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How Much Should Stuff Cost?

I get a lot of snide comments about equipment cost. Surprised? I'm not. This shit is expensive. And by expensive, I mean "send my kids to college" expensive. Or condo in Miami expensive. Or sports-car expensive. Or [insert your own analogy here] expensive. However you cut it, high-end audio isn't like buying an iPod and downloading from iTunes. But does it have to be expensive? I think a lot of folks are pretty much convinced that the sticker prices they see are some kind of joke. What could possibly cost $40,000 in that DAC? What on Earth could make that amp cost $80k? And how can you possibly justify asking for $200k for a pair of loudspeakers? "And don't even get me started on cables," goes the rant. Look, I hear you. It's criminal. It does seem to be the case that the prices for some of this stuff are just insane. Clearly the work of a gouger, or a profiteer, or just a complete asshole. Right? Wrong.

Look, I’m not going to defend specific offenders here. I’ll grant that there are bad apples in the barrel. Some of the prices out there are clearly the work of the sick and deranged. But before you go haring off on a Walmart-inspired crusade of price cutting, take a breath. Remember. Life isn’t fair.

That’s a hard pill to take, and one I find particularly annoying. I work. A lot. And get paid. A lot. I admit it! And I am still faced with the “I don’t have enough to do what I want to do” reality of the everyday. I used to think that if I just worked a little bit harder or got that new job that paid just a little bit more, then, finally (FINALLY), everything would be just perfect. I’d be able pay all my bills, get the new car, save for retirement and my kids’ college funds, finally rip out that ugly ass carpet and get the new floors for the living room, and still have money left over to get that new stereo component. Yeah. Guess what. Ain’t happening. Life’s a bitch that way. I think that this is true for most of us, to some degree. But the point is, no matter what you make, unless you’re bizarrely rich, this level of irritation will float up with you. The rising tide lifts all boats — including your expectations, debts, and obligations. C’est la vie.

What I mean by all this is fairly simple — just because it’s expensive doesn’t make it a personal affront to or an indictment of you, your hard work, or lifestyle or life choices, or well, anything to do with you at all. Just … chill.

Pricing does come from somewhere. This is Capitalism, after all, and absurd pricing has to be supported somehow, someway — or the pricing would be different or the products and makers of those products would be forced out of the market. The fact that the high-end of the high-end is still cranking out ever-more-expensive products should be a clue that it isn’t just some jackass vendor channeling hope.

I’ve written about the linkage between parts-costs and MSRP before, so I won’t rehash it again. Feel free to check it out here:

An Aside Abut Pricing

So yeah, shit costs whatever it does. Don’t like it? Don’t buy it. It’s pretty simple, really — if you have a severe allergic reaction to the price of a product, vote with your wallet. If enough consumers do that, the market will change. The fact that it hasn’t, though, should tell you something.

I had a preamplifier here from Sonus Veritas. Marvelous piece of work. But I was asked, repeatedly, “is it worth $17k?” I get it. That’s a lot of money, right? I think so. So does the designer! But with $4k worth of parts, there’s not a lot of room for them to move. They have to recoup build-time, right? And then there’s all the R&D that went into the final product — that has to get absorbed somewhere. Just think of all those prototypes. Those had costs, too.

So, once the design is finalized, you, the eager consumer, will presumably need to actually find out about it and hear about how awesomely it does its job — enter “Advertising.”

Note that this is al before we add in any profit to the maker. I mean, we’re all capitalists, right? A designer/manufacturer deserves to do better than simply break even, right?

Said another way, if you can’t make a profit on it, you don’t actually have a product — regardless of how awesome or innovative or beloved it actually may be. So, with all that in hand, you now have to get it out into the hands of the folks that have the expertise to sell it (and support it). That means dealers. Sure, a lot of manufacturers either skip this step and do it “direct” — but that means even more money up front for advertising, marketing, and brand management, and ongoing costs to support customer through that purchasing decision — and after.

That’s all real money.

Is that it? Nope.

