and we got on to geo-blocking before. I have not seen geo-blocked music, but I am sure it is out there. I have certainly seen geo-blocked software. Is that an issue that the industry association has a particular policy on?
Mr Rosen : We do not have a particular policy on geo-blocking, no. But I think what we have seen over a recent period of time is that there seem to be, in music, more global releases. So when something is released in one market it seems to be released in most markets around the world at the same time. Maybe decades ago there was—
Mr SYMON: It used to take weeks or months. Being an avid consumer of the format, I know very well from my younger days.
Mr Rosen : I hope you still consume it!
Mr SYMON: I do.
Mr Rosen : Excellent—thank you!
Mrs PRENTICE: Going back to where Mike started, ARIA said earlier today that you do not have access to prices in the industry, but in a previous submission you commented that your members' wholesale revenues had almost halved in the last decade. I think that study was industry funded. Surely that study accessed financial information. That was my first question. Following on from that, we received a report from the Communications Alliance at our Sydney hearing that actually contradicted that. So I just wondered what sort of information the industry has on pricing and why you would consider that other people think you are wrong on that.
Mr Rosen : As I said at the start, ARIA does not collect any specific information on pricing of particular goods. We are not involved in any way in the setting of pricing. We do collect aggregate wholesale revenue which we publish, which is how we got the figure that it has fallen from $600-odd million to $300 million in the last decade but it is in no way specific pricing on any specific items.
It is difficult for me to comment on the Communications Alliance. I would assume it was John Stanton from the Communications Alliance. I do not know what he claimed we had but I know John and deal with John on certain issues.
Mr HUSIC: He was talking about Valve. It was Valve he quoted. Valve adjusted its prices to do two things: one was to check what impact it had on piracy and the other was to see what impact it had on revenue. There is the report that they quoted. That found that piracy contracted and revenue increased because demand started to respond accordingly.
Mr Rosen : Piracy is an incredibly complex issue and there is no silver bullet to that. Occasionally the committee has quoted US prices that are cheaper than Australia. I do not think piracy levels are any less in the US than they are in Australia so I do not think we are seeing, as an industry, a direct correlation between pricing and piracy.
Mr HUSIC: That is not what the US is saying. The US is saying that when they finally put a reasonable price on music—when Apple was charging 99c a single—consumers were making the decision that it was better to buy the single properly rather than to pirate it. In the US, they say it made a difference. I am sorry to interrupt but think it is important to put some other perspectives on the table. They are saying that when you price in a particular way you can make a dent on piracy.
Mr Rosen : As I mentioned earlier, the music industry has done an enormous amount in the last decade.
Mr HUSIC: Spotify is phenomenal.
Mr Rosen : It is harder to get cheaper than free. You now have the opportunity to sign up to Spotify and get a legal free service. There would be no happier person in Australia if music piracy was eliminated than myself and probably all of my members because it would mean they would be making more money and it would mean they could invest in Australian artists and Australian artists could make more from their creativity. I think we all have an interest in making sure that piracy is reduced and eliminated. All we can do as an industry is make sure that the innovative business models are there to give consumers the choice.
Mr HUSIC: I will put a statement to you and see if you agree or disagree. I do not think the Australian music industry is going to make a dent on piracy at all if Australian consumers think they are being ripped off when they go to buy an Australian artist's product here and they know it is being sold cheaper to someone else to listen to an Australian voice. Do you agree or disagree?
Mr Rosen : I think Australian music fans have an enormous amount of choice in ways to get their music.
CHAIR: In your submission to us you say there is no coherent industry or legislative framework to deal with the problem of unauthorised access to music. Would you comment on that a bit further. On the one hand you are saying no price regulation, no need for government intervention but on the other hand you are saying there is no legislative or industry framework for dealing with piracy, which would seem to me to be a pretty serious issue for the industry. What legislative frameworks exist in other countries or in the ideal world even?
