Brits Say Apple's iTunes Discriminates against UK Customers

Apple's iTunes service is the biggest and most successful musical download operation worldwide. Worldwide is an interesting problem for iTunes, though. Some British consumers are upset because Apple's break-through 21st century technology has been structured with a 20th century sales system. In a nutshell, a customer in London pays more for each and every song than a customer in Paris or New York. Britain's Consumers' Association has asked the Office of Fair Trading to Investigate.

According to the Evening Standard, music lovers in the UK pay 79 pence per song they download. Across the Channel, German and French downloaders pay 68p. Under European law, UK consumers should get a similar price. Now, the big hole in the Consumers' Association's complaint is floating exchange rates -- the UK uses the pound still, which the French and German consumers pay in euro. However, in the last year, the sterling-euro rate has stayed within a 5p range. Floating exchange rates can only explain about half of the difference. Taxes, fees and other costs don't explain the difference either.

Apple told the Consumer's Association, "The underlying economic model in each country has an impact on how we price our track downloads. That's not unusual. Look at the price of CDs in the US versus the UK. We believe the real comparison to be made is with the price of other track downloads in the UK." Sounds good, but CDs are physical items that require manufacturing, shipping, storage and so on. Computer files do not -- the cost of downloading is virtually free, the price of the download covers royalties and record company squanderings.

Apple has set up iTunes on a national (out-dated) basis. UK consumers can't register through the French or German sites because Apple requires them to provide a French or German address and payment details. The fairness of this can be assessed with a thought experiment. Suppose one possesses the means to own three homes, one LA, one in Manchester, one in Frankfurt and one registers with each nation's iTunes service. On Tuesday, one downloads 10 songs from the US service to listen to on the way to the UK for US$9.90 (£5.50, €8.15). On Wednesday, before flying to Frankfurt for a business meeting, another 10 songs go into the MP3 player from the UK for £7.90 (US$14.00 , €11.56). After a successful meeting, one downloads another 10 from the German service for €9.90 (US$12.00, £6.75). Same customer, different prices based on geography for a non-geographic service.

This is a case where, even if Apple is right by law and practice, it might just lose the PR battle. After all, some consumers in the UK keep euro accounts at their bank. Letting them pay the continental rate might cost a few eurocents, but the ill-will it might avoid has the potential to undermine the iTunes service. There are competitors, and they may move quickly to score points on this. Apple needs to move quicker.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


Home