Say that we’re talking about a boutique designer who’s a wizard with circuits who’s made a great product. Do you honestly believe that every wizard is somehow magically also able to eloquently advocate for their product? Ever met a designer? “People person” isn’t a common way these folks get described. Making them the de facto sales contact not only entails a struggle (honestly, some folks just aren’t cut out for it), it also means that there’s an opportunity cost — shouldn’t the smart person really be building something or designing something new? You’d think. So, they need to pay someone to do that “sales stuff” for them — they need to hire someone. Which means they have to pay them. Factor that back into the “cost” equation.

Or, they could start a dealer network. Personally, I think this is why most manufacturers go this route — it makes sense, and it’s easy. A good dealer can provide a lot of value. I talk a bit out this, here:

21st Century Audio Dealer: The Consultant and the Retailer

Of course, they don’t work for free, either. Why should they? Capitalism, remember? And this is where competition first enters the costing equation. There are a lot of other manufacturers vying attention, so to get that attention focused on you, to earn that love and loyalty, quite frankly, you have to pay them handsomely. Given that the high-end audio biz isn’t really all that transactional, you can’t seriously ask them to take a crappy margin and make it up on volume. Do that, and they’ll sell someone else’s gear. And you can’t fault a dealer for this. Remember that bit about “pay all my bills, get the new car, save for retirement and my kids’ college funds, finally rip out that ugly ass carpet and get the new floors for the living room” — that’s true of everyone, including dealers. Now these folks aren’t stupid, and falling more on the coin-operated side of personality disorders, dealers need incentive — which (perhaps unfortunately) means a (dramatically) higher MSRP. But hey, everyone has to earn a living.

And that’s why things cost a lot. That’s how $4k worth of parts end up as a $17k component. Whether or not it’s actually a product will depend on many things, including whether or not folks buy it. But that’s another story.

So, when you see a $200k/pair of loudspeakers, feel free to rail at the injustice of not being able to afford them. I can’t either, and yes that sucks. But that doesn’t mean that there isn’t a valid economic equation in there that spat that number out. Just because we can’t afford it doesn’t mean it’s not valid. Sure, sometimes pricing is arbitrary. But not always. Not even commonly. But … sometimes.

Outraged? No worries. This is capitalism. Remember, you get to vote — with your wallet. And done. Move on.

I’m in the middle of a rather expensive detour through audio’s high-end. It’s interesting and fun, sure. The air up here is really different! But as a reviewer, it helps tremendously to have a baseline of what’s possible. Of actually know what terms like “SOTA” and “cost-no-object” actually mean and refer to. It makes me better, as a writer and a reviewer. Sure, I’d love to be able to afford this stuff — more properly, I’d love to be able to afford whatever I damn well please. Oh well. One of life’s many little disappointments. In the meantime, this tour is turning out to be quite eye-opening.

Anyway, I appreciate your patience. I’ll be returning to more affordable stuff shortly, I promise. It’s where my heart is, and more importantly, it’s where my wallet is.

Cheers.

Get your Occasional now

20 Comments on How Much Should Stuff Cost?

  1. Hi Scot:

    Quote >>>
    “Look, I hear you. It’s criminal. It does seem to be the case that the prices for some of this stuff are just insane. Clearly the work of a gouger, or a profiteer, or just a complete asshole. Right?”
    <<< End Quote

    Right! You should have stopped there (while you were ahead)….

    There is a simple fix to these price woes — DIY audio. When you start to build your own gear, you see just how grossly out-of-whack the industry is — the problem is cultural: most American audio manufacturers 'believe' that they have a right/obligation to do a "David Wilson" and accrue wealth for themselves and their employees. Capitalism "Gone wild…."

    It sounds like you started down this DIY path once — when you heard the ORION(4). Should you ever want to walk that road-less-traveled, come over and listen to a set of LX521's — it just might change your (entire) perspective on high-end audio industry.

