advertisement


Bruno Putzeys on audio pricing

Markus S

41 - 29
Trevor White said:
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.
Original quote here:

http://www.diyaudio.com/forums/vendors-bazaar/190434-hypex-ncore-196.html#post2898572
 
Spot on.

When I was working for a manufacturer of professional broadcast products, our quantities were tiny, not unlike high-end HiFi. However, our customers couldn't care less what it looked like, so we didn't have to put it in a fancy case, but on the other hand, we couldn't get a premium for using "bespoke" or "audiophile" components, as they couldn't give a rat's arse for internal cable types or special capacitors.

It was real problem in that we made too many to buy bespoke 1-5 offs, but not enough to interest any quantity manufacturer...I remember asking one manufacturer of a particular FET for a price for 250. He said 250 a week isn't much, I said I wanted 250 total, for the whole production. He sent them to me as "samples"! Not worth his while invoicing.

High-end HiFi isn't much of a way to make money. To paraphrase somebody else, the best way of making a small fortune in High-End HiFi is to start off with a large fortune.

S.
 
Where do folded steel boxes with a tiny component count and a huge price tag fit in the model please?

Or a two way compact mdf built speaker with off the shelf , same drivers as a £1500 one but costing £5000?
 
I would say that analysis by Markus S is absolutely spot-on; use that analysis and the state of the market makes sense (ie..it is now pretty disfunctional.)
It's all in the numbers, the less you make the more each item costs. If the market is tiny, and getting tinier (that's us lot) sales fall, costs rise, 'value' gets even poorer.
But then 'artisan' products, hand-made in small numbers, will always fail to make 'economic sense' in a consumer market based on mass consumption and production. If you don't like it, don't buy such stuff. If you do want it, you have to face economic reality and pay up. In fact most hobbyists now look for such stuff second-hand, which is fine, but if sales of new stuff keep shrinking, where does the future second-hand stuff come from? For us, the future of hi fi is some pretty mass consumption stuff, and loads of tiny, fragmented, niche products, each manufacturer differentiating itself by ever tinier distinctions. (Think Shindo, Air Tight, Tron, Jadis, Audionote, Kondo etc etc etc, all chasing a very small specialist valve market. Long may they prosper.)
Moaning about it is pointless, you are looking at social and economic reality. It won't change just because you don't like it.
 
Perhaps the only viable future for small-volume hi-end stuff is for the consumer to buy directly from the maker. You eliminate several passages and costs (transport/stocking, distributor, retailer, with taxes of some kind on some of these.)
 
But specialist (ie small volume) high-end stuff is precisely where the services of a good dealer are most useful.
 
It seems to me that Bruno Putzeys was simply outlining standard economics - quantities of scale etc.

I actually think that the most salient points were:

Leaving aside the question of how well-designed the innards of an audio products are, there are some very basic economic facts:

and

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.

which would imply that the price of an item is no indicator of its ability. Emperor's new clothes and all that.
 
It seems to me that Bruno Putzeys was simply outlining standard economics - quantities of scale etc.

I actually think that the most salient points were:



and



which would imply that the price of an item is no indicator of its ability. Emperor's new clothes and all that.

That's very much my view about high-priced and poorly performing equipment like AN, Kondo et al. The attractiveness of these products has nothing to do with any objective measure of performance.

S.
 
But then I don't think anyone is making any claims as to their objective performance.

That's what I really don't understand, why anyone should want something that's so technically flawed, unless it was very cheap. That I can understand, but not something that doesn't work as well as an everyday unit from Comet, and yet is very expensive.

But then I have exactly the same problem with wrist-watches, jewelry of all sorts, hand-crafted anything and so on.

My problem I suppose...no soul.

S.
 
I`ve just looked at the spec for a Kondo - .5% / .7% distortion? it`s not even vaguely Hi Fi.

Ah, but that appaling distortion figure is produced by especially trained foo-fairies & designed to massage your soul.

But you are right. They must sound appalling.

Chris
 


advertisement


Back
Top