A question of value in today's hi-end.

[DaveyF]

With so much gear coming on the market these days in the $20K,30K and more price ranges, I am wandering what most of you think of the perceived value of today's high-end pieces.
In the current issue of Abbo Sound, Peter Breuninger states in his Ayon review..."The kicker is Ayon products are priced at, dare I say, realistic ultra-high-end levels. Only three components are MSRP'd at over $25,000- unheard of for this level of European manufacturing". When I started in the hobby( ok- many moons ago), the cost of high end gear to average income ratio was far more in-line that what it appears to be today
Are we maybe pricing our hobby into oblivion Just a thought

 

[hifidelity1]

I would say yes, things are a bit out of control as far as pricing is concerned, don't get me wrong I like dreaming about the highend stuff but the very notion of ultra highend is a major turn off in my opinion. Nowaday when I read the publications and see all the five thumbs up for everything over $25000 I kinda laugh within myself and wonder who is buying this stuff at these prices , nothing against those who can afford to do so. I just feel people are being taken advantage of for something being claimed to be ultra highend when its only highend, this is why there is so much of the reportedly new good stuff. I mean the very materials could never add up to these prices unless its that stuff from Avatar. I Never understood politics much but I finally get it about "Putting lipstick on a pig". That being said the Highend is good enough for me!

 

[c1ferrari]

Hey DaveyF,

The majority of gear I possess has been acquired pre-owned

I imagine the business paradigm adopted by a number of high line gear manufacturers is to sell fewer pieces at exalted prices eschewing profit as a function of volume.

Did I mention I generally purchase my equipment, pre-owned?

 

[rbbert]

It is a business, and if those ultra high-end ultra expensive manufacturers don't sell enough to be profitable, they probably won't stick around. I think there is probably more reasonably priced equipment (at whatever price level you consider "reasonable") than ever, especially when you factor in the used marketplace.

 

[Phelonious Ponk]

It will come as no surprise to many here that I think the price/performance ratio in this category is so far out of whack that it often seems to work in reverse - above a certain point, rising prices are a sometimes an indication of falling performance.

Tim

 

[JackD201]

Personally, I think there has been no time in the history of audio save the very beginning where one had to pay so much for ever shrinking performance gains. I can't recall how many times I've set up systems for clients and friends that have made me say to myself in complete honesty what I think some of you might have uttered too. "I could seriously live with this."

Now if only life was so simple. By education, I'm a Business grad with a specialization in Marketing specifically in the areas of Sociographics. In the last four decades one of, if not the biggest trend in consumer behavior is individualization. I have little doubt this was anchored on increases in base pay but is in all probability due to the availability of retail credit. Take athletic shoes. Watch a pick-up game in a park and see just how many players are wearing the same shoes and compare that to the 50's when practically everyone was wearing Chuck Taylors, the 70s with Adidas All-Stars, the 80s with Air-Jordans or your pick of Celtics Green or Lakers Yellow Converse' so on and so forth. It exploded in the 90s and not just in sneakers either. Coincidentally the same time audio equipment's threshold jumped dramatically. The result is a proliferation of products aimed at very narrow target markets. While we are seeing unprecedented scale in overall corporate operations we are not seeing the same economies of scale on a product by product basis. E-commerce in the 21st century bolstered this trend further allowing manufacturers not just of finished products but of parts as well to further target even smaller niches spread out over an almost global area. This "access" also lowered the barrier to entry in many industries, audio included to the point where intellectual property is at its most premium.

No surprise then that even as players multiply, competition is not driving prices down in the way traditional economic models would predict. I know I am over simplifying things and have left a lot of factors out but this is a post not a dissertation Anyhow, the products are out there because the opportunity is out there. Choices are a wonderful thing but apparently it isn't free. The good news is that now more than ever we have so many good products to choose from in terms of base performance. The price paid is that the cutting edge has gotten wildly expensive. Where one chooses to play all things being equal is another story altogether. Gawd. I hope I didn't bore you guys to death.

 

[amirm]

I think we have to be fair and put aside the issue of affordability. That topic gets mixed into this discussion often. In my business we deal with customers where the cost of such items is round off errors in their bank accounts. By the same token that they buy $300K cars, they can buy such things regardless of what they cost. It is their choice and ability to purchase such equipment and in some sense, we have nothing to complain about other than what they did right that we did wrong .

