Half a century or more ago there was a serious collapse of a UK washing machine company called "Rolls". The owner was a serious money spender and had a very large 'yacht' which boasted 3 masts...more a schooner. This was moored at a quay in Dublin and I remember looking through a few portholes. Beneath one was a Garrard 301 - mounted in gymbal rings. Some took 'at sea' sound seriously!
I know, he is one of our best clients.. And my colleague next to me worked for him for years!
Another client has the full Lyngdorf system, in a dashing minimalistic interior. (he also regularly fills his private jet with watermelons from Sardinia to Moscow, not relevant, I know)
Still, the majority have crappy sound systems. The video systems on the other hand often are very good.
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A colleague of mine knows a local speaker manufacturer who sadly went out of business.
The speakers were expensive - but honestly priced.
According to the guy who made the speakers his biggest mistake was not to ask high end prices that would have assured high end exclusivity.
He might of sold less cabinets but it might have assured his survival in the market.
So have the manufacturers who cater for the high end got their business model wrong or right? If they are still in business they must be doing something right!
The speakers were expensive - but honestly priced.
According to the guy who made the speakers his biggest mistake was not to ask high end prices that would have assured high end exclusivity.
He might of sold less cabinets but it might have assured his survival in the market.
So have the manufacturers who cater for the high end got their business model wrong or right? If they are still in business they must be doing something right!
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Much has been said in this post, but i can give first hand experience.
I own a loudspeaker company that has been in start-up for 2 years.
To put it from a manufacturers perspective i agree, that the markups and costs that are associated with products inflate the price about 6x what the raw cost of building it is.
In all the industry costs alot of money, dealers take a minimum of 50% mark-up. Out of the manufacturers cut there are the overheads, even small production costs, then there are the MASSIVE advertising costs of shows and all those wonderful banner ads that reviewers want after they say a few nice words about your product.
The research and development of designing, modelling and testing speakers comes at a costs, like i have seen in a post here, the various parts that you test and then tweaks that are made to drivers costs.
Then take into account the relatively low volume of sales that are made and the ratio of cost vs. margin and you have the reason products are marked up so very much.
For these reasons, i'm cutting out as many of the steps in markup i can (at least for Canada and US) and selling direct and literally 50% of the price that the products now have in a dealer.
But in the end, this is a DIY forum, and it is DIY because all of you know and understand that building it yourself allows for much more learning and eventually a product where the price paid and returns had are better than anything you can buy anywhere.
I own a loudspeaker company that has been in start-up for 2 years.
To put it from a manufacturers perspective i agree, that the markups and costs that are associated with products inflate the price about 6x what the raw cost of building it is.
In all the industry costs alot of money, dealers take a minimum of 50% mark-up. Out of the manufacturers cut there are the overheads, even small production costs, then there are the MASSIVE advertising costs of shows and all those wonderful banner ads that reviewers want after they say a few nice words about your product.
The research and development of designing, modelling and testing speakers comes at a costs, like i have seen in a post here, the various parts that you test and then tweaks that are made to drivers costs.
Then take into account the relatively low volume of sales that are made and the ratio of cost vs. margin and you have the reason products are marked up so very much.
For these reasons, i'm cutting out as many of the steps in markup i can (at least for Canada and US) and selling direct and literally 50% of the price that the products now have in a dealer.
But in the end, this is a DIY forum, and it is DIY because all of you know and understand that building it yourself allows for much more learning and eventually a product where the price paid and returns had are better than anything you can buy anywhere.
Years ago I remember the designer of the ASR Emitter amps claiming that it would not be possible to buy the parts for less than his amps retail for.
How true that was I do not know.
I do know that the big Quested monitors retail for £68 000 + VAT (less if you ask nicely) the pair and the parts (without wood or labour) they contain cost £22 000 retail.
How true that was I do not know.
I do know that the big Quested monitors retail for £68 000 + VAT (less if you ask nicely) the pair and the parts (without wood or labour) they contain cost £22 000 retail.
I don't think there is a single german engineer (in the german sense ie holding a masters degree) who could not afford a BMW.
I went to school with a kid who ended up working on the assembly line making BMW bike helmets. He has never driven anything but BMWs or Mercedes.
In 2009 BMW put a flyer on all non-BMWs in their staff car parks reminding them that it might be a good idea to drive a BMW. They issued a total of 7000 flyers to their staff of 73000.
Almost every VW employee owns a VW.
One of the perks working for VW is (or was) that they can buy one VW per year at cost (by which I mean actual cost, not dealer prices).
After a year they can still sell them at a profit.
I went to school with a kid who ended up working on the assembly line making BMW bike helmets. He has never driven anything but BMWs or Mercedes.
In 2009 BMW put a flyer on all non-BMWs in their staff car parks reminding them that it might be a good idea to drive a BMW. They issued a total of 7000 flyers to their staff of 73000.
Almost every VW employee owns a VW.
One of the perks working for VW is (or was) that they can buy one VW per year at cost (by which I mean actual cost, not dealer prices).
After a year they can still sell them at a profit.
In the early to mid 90's I designed a number of listening rooms for customers of an ultra high-end audio line. The top loudspeakers of that line were $125,000 per pair as I recall.
The cabinets were certainly well made, but not stunning, the driver complement per side was 2 each 30cm Dynaudio woofers, accompanied by line array of 8 each Dynaudio dome mids and tweeters.
That many costly drivers will add up, but still, $125,000? I asked the owner of the company why they were priced so high. His immediate and matter of fact reply was "They are worth what customers will pay for them."