    — Charles

  2. Soundminded // March 31, 2013 at 9:45 AM //

    50 years ago the most expensive audio system you could buy cost around the price of an average new car. Today it’s closer to the price of a mansion. Worst news is, it isn’t a whole lot better. Once high end audio promised it would eventually duplicate the sound of live musical performances by the world’s greatest artists playing at live concerts. Nobody even pretends anymore that’s the goal, the problem has beaten the industry so badly it came to the point where it had to find an entirely different rationale to exist or admit defeat. In a period when the consumer electronics industry offers more and more product for less and less money and this improvement in quality price ratio has occurred at an astounding rate (just think of how much computer or TV set you can buy for the same money today compared to 10 years ago) the high end audio industry stands out as the sole exception where you pay more and more to get less and less. And every month the last month’s consumer magazine’s best amplifier, speaker, turntable in the world is replaced by an even better and more expensive one. Each year manufacturers turn out new variants of the same old products which have “fixed” the problems their older models had that they never admitted to in the first place. You’d hardly know this technology is not aiming at a moving target. This is just one reason why in the market for consumer audio equipment the high end has become the dead end. What’s more, not only is the technical rationale for most high end audio equipment flawed, manufacturing techniques and other aspects of producing products that drive cost down don’t seem to exist in this arena. Furthermore, as someone who is very familiar with scientific research and development in many industries, I categorize what people who create products in this industry do as little more than tinkering. When through what is often no more than endless trial and error they devise something they like a little better than their last offering, it’s a “breakthrough.” If you want to buy high end audio equipment, either buy used at a substantial discount or learn to build your own. As a determined hobbyist you can nearly duplicate most products on the market using similar off the shelf parts and where possible through reverse engineering (where you are not illegally violating a patent) for a small fraction of the retail price.

  3. Like most people, you are utterly confused about the distinction between capitalism and markets. Sony is a capitalist firm. Their production is capital intensive. In other words they have big factories filled with expensive machinery that are their primary expense. Harman, JBL, Polk, those are examples of capitalism.

    High end firms are boutique shops with relatively little invested in capital. Most of their expenses are for raw materials and parts. At best they are “small capitalist production.” The price pressures to which they are subject would be the same under feudalism or socialism.

  4. We’ve long been in the realm of “It’s just different, not better,” for sound reproduction unless human ears have evolved at some point in the last twenty years. But hey, follow your bliss and if bliss is $100,000 speakers, go for it.

  5. randolph32 // March 25, 2013 at 1:18 PM //

    Agree wholeheartedly…if you can’t afford it, I’m sure there’s some great gear out there that you can afford, and it will sound great. Spent a weekend at Axpona in Chicago and was taken aback at how great most of the rooms sounded – sounded so good I went back for a 2nd day just to listen with some of my tunes I brought along as I found some of the rooms really didn’t pick music that was as good as it could have been. I could afford once, then the recession hit, now I have a nice Rega Brio R, my vintage TT’s and other nice, but not expensive gear and a few thousand LP’s; and for me it still sounds good, it’s about the MUSIC, not the gear.

  6. Several years ago I purchased a set of $12,500 stand mount loudspeakers (Full Range) that got rave reviews and looked drop dead beautiful, built like a tank with stands and hardware that looked like jewelry. I spent the next 6 months trying to convince myself that they were worth the price I paid but sadly they were not. Luckily they have a cult following and I was able to sell them on Audiogon for what I had in them. To replace them I bought a set of $3,000 stand mount loudspeakers with a $3,000 set of subwoofers. This set up makes me smile every time I listen to them. So that proved to me that great sound can be had at reasonable price.

  7. Coming at it from another angle: I’d be a little more willing to accept a $50,000 speaker or amp if I knew that those products represented real excellence. Too often, though, the product is mediocre,despite the big price tag. A Ferrari is plenty expensive too, but people know that a car that goes 200mph and corners on rails is going to cost a lot and see the value. And here’s another issue that won’t go away: the magazines and websites that supposedly evaluate these audio products should have the balls to say that these big ticket items are mediocre (when they are). Instead we get the usual overt or covert shilling, a miasma of obfuscation. If we knew they were truly excellent, complaints about price would be diminished.

