HiFi costs explained...
First of all hi, I'm very new to hifi but have been pointed in the direction of AKSA and it's followers.
I'm extremely interested in getting great sounding hifi and initially did the classic thing of buying What HiFi to see all the expensive Cyrus, Audiolab and Naim equipment, all of this equipment was too expensive for me. I then started to do some digging around and came across a UK company called NVA which got amazing reviews but obviously avoids all forms of marketing.
This led me to the entire World of high end hifi but it left me very confused and searching for a straight and honest answer to why hifi is so expensive and what is the difference between a £100 amp, £500 amp and a £5000 branded amp.
To be the internals of an amp look cheap (not sure if I'm right or wrong) and seem to include a big power supply, circuit board/s and connectors and a volume dial. Now I understand that cases, screens, dials etc can cost money but why are Amps in general so expensive?
Like I said I'm new to hifi and I know very little but am keen to learn and understand just why amps and dacs have such varying costs and from a sound point of view what's important.
Amp cost to the consumer = Dealer profits + Dealer allocated fixed costs (rent, insurance, utilities, advertisement) + dealer variable costs (commissions, etc.) + manufacturer profits + manufacturer allocated fixed costs (rent, insurance, utilities, salaries, research & development, marketing expenses) + manufacturer variable expenses (labor for assembly, electronic component costs + chassis costs).
The above picture is simplified, but electronic part costs are only a tiny part of the total costs. Whether the allocated overhead is large or small depends on distribution channel, units sold, and R&D. Since audio equipment are not toothbrushes, R&D expenses are large and number of units are small. Therefore allocated overheads tend to be large per unit.
You can also see there's a lot of costs involved, so most dealers and manufacturers of audio equipment make just a small amount of profits (more likely actually lose money)
The most likely differences between a cheap amp and expensive amp are
(i) how it is marketed and (ii) amount of R&D involved (e.g. some chip amp design just copy from application sheet, so it's free R&D from the chip makers). But there is no guarantee. Some time you get a good deal, other time it's a raw deal!!!
Part costs are not an indication of sound quality either. It's the design (intellectual property) that determines the sound quality. Part of the design is specifying component quality, which has some effect on part cost.
Hope that helps!
I am sure that many on DIYAUDIO have a better understanding than me on this but i would like to give you some of MY ideas.
a) cost of doing business = if you are a mjor retailer in the USA and a person comes in your brick and mortar store, then you are losing money. if this costomre decides to buy something and the reciept is less than eg. USD 8.00 the store still loses money as the cost per customer coming in the store (based on yearly numbers) is much higher than that number. I personally know of a chain store that needs every customer to pay at least US$ 12.00 each time a receipt is printed, anything less is losing money for them. and if you wonder why, then just think of cost such as the premises, electricty, all sorts of taxes, less but still important the cost of staff, the cost of a HQ including theiir staff, distribution etc..
B) In order to cover all these costs the store needs to mark up their product. it is astonishing to me that so few americans realize that everything that is sold has a mark up. Some "experts" claim that food stores have a mark up of 15 pct, LOL. That is of course putting up a smoke screen. in the food retial business mark up starts at 35 pct and rarely will you find a product under that treshold.
In clothing mark up is even more attractive. mark ups are on average 300 pct with some retailers that sell "exlusivity" go up to 1000 pct = yes, 10 times the cost of the product they spent... Surprised? Please, don't be. Again, the costs for them to run their business model are usualy "exlusively enormous... rent, store interior etc.. plus the lower product sales number requires them to maintain a high mark up.
C) Let's go one more step, the brown industry - hifi. A competitive business where all points of sale would be selling the same cassette player, the same CD player etc...
The change was marked with the arrival of the CD player. Then factories were able to fabricate, on large scale, the same player with different casing and small changes in detail and lay out. It goes so far that sometimes brand X makes a device with 4 led's and Brand Y has 3 LED's = the factory does not bother to eliminate one led, they just cover it up with a black screen or so...
D) Then we get to High End. The consumer here is a bit more picky and picky ALWAYS result in higher cost. not becasue it is warranted by product cost but because the retailer can do so. Sales numbers are lower but the store still has the same costs = rent, electricity etc... hence te gross profit margin needs to be higher to cover everything, same as a cheap outletstore.
Again, let's talk numbers. EG. a Denon Amp priced at $499.
bought for $110, gross profit $389 - Store sells 12 per year ($4668)
An ARAGON Iridium (Selling for $4000) cost to make $800)
Aragons sell, maybe one per year if the seller is lucky... so in order for him to cover all the expences occring in the store he needs the mark up, simple as that.
