The grey import market in Australia has seen significant proliferation in the last two years with the rise of the Aussie dollar.
It’s left local publishers between a rock and a hard place, as any leeway on pricing now, will have to be rectified once the dollar drops again, and consumers aren’t too fond of accepting increases in price, even when they’re a valid expression of market forces.
The grey import market itself, however, doesn’t appear to be having too much of an effect locally in terms of volume of product sold directly to consumers, with the slight dip in the size of the market in 2011 being perfectly in line with analyst’s expectations and not likely to curtail long-term growth. Where it does make a difference is when retailers use similar channels to import post-launch quantity of stock through the more enterprising overseas sub-distributors, leading to the only too familiar sight of a PEGI or BBFC rating logo on ‘Australian’ second-hand stock.
With so many titles in the market, retailers in ANZ now have significantly more bargaining power to push publishers to lower their prices. With Harvey Norman legitimising grey importing significantly with its ‘Direct Import’ offering, and EB Games defending its decision to import Star Wars: The Old Republic (albeit on an ad hoc basis), the simple fact is that (unless titles are refused classification here) it’s all completely legal and local publishers and distributors will have to react.
The tension will now be between retailers and publishers as to which has to take the hit to their margin, but with retail holding the bargaining power of a legal alternative.
So it seems inevitable that prices are going to have to fall to some extent. The question at this point will be which publishers will begin to drop their RRPs first. Namco Bandai is releasing The Witcher 2: Assassins of Kings and Dirt: Showdown at only AUD$79.95, and Ubisoft is putting Ghost Recon: Future Soldier out at AUD$89.95, however it’s down to speculation as to whether these are the first local price drops of many to come or a decision made specifically on these titles.
The threat to local publishers isn’t large numbers of consumers flocking to grey import sites, it’s a large enough number that large retailers might look more seriously at going outside this territory for cheaper stock after day-one.
Perhaps the most significant remaining blockers are the interlinked deals publishers and retailers strike with each title. Without local publisher support, EB EXPO wouldn’t happen (or any vendor shows for that matter), marketing money would be lost by retailers who charge to feature games in window displays, on end-caps and in catalogues, and the ongoing dedicated team of local publisher staff dedicated to sorting out logistical issues and resolving any hiccups in the not insignificant task of bringing each game to market in such a vast region of the globe would evaporate. The result would be an inefficient local market.
No, local publishing arms aren’t going anywhere – the risk is just that they’re facing a hit directly to their bottom line if the retailers get more bullish, and that could manifest in a many different ways (including to an extent reciprocal bottom line effects on retailers through smaller marketing spends).
There will be teething issues around local pricing for some time to come as the re-shaping of the local market takes its toll and the various sectors figure out how the lie of the land will look after the dust has settled.
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