  8. T'Mershi Duween // March 22, 2013 at 3:10 PM //

    These are boom times for excellent affordable audio gear. Between internet direct companies and audio forums for research and either selling or buying, the “frugal” audiophile has no excuse to have crappy sound. Those who scoff at spending big bucks on audio are usually the same ones who will spend money on lavish homes and expensive cars that promote their status. Just because I’m willing to invest 100k (and over!) in my audio habit does not mean that I’m swimming in money, just that I’m willing to work hard and save to buy, what is to me, very important “quality of life” hardware. These are my priorities.

    To me, the very high end stuff is aspirational. Something to dream of and strive for. Perhaps not always realistic, but a guy can dream can’t he?

    I also hate evil, predatory capitalism myself. A healthy, prosperous and educated middle class is essential for society to survive.

    But when the class war starts, I call dibs on the evil rich guy’s MBL system…

  9. We all know this stuff, people make markets…..for their own reasons. Some business owners know how to manage their own long term prospects to maximize market share. Others are just stupid pigs.

    As in life, there are all types. You are the consumer…..your job is maximize your ‘buck’.

  10. A couple of points I think are worth adding:
    Don’t forget that even the “biggest” high end manufacturers don’t benefit from economies of scale enjoyed by other consumer electronic makers and thus need greater margins to survive.

    I, for one, am glad some people can afford the cost-no-object gear. The technologies and processes developed for those products inevitably find their way into real-world stuff that is more in my price range. So from that perspective, it is a win-win.

  11. OneThousandAnswers // March 22, 2013 at 12:01 PM //

    Pursuant to some of the previous comments about purchasing used equipment off of sites like Audiogon and AudioAsylumTrade, I wonder what portion of the mid/high end market (i.e., anything above Best Buy) is second hand vs. direct purchase from the manufacturer or dealer for MSRP. That vibrant second-hand market has provided me access to a far greater array of goods that I might otherwise have been. In the rare case it has also given me confidence to go to the manufacturer/retailer to invest in gear that I know will stand the test of time in my system.

  12. Scot,
    This is exactly the points that I have made here, and the point to Affordable$$Audio (not trying to hijack your blog by referring back to the ezine I write for). The point is that the reality of the pricing of a product must include the development/engineering costs, marketing, shipping and packaging (both of which are significant). As a manufacturing process technologist, I’ve been trained to look at all costs, including the cost of embedded energy which can be significant. So what are the options?

    One can buy used (which can offer significant savings, but is not the “deal” many might think). Another may be DIY, but the results can vary from the truly beautifully finished project to the the truly (dangerous) horrendous. Another is to seek out the highest value products within a performance catagory. Remember the well respected Adcom GFP-750 buffered passive preamp? What about the Pass “First Watt” products? Or the well reviewed AVA Transcendence Eight+ buffered preamp? Or the McCormack DNA amplifiers and preamps (disclosure: I own a McCormack pair, but feel they are good examples of great products at reasonable cost)? There are great pieces out there that can bridge the gap between quite low pricing and very high performance. But please don’t expect jewel-like finish and the feeling of solidity of granite at these sorts of pricing.

    And this does not reflect the years of experience and commitment to the end user (the consumer) that a real bricks and mortar storefront independent audio dealer provides. So many forget the value that an independent dealer usually brings and the fact that many can actually save the customer money. Just this morning (March 22) CNN reported the unfair advantage that many online retailers have because they don’t collect taxes for the customers’ state. Apparently someone is looking into that. My thoughts regarding online authorized audio resellers is that many do not represent lower pricing, but rather offer a range of products that few independents can match.

    This conversation can and will go on for as long as there are online retailers and brick-and-mortar stores exist.

    Sorry for the long comments…

  13. I get it. I work hard too. I see how businesses, the ones we ants go to work for have undermined an employees skill set in the name of hard times just to make their stock holders money. Low pay, while upper management serve up megabucks to themselves because their feet hurt. There is no middle class. Just like the middle class of audio has been cut out. And to take that to the next level, instead of building on an infrastructure that could use building, we go to China and ignore the folk that these rich people live alongside. Its greed in the end and nothing else.

    Jonas Salk, known for the first polio vaccine didn’t patent his miracle cure so more people could afford the vaccine. That wouldnt happen today.