Second factor that is important and basically is fact of life is how this equipment is sold. They go through a retail channel with a very "high touch" way of selling. You all are a picky bunch . You don't walk in and walk out like you are buying something at K-mart. Typical conversation with an audiophile in a showroom is measured in hours not minutes . Then there are privileges such as letting you take equipment home and then bring it back if you don't like it. Massive gear that is a pain in a neck to ship and deliver. And the huge cost to put in the showroom as Gary eloquently talked about in another thread. Even at our dealer discount, we are talking huge sums of money tied up in demo gear. All of this means a healthy margin is put forth for the dealer and acts as a multiplier to increasing base cost. Add to that the fact that these companies use a manufacturer's rep model where they also have to get paid as their "sales force" and the retail price keeps climbing up against mass market products sold online or in big box stores.

For these reasons, you are not going to see a $2,000 high-end product of any sort. Indeed, anything less than $6K or $7K makes no sense and will fail due to economics of the channel as opposed to the product merit.

All of this said, I like you have a severe reaction to high costs for the sake of having an expensive product. At CES, the Tidal engineer told me there is a single cap in the speaker which costs $12,000. Now, if he could explain why only such an expensive capacitor could do the job and nothing else, then I would accept the high retail price of them. After all, a 12-cylinder engine is also super expensive and cars with them are priced in the stratosphere. By the same token, if we could all understand the high cost factor here, we would accept it even if it prices it out of our price range.

Fortunately there are still products that are priced according to what they cost rather than what the market can accept. There are far fewer of them to be sure, and they still have to meet the above category (so they don't cost just $1,000), but they do exist.

 

[Steve williams]

For these reasons, you are not going to see a $2,000 high-end product of any sort. Indeed, anything less than $6K or $7K makes no sense and will fail due to economics of the channel as opposed to the product merit.

Not so sure I would agree with this statement Amir as you seem to be equating a thresh hold of the MSRP to "the high end"

There are countless products now in this price range which can be construed as high end

 

[amirm]

No surprise then that even as players multiply, competition is not driving prices down in the way traditional economic models would predict. I know I am over simplifying things and have left a lot of factors out but this is a post not a dissertation Anyhow, the products are out there because the opportunity is out there. Choices are a wonderful thing but apparently it isn't free. The good news is that now more than ever we have so many good products to choose from in terms of base performance. The price paid is that the cutting edge has gotten wildly expensive. Where one chooses to play all things being equal is another story altogether. Gawd. I hope I didn't bore you guys to death.

Very interest perspective and not boring at all Jack! I think one reason there are so many manufacturers is that a) it is relatively easy to get into this business and b) so many wealthy individuals confuse a hobby with a business and decide to go and manufacture such gear.

On (a), the availability of computer modeling and ready outfits in far east and elsewhere to build anything under your brand, has really changed the dynamics here. What used to require gray hair, lots of skill in manufacturing, and familiarity with a soldering iron, has yielded way to quickly packaging things up from ready parts and getting them to market. Nowhere this is more true of speakers where it is more about woodworking skills than any other trade . So we have a hundred different companies making high-end speakers.

On (b), I am guilty of that to some extent myself having started my own A/V business . You get frustrated as a customer and decide that you can do better by having products produced to your spec. And that since you are convinced you know more than other audiophiles , you will be wildly successful. Alas, I heard a great line in woodworking magazine about getting into furniture making: "the worst thing you can do to ruin a great hobby is to turn it into a terrible business." It is fun to be an audio hobbyist but running a manufacturing line? Not so. And skill set in one business doesn't necessarily translate into another.

So I am not sure there is sound economics behind so many brands. A lot of money is lost on behalf of the wealthy investors in this business.

 

[es347]

Duelund CAST Silver Capacitors are used in the Tidal speakers and they are their "best", selling for about $5K...less than half the amount claimed by the Tidal engineer. $5K for any capacitor is nonsense but significantly less nonsensical that the $12K claimed by the engineer. I have no doubt that the Tidal Sunrays are a great speaker but I'd come much closer to justifying purchase of that Porsche Turbo I've lusted after all my life for about the same money. I of course realize that the speakers contain a much higher level of technology and are much more labor intensive to manufacture.....riiiiiight.

 

[vinylphilemag]

I don't like how highly the absolute top of the high end is priced, if only because I can't afford it! But there is clearly a market for such items, just as there is for other expensive items (like the sports cars Amir mentioned).

To use a non-car analogy: is a $30,000 Rolex Oyster watch really any better at keeping time than my $300 Seiko Kinetic? For that matter, does my $300 watch really keep better time than a $10 plastic digital Timex? Finally, I bet that the parts in that Rolex don't cost THAT much more than those in my Seiko (gold case notwithstanding)...