Mr Rosen : There are numerous territories that have frameworks for these. A lot of times it is a graduated response regime where they work in concert with the ISPs to understand what customers and consumers are doing. Korea has been very successful in that. Korea is a fascinating example, I think, particularly for Australia, in that it invested heavily in broadband—which we as a country are also doing—and at the same time had strong IP protection laws so that its local industries were able to protect their local content. Using music as an example, the Korean music market has gone gang busters in the last few years since they did that dual strategy of broadband, where everybody has access, but protecting content—so much so that the No. 1 song on the Australian charts at the moment is a K-pop, or Korean pop, artist, which would have been unheard of, as you would imagine, a few years ago.
Mr Rosen : Gangnam Style, yes. This is not just a music industry issue; I think this is a creative industries issue. If we are going to invest in fast broadband to everybody's home and get Australia connected, we want to make sure that that is a pipe that is also going to help our creative industries and our content industries grow so that we have local industries and it is not just stuff that we are importing from the US or the UK. In Australia we do not have the natural hedge of language that potentially some Asian markets have, or France, Spain and the like. So it is very important that we can protect our property. We are not asking for any more than that the law gets enforced and that you have the right to protect your property in the digital world the same way that you do in the physical world.
CHAIR: You talked about the revenues of labels halving and that happening around the world. How has that affected the development of Australian music? Did that halve the amount of development or the rate of investment in the local content?
Mr Rosen : I think that is something that you would need to get specific advice on. I can talk about it from the perspective of the charts.
Mr Rosen : I think that the music industry has gone through a massive revolution in the last decade. I think it was the first content industry to really get whacked by the internet, if I could use that word, but it is probably the first content industry coming out the other side and developing the new business models. It is really trying to use the benefits of the internet and digital technology, and I think that we are starting to see the labels adjust to the new reality and the new environment. Certainly in the last year we are seeing a lot more Australian artists back at the top of the charts, which is a fantastic thing. To address your point, Ed, I think it is showing that Australian music fans are buying Australian music, which is fantastic, and that we are seeing Australian artists back at the top of the charts and also playing big venues around Australia. We have a very robust and strong live market. So I am very optimistic about the Australian music industry. I think it is an incredibly exciting time for Australian artists at the moment. Gotye is just the latest example of an Australian artist that really took the world by storm, so hopefully there will be more of that to come.
CHAIR: Given that we are having this revolution which is basically being caused by the internet and, as I have alluded to before, it is making consumers much more aware of what is charged in one market versus the other and making staggered releases and the like practically impossible, is the copyright regime that we currently have set up, ostensibly to protect local industry and the like, sort of staggering under the weight of its own antiquity both for consumers and, in part, for the industry? You are telling us there is no legislative framework to stop piracy.
Mr Rosen : Yes.
CHAIR: I 100 per cent agree with you that someone should not be able to steal someone else's intellectual and creative produce and flog it to someone else.
Mr Rosen : Yes, sure.
CHAIR: But we have this flip side issue that a consumer goes on Apple or company X and sees their local subsidiary charging a higher price than their international one.
Mr Rosen : Sure. As I have alluded to a few times, and as I think the Productivity Commission and Treasury reports have said, price differentials are made up of a myriad of factors, of which the copyright regime is one. I am not sure it is the silver bullet, but it is certainly one of the factors that are part of how people protect their rights.
Mr HUSIC: But, Mr Rosen, the Productivity Commission also said in their report that they did not see that the arguments put forward for regional price discrimination were 'persuasive'—that was their word. They do not see that the argument put forward—
Mr Rosen : I am not sure—
Mr HUSIC: I can quote it. It is in there. I urge you to read those quotes. Let me come back to the issue of piracy. When the industry tries to tackle piracy through its public education campaigns it tries to tap into an emotional response, particularly looking at it from the nationalistic perspective, which is: if you want to hear Australian voices, you need to do what you can to protect the livelihood of those artists. You try to go on an emotional level. I understand it and get it. When you go on online fora general consumers say they are being ripped off and they are using that as a justification for what they do. If you are on the one hand trying to pitch at an emotional level to stop piracy, what do you reckon consumers think when you then use price discrimination to justify the way the costs are structured here in Australia, as you did earlier? You said a lot of products cost a lot more here and it is just what the market will bear. What do you think the emotional reaction will be of consumers when they hear that as a justification for prices being the way that they are in Australia in this case for music?
