Originally Posted by Trevor White
High-end = High Price tag - Fancy box - and the least amount spent on the electronics that they can get away with
That's the cynical view. The non-cynical view of most high end is having philosophies instead of facts and esoteric parts instead of circuitry. Oh no that's still cynical. But there's a point. If one cared to look inside most high end equipment you'd find that whatever they lacked in knowledge they sure made up in expensive content. Heck, some buy up loads of obsolete parts under the presumption that they're better than the new stuff and on the other end of the scale some have their own power transistors made in an esoteric new technology. These guys are spending money, not raking it in.
Leaving aside the question of how well-designed the innards of an audio products are, there are some very basic economic facts:
1) Regardless of market, the mark-up between the BOM and the end-user price is around a factor 5. Most of that goes to the retailer. Then the distributor. The remaining pittance goes to the manufacturer.
2) Economy of scale: production cost drops with the logarithm of quantity until you hit the raw materials cost (i'm told that the old Philips TV factory in Bruges could reliably estimate the cost of a TV set by weighing it). The same product, manufactured in tens or in thousands ends up with a markedly different price tag.
3) People want their money's worth. You spend 5k on a piece of kit, it has to look expensive. I'm talking fit and finish, not looks. It may look "butt ugly" so long as it's polished like a baby's bottom (with only as many visible seams).
So you want to make a "better than average" product? That will make it more expensive than average. So you'll sell fewer of them. So your manufacturing cost will go up and you need to increase your profit margin. The price starts getting a bit "exclusive". So people will not want the same folded casework as a $25 DVD player. Some of these look pretty sleek with the sort of plastic casting that's available when you make 100k units. If you want to get the same quality with 1k units, it'll have to be machined. This spiral continues until a company almost but not entirely runs out of customers and equilibrium is reached. Of course, that leaves room for many more small companies with slightly different offerings who appeal to a different but equally small subset of potential audio buyers. All it takes is the above 3 obvious truths to explain why the high end market is saturated with innumerous tiny companies trying to be slightly different from one another. The same spiral explains why the middle segment (where say 1500 euros would buy a very decent stereo) has pretty much vanished from the market.
People seem to have the impression that manufacturers of high end gear are greedy bastards who are making way too much money. I can assure you that the companies that churn out cheapo DVD players have a boardroom full of way richer guys, none of whom actually give a damn for audio. Even a middle manager may fetch rather more than some of the people manufacturing the high-end gear that's meeting with such opprobium for their price tag.
You can have me ranting about the complete lack of technical sense shown by equipment designers and whatnot, but as far as economics goes, the smart ones and the stupid ones are in the same boat.
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2012-06-24, 13:32 #1
- Join Date
- Dec 2011
Bruno Putzeys on High End PricingVortexbox>SBT(stock)>>Forssell MDAC-2>>>Klein and Hummell 0300D
Sota Sapphire/Lyra Kleos>>Bespoke Valve Phono Stage>>Mastersound Due Venti>>Link Audio K100
2012-06-24, 23:57 #2
- Join Date
- Apr 2005
- Watford, UK
OK, so the high end manufacturers are not raking it in.
That doesn't suddenly make their ludicrously overpriced offerings any better value for money to the end consumer.
All it means is that they have chosen to operate a business model that does nobody (themselves included) any favours.Transporter -> ATC SCM100A