It was an honest answer. With the question of what is something worth, a necessary coefficient is "what is it worth to who?". They were certainly not worth that to me, but I couldn't really make the blanket argument that they were not worth the asking price since they were selling (and selling well for such a stratospherically expensive item).
The cabinets were certainly well made, but not stunning, the driver complement per side was 2 each 30cm Dynaudio woofers, accompanied by line array of 8 each Dynaudio dome mids and tweeters.
That many costly drivers will add up, but still, $125,000? I asked the owner of the company why they were priced so high. His immediate and matter of fact reply was "They are worth what customers will pay for them."
It was an honest answer. With the question of what is something worth, a necessary coefficient is "what is it worth to who?". They were certainly not worth that to me, but I couldn't really make the blanket argument that they were not worth the asking price since they were selling (and selling well for such a stratospherically expensive item).
I got a similar reminder when i worked as a VW/Audi tech, but then i had allready learned quite a bit about the cars and the work shops business moral. I refused and got out of that business a couple of months later.
Now, more than 10 years later, i still refuse to consider a car from VW or Audi.
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One thing that has not been mentioned is the time it takes to develop a speaker. Lynn Olson has often stated that it takes a designer at least 6 months to properly dial in a speaker design. That amounts to a lot of costs in terms of building rental and other overheads, never mind the salary of a good designer like Lynn himself. I am sometimes surprised that the manufacturers selling 'cheaper' loudspeakers survive. You'd have to move. Quite a bit of volume to pay for R&D. That is also why something like the Ariel is such a bargain. If the Ariels had to sell commercially they would have been pretty expensive. We DIYers often forget the time it takes to finally dial in the sound, or some of us never really bother too.
Enjoy,
Deon
Oh goodie, another chance to tell war stories about the hifi biz!
Things may have changed now, but the salary at Audionics was laughable. It literally went up three times when I took the unglamorous job of tech writer at Tektronix in 1979. (Little-known fact: tech writing can pay nearly as well as an EE job, and you don't need an EE degree. But you do have to write well, and translate scribbled engineering notes to human-understandable instructions. And don't get me started about "self-commenting" code!)
The deployment of personnel in most hifi companies is laughable as well. Engineering teams are almost unknown; there's usually only one actual designer or engineer, and he is always kept well out of sight, to maintain the happy illusion that the CEO is the latest incarnation of Einstein, who for some inexplicable reason is now working in hifi. The ratio of marketers (shills) to engineers is 3:1 or worse.
The dirty little secret of audio is that designers get tired of getting treated like dirt, and move to another manufacturer after a few years of abuse. This is the reason the "house sound" of XYZ manufacturer changes over time - the real people who made ABC famous product have moved on! Pretty similar to the reason the quality of food at a local restaurant changes over time - the chefs who made the reputation of the restaurant move on, taking their quality food with them.
The 6-month design-time figure is still pretty typical, although there is a new breed of designers who are proud of never auditioning what they design. A design-by-the-numbers, of course, can be knocked out in a matter of hours, although the sound quality will be less predictable. If there's no "house sound" for a given manufacturer, that's probably what's happening.
A more dire example are speaker manufacturers who have the Prez select the drivers and design the cabinet (so it looks pretty, of course), and then hire an outside consultant to design the crossover (which controls how the speaker will sound). When I'm at hifi shows, it usually takes a little digging to find out if the "official" designer actually did the real work, or just designed the cabinet and picked some drivers they thought might sound good.
Although it's traditional in the hifi biz to have a 1:5, or even 1:10 ratio between (raw parts + cabinet cost + assembly labor) to retail price, this doesn't apply to the $20,000-and-up market. I've thought about the Ariels, and they probably couldn't be profitably retailed for less than $10,000/pair (remember, the dealer gets 40%, and the regional rep another 5% or so). The Karna amps would certainly have to sell for $50,000, or more; they have a lot of expensive parts in them, and a lot of construction labor.
What puzzles me are high-priced transistor amps, preamps, and DACs and over-the-top speakers with the usual-suspect drivers and pretty ordinary crossovers. The most expensive parts of transistor amps are (1) the chassis + heatsinks (2) transformers (3) output transistors (4) power-supply caps. The circuit board and all the little parts on it are not that expensive, a couple hundred bucks at most. Same story for preamps and DACs; even the most pricey ESS Sabre 9018 converter is about $40 (in small quantities), and that has 8 channels of output! Discrete transistors and opamps are only a few bucks each (in quantities of 100 or more).
In terms of actual price of what-goes-in, I don't see why any transistor amp, preamp, or DAC goes for more than $5000 to $10,000, aside from the silly chassis with fancy NC-milled shapes. Anything above-and-beyond that is amortizing development cost, silly chassis (that has no effect on sound quality), and marketing costs (exhibiting at the CES can run $30,000, while the RMAF is around $3,000 to $5,000).
Tube amps and high-efficiency speakers are another matter. Pro drivers really do cost more, and the transformers that are mostly inevitable with tube gear are inherently labor-intensive to wind and assemble. Vacuum tubes have never been cheap; adjust for inflation, and tubes cost a lot in the 1930's, 1950's, and now. They've always been assembled with hand labor, and need to be individually tested and QC'ed, with a fairly high reject rate. There have proposals over the years to build them with robots (which would improve QC), but the capital expense is hard to justify with the small production quantities.
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Driving a Trabby is cool !!!
Not sure about that but then the closest I ever got to Trabbies is making a few of them fly above the stage for a U2 tour back in '92.
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