 

[amirm]

Not so sure I would agree with this statement Amir as you seem to be equating a thresh hold of the MSRP to "the high end"

My definition of "high-end" is what we collectively discuss in this forum and elsewhere. Almost all of those products fall in the price category I mentioned. I call the products you mention above "high-value" category, not "high-end." High-end by my definition means maximum performance. Or at least striving for it. I don't know personally how to make maximum performance products cheap. If I hand match output transistors in an amp, it costs a fortune. If I have to make a class A amp with high power, it costs a fortune. If I want to make a high-end tube amp, it costs a fortune. If I want to have a curved speaker cabinet and highly matched and low distortion speaker drivers, that can cost a lot. That last bit of precision *is* expensive. Don't let anyone tell you otherwise. It is a rare event where laws of physics let you get something for nothing.

In the tier just below, we can do well. Take Paradigm speakers. I recently compared their bookshelves to Revel. I would say they achieve about 70 to 80% of the performance for about 60% of the price. How often do people here talk about speakers like Paradigm? I rarely if ever hear anyone talk about them. Instead, it is Wilson this, and XYZ that. Is Wilson performance available at $1000 range? $2,000? $5,000? I call our Paradigm speakers "high-value."

Talking about bookshelves, the Revel M22 came within 10-20% of the fidelity of the Salon 2. They have the same tonality and superb imaging. Alas, it simply doesn't have the same bass performance being such a small speaker. At 10% the cost, it does provide superb value but it doesn't fall in my definition of maximum performance. And this is compared to Revel Salon 2s which are priced extremely low for flagship speakers ($11K each).

So maybe it is a case of terminology.

Note: my company is a dealer for Paradigm and Revel line. So please take personal bias into account as you read the above .

 

[Steve williams]

how about the new Maggie 1.7's which by all accounts is a high end speaker at less than $2K

 

[amirm]

how about the new Maggie 1.7's which by all accounts is a high end speaker at less than $2K

So what about the more expensive Maggies? Do they not do anything better? How about compared to Wilson? If someone compared them side by side, you would say that is the right thing to do?

Again, we go back to definition of "high-end." Is it maximum performance? Or is it great price/performance? I heard the smaller Martin Logans at CES. While they sounded great and bring superb value, but they clearly were a step down from the more expensive ones. I didn't hear the Maggies but I suspect the same equation holds there. High-value vs high-end....

 

[Mark Seaton]

Now if only life was so simple. By education, I'm a Business grad with a specialization in Marketing specifically in the areas of Sociographics. In the last four decades one of, if not the biggest trend in consumer behavior is individualization. ...
...E-commerce in the 21st century bolstered this trend further allowing manufacturers not just of finished products but of parts as well to further target even smaller niches spread out over an almost global area. This "access" also lowered the barrier to entry in many industries, audio included to the point where intellectual property is at its most premium.

No surprise then that even as players multiply, competition is not driving prices down in the way traditional economic models would predict. I know I am over simplifying things and have left a lot of factors out but this is a post not a dissertation Anyhow, the products are out there because the opportunity is out there. Choices are a wonderful thing but apparently it isn't free. The good news is that now more than ever we have so many good products to choose from in terms of base performance. The price paid is that the cutting edge has gotten wildly expensive. Where one chooses to play all things being equal is another story altogether. Gawd. I hope I didn't bore you guys to death.

Very interest perspective and not boring at all Jack! I think one reason there are so many manufacturers is that a) it is relatively easy to get into this business and b) so many wealthy individuals confuse a hobby with a business and decide to go and manufacture such gear.

On (a), the availability of computer modeling and ready outfits in far east and elsewhere to build anything under your brand, has really changed the dynamics here. What used to require gray hair, lots of skill in manufacturing, and familiarity with a soldering iron, has yielded way to quickly packaging things up from ready parts and getting them to market. Nowhere this is more true of speakers where it is more about woodworking skills than any other trade . So we have a hundred different companies making high-end speakers.

On (b), I am guilty of that to some extent myself having started my own A/V business . You get frustrated as a customer and decide that you can do better by having products produced to your spec. And that since you are convinced you know more than other audiophiles , you will be wildly successful. Alas, I heard a great line in woodworking magazine about getting into furniture making: "the worst thing you can do to ruin a great hobby is to turn it into a terrible business." It is fun to be an audio hobbyist but running a manufacturing line? Not so. And skill set in one business doesn't necessarily translate into another.

So I am not sure there is sound economics behind so many brands. A lot of money is lost on behalf of the wealthy investors in this business.

You forgot about the huge EGO's that the industry draws, and the opportunistic salespeople who see nothing but dollar signs in the rabid consumerism so evident in the high end 2ch side of the business. There are also many factors tied to trends in manufacturing which have pushed toward just as much segmentation of the market as we see in wealth distribution. I do caution against getting to broad with the brush, as many in the business quite genuinely believe the efforts the employ are the only way to get the end results, and it isn't just about generating huge profits. There is a severe lack of sound business practices in the audio world, making both manufacturers and suppliers very fragile.

Quite regