OPINION: Yesterday, Microsoft slashed the price of its 4GB Xbox 360 console from NZD $349 down to $279 in a bid for New Zealanders' holiday dollars.
The move is in response to new offerings by its main competitors in the gaming sector, Nintendo and Sony. Nintendo will launch a new console in November, the 8GB Wii U, starting at $469, and last week, Sony announced a new 12GB super slim PlayStation 3 console, starting at $399.
Each company is also offering models with higher storage specifications and add-ons. A 250GB Xbox 360 bundled with Kinect will now cost $479, a 32GB Wii U will cost $569, and a 500GB PlayStation 3 will cost $519.
These pricing announcements follow similar announcements made in Australia, from whence New Zealand's retail stock is secured. The New Zealand dollar is currently worth 0.806 Australian cents. When adjusting these prices at the current exchange rate, it becomes clear how much Microsoft, Sony and Nintendo are each charging each Kiwi consumer to ship each console across the Tasman.
There are two mitigating factors to consider. The obvious one is the cost of shipping and warehousing the stock. Another more imprecise variable is the somewhat erratic New Zealand dollar: local businesses securing their stock from abroad need to prepare for potentially damaging fluctuations in the value of the New Zealand dollar when setting their local recommended retail prices.
But if there isn't a "New Zealand tax", there most certainly is an "Australia tax", and it has a significant trickle-down effect for Kiwi consumers that we're powerless to address. The value of the Australian dollar has rocketed in recent years on the back of a strong economy and a flagging US dollar, while prices have remained static.
When comparing prices with markets outside Australasia, particularly larger ones such as the US, things get trickier still, and the one for one comparisons below should be treated only as indicative. Australia and New Zealand are geographical outliers, and our smaller consumer base requires much less supply while creating more logistical difficulties. Naturally, the cost of overcoming those issues is borne by the consumer.
The overdue price cut for the Xbox 360 range is only in Australasian markets, and finally very closely aligns the asking price in this region to the US market. That US-based Microsoft is prepared to charge less than A$8 per unit to ship Xbox 360s from its manufacturing base in Asia is very telling indeed. Sony and Nintendo also manufacture in Asia, but the markups on their products - particularly the 500GB PlayStation 3 - look positively nefarious in comparison.
Unfortunately, these are costs Kiwis must bear before stock even arrives in New Zealand. There is light at the end of the tunnel, however. A new Australian parliamentary inquiry is calling for technology companies to explain their pricing structure in that country.
While the inquiry is particularly focused on probing the potential price fixing of digitally distributed goods in a way that appears to both protect bricks-and-mortar retailers, and maximise profits, Australian Minister for Communications, Stephen Conroy said in a letter to Sydney MP Ed Husic that, "Australian businesses and households should have access to IT software and hardware that is fairly priced relative to other jurisdictions ... the global digital economy is likely to make it increasingly difficult to sustain business models that are based on a geographic carve-up of markets."
In this instance at least, Kiwis ought to be rooting for an Australian win.