Mr Rosen : I am not—
Mr HUSIC: I will come back to your earlier point. In your opening statement you pointed out that a range of products available in Australia—and we obviously have to take into account music because that is what you are here appearing before us in relation to—cost more. You say it is regional price discrimination that is driving it and it is largely what the market is able to bear. I think you quoted that—you can correct me if I am wrong.
Mr Rosen : It was the Productivity Commission that said that.
Mr HUSIC: Okay. So if that is basically the reasoning—that that is what the market will bear; that we charge this because we reckon this is what people will pay—how do you think people will react when they are effectively being told they are paying this because they are prepared to pay it and we are prepared to charge them more for these products? What do you reckon the emotional reaction is there and how do you reckon that works with the other emotional pitch you are trying to make to people to protect Australian voices and not engage in piracy?
Mr Rosen : You have raised a few things there. Firstly, I was just mentioning the Productivity Commission. I am not saying that that was a justification. I am saying that is one of the reasons that goes into it. As I said before, I think there are a myriad of reasons why things can potentially cost more in Australia. Having lived in the US for a long time, I do not think there are many retail goods that are cheaper in Australia than in the US.
In terms of the appeal to people on piracy, I do not think it is necessarily an emotional appeal; it is the reality of an appeal that we want to make sure that the money is flowing back to the people who created the work.
Mr HUSIC: I agree absolutely, but again if I have citizens come up to me and say they can buy Gotye or Richard Clapton's greatest hits in the US for $10 cheaper than in Australia. I know it is a small amount, but again I come back to the emotional thing. You are appealing at an emotional level to protect Australian artists and we absolutely are committed to that but at the same time too they see the pricing work in a way that means that someone who is not Australian can get access to an Australian artist cheaper.
Mr Rosen : Again I understand the example, but I think isolated examples are dangerous. You need to have a look at this thing in a range of ways. There are a range of ways for consumers to get that Richard Clapton music.
Mr HUSIC: I am wondering how you are ever going to get significant buy-in on the issue of piracy if people feel that—and I am just quoting other people—they are being ripped off.
Mr Rosen : I know. I get it. As an industry all we can do is continue to provide choice. Market forces are such that we have now over 30 digital retail options. We now have streaming services where you can listen to that—I know Richard would like us to talk about him, so I will still talk about Richard—
Mr HUSIC: Absolutely.
Mr Rosen : You could listen to that album for free if you signed up to Spotify. So I recognise that some consumers might think that, but we think that market forces are such that there is an enormous range of options there for music fans.
Mr SYMON: I have one further question. In your letter you spoke about IFPI's Digital music report 2009. I had a quick look at that; it is based on 2008 figures. Has there been any follow up to that? A lot has happened in that space in that time?
Mr Rosen : I do not think they have followed up on those particular figures, but I am not sure. I can certainly follow that up for you and get you the latest piracy reports from international bodies like IFPI.
Mr SYMON: Much appreciated.
CHAIR: I think we are ready to set you free.
Mr Rosen : Tune in for the ARIA Awards on Thursday, 29 November.
CHAIR: There you go, a free plug. Thank you very much for giving evidence. We greatly appreciate your attendance here today. It stands in stark contrast to some other industry players, but we value you helping the committee deal with these issues. Again, if you can extend to your members that if any of them wish to attend or give evidence it would assist the committee greatly in dealing with this rather complex question.
Mr Rosen : Sure. Thanks to the committee for its time.
CHAIR: You will also get a copy of the transcript. If there are any errors in transcription feel free to correct them. The Hansard people do a good job, though, so I doubt there will be any problems. It would assist the secretariat that if you need to give us any additional material you provide that directly to the secretariat.
I ask that a member of the committee move that the committee authorises for publication the transcript of evidence taken via the public hearing today.
Mr SYMON: So moved.
CHAIR: Carried. On that note I declare this public hearing closed.
Committee adjourned at 12:27