E) And i am going to spare you the business practice of Dynamic Pricing and Source Pricing..
and remember, next time you enter a Dollar store, and you pick up a set of plastic containers with lid priced at $1 of course, remember that the store, the staff AND the HQ are all making money on this on dollar item, they are not selling it at a loss! think of how much this item is purchased for by them? take a guess.. is it $0.12 or $0.15?
A toy costing $29.95 in a store will cost them not more than $3!!!!
A men's shirt selling fro $49.95 not more than $6.00 and so on...
F) And to end this long contribution.. think a bit further...
the toy selling for $29.95 costed $3, but at $3 cost some one made a profit and was able to cover the costs of the plant where it was made, cover the salaries of the people making it, funding transportation, insurance and distributors right...
Mindboggling, isn't it?
As a DIY-er, which seems more miraculous to you? That a car can be designed, manufactured and sold for $15,000, or that a valve amplifier based on 1920s technology, a dressed-up $5 DAC IC in a nice box, or even a mains cable can sell for the same price?
"Why are Amps in general so expensive?" As amps can cost anywhere from a few hundred to several hundred thousand $$$ (I'm talking new, here - used gives you much more choice) I'm not sure which price level you class as "so expensive"?
In line with hoxuandoc's comments, I suggest the cheapest amps will probably come from the multinational Japanese brands, due to their size and resources. But you will undoubtedly find other (smaller) makes that cost more and sound better. ;)
In my own case, after having been a "Naimie" for over 20 years, I took one of my Naim 250s to Hugh's place 10 years ago, to compare against his 1st-generation AKSA amps. The result - I placed an order for 3 of his amps and when I'd built them, sold my Naims (which was sufficient to "clear the slate"! :) ). 5 years ago, I upgraded to his next-generation amp modules.
"(Sonic-wise) what's the difference between a £100 amp, £500 amp and a £5,000 branded amp?" Let's just say ... you may not get a better "sound" out of a 5K GBP amp than a 500 GBP amp. But the 5K GBP amp probably has a network of repairers?
However, you can't really answer this question by comparing an AKSA amp against a "named retail" amp - as the AKSA amps are kits (except for the Soraya) and so a) lack some compenents and labour and b) is not supported by the wider public as a "brand" in the same way, so there may not be a ready marketplace eager to take it off your hands, like there is for Naim amps.
Also, I would suspect even a NAKSA 70 is not exactly a 500GBP amp, once you've bought the case, transformer etc ... as well as the stereo amp module.
But if you want a really excellent sound for much less money than a "named" brand amp and you have some DIY nous, IMO you will not buy better sound for the same money than an AKSA amp. :)
Just have a look at the PASS thread to see what can be achieved when the designer, Nelson Pass in this case, is happy to let DIYers use his designs.
First of all fantastic feedback people!
Just to clarify I completely understand the principle of markups, you've only got to look at spectacles and sunglasses frames!
What I'm really interested in trying to understand is what makes an Amp or DAC sound better than another and how price and the components used affect this.
For example does a AKSA amp sound good because it's full of expensive and high quality components....I don't know but for example really expensive transformers full of gold that cost £200 each...or is it just cheap simple components that have been put together in perfect synergy thus creating great sound?
In terms of DACs I'm equally confused as there seem to be endless models available in the £30 to £500 region but from a pure sound point of view whats the difference?
I have no idea what a AKSA amp costs or what it would compare to sound wise/power wise compared to a branded amp...is there anyone in Berkshire UK that I could visit to listen to a AKSA?
You don't have to spend too long in these forums to find that no one can point to any objective measurements that can predict which 'audiophile' component apparently sounds better than the next, or whether it sounds better than some mid-priced commodity system with, apparently, just-as-blameless specifications.
But there is obviously an audible improvement when say blind testing a top end Naim or Cyrus system to a £30 Tesco cheapo system...
So in a AKSA amp are the actual components expensive, high quality and that helps create a great signal to drive speakers or is it just a fantastic circuit design or as I'd guess both?
Put another way how does a AKSA amp compare to a Cyrus amp in terms of its price, components, power, class etc...
Before someone says it I fully understand that everyone is different and there isn't a "best sounding" amp in the World it's all down to personal preference. But there has to be some agreement that one is better than another either technically or in design.
One example of this must be why do people have huge mono blocks when they could just have a small integrated...
Mono-blocks will always have the edge over an integrated design.
Any amplifier design that uses a single power supply for everything will suffer to some degree from cross-talk. Using two completely different power supplies will therefore eliminate this problem.
A GOOD integrated amp may have vitually inaudible cross-talk, however, a crap mono-block will always have zero cross-talk.
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