    Of course, it would be nice to see more affordable products, but there are always deals to be had buying used… or knowing a dealer. You have to work the system thats trying to work you is all. 😉
    M

    • Part-Time Audiophile // March 22, 2013 at 10:55 AM //

      Look — don’t get me wrong. I’m a fairly loud critic of capitalism. Just not sure that matters. 😉

      But to your point about the “audio middle class”, there is quite a lot of great work being done “down there”. Zu Audio is making some very nice, and affordable, products in that space, as are Rogue Audio. VPI, Magnepan, Odyssey Audio, Decware, and many others; they all make high-end gear at prices at semester-at-community-college prices.

      It’s out there. It’s just not what gets the most press. In defense of the press, we’re all ADD, and easily distracted by bright and shiny objects.

      (Squirrel!)

      Which is where marketing comes in. To write about it, the press has to hear about it, and that means someone has to do some work to get the word out. There’s just too much ocean to cover, which is why it’s critical that chum be thrown into the water so the sharks know to come on over for a friendly bump/grab. But this is exactly where the “little guy” can’t hang, and where the prices start to creep up — having to, and being able to, pay to get some level of exposure, well, it adds cost. Enter: pricing spiral.

      There will always be “great deals” out there in any market segment. Stuff not everyone knows about. And they’ll stay “great deals” right up until they jump Moore’s Chasm. After that, the products will likely get a bit better, but as penetration reaches saturation, they won’t be such great deals anymore.

  14. All very true. Looking forward to seeing all of this expensive stuff at the NYC audio show in April.

  15. Your article provides an interesting point of view (to which I mostly agree), but I think the assumption that only margins and and distribution or costs add to the final price is frequently incorrect.

    Case in point: the Sonus Veritas guy explaining how switching from the copper wound transformers to the silver wound ones would result in ‘thousands’ more on the final list price.

    Pardon me?

    Once you’ve factored in a comfy margin for distribution, R&D, etc… why on earth would swapping one model of transformer by another more expensive one would increase the cost of the whole product by the same margin as everything before? Do silver transformers require more effort to ship the product? Do they require more effort from the sales guy? They make no difference apart from the initial part cost and the product’s sound.

    I don’t really care about the product’s price, as you said I simply vote with my wallet but the transformer price increase had me really wondering if greed isn’t also involved in the whole process…

    • Part-Time Audiophile // March 22, 2013 at 10:40 AM //

      Interestingly, Lundahl silver transformers are quite a bit more than the copper transformers. Take a look. The silver transformers are the ones with “Ag” next to them, and they’re pretty much 3.5x the cost of the copper ones. Multiplied out, yes, I can believe it when a vendor tells me that a move to all-silver will add thousands to the bottom line.

      The point I’m trying to make is that the price may actually be derived, by smart folks using established formulas, and not simply black magic or opium-induced delirium. Not saying that the latter isn’t important, but we’re not talking about product genesis, we’re talking about pricing.

  16. Great article, although I’ll admit that I’ve been gobsmacked at the proliferation of uber-high-end components (or at least prices) in recent years. When I got into this hobby, I aspired to owning a high-end system someday. When I got there, I realised the high-end had moved on FAR beyond my means, realistic or aspirational. Sometimes I just want things to be the way they used to be.

    Despite agreeing wholeheartedly with your views, I do sometimes wonder about the pricing of some components. Of course the market will ultimately dictate the sustainability of the price, but could it be that some firms are pricing at a level where very few sales are required to make a profit? Is it “easier” to set prices at stratospheric levels and hope for a few gullible fools? Maybe I’m too cynical.

    Deep down, I think the biggest problem is simple begrudgery. The average audiophile is SURE that he’d appreciate those components WAY MORE than the hedge fund manager who can afford them. The buyers will probably never even listen to them…

  17. I bought my $24K preamp for $6K, my $36K speakers for $7K, my $32K amp for $11K, and my $7K speaker cables for $2K. I still paid too much, but I don’t NEED to buy brand new. I just buy “like new”.

  18. Ryan LeClaie // March 22, 2013 at 6:28 AM //

    Great reading! Clearing up the details of our capitalist nation. Get out and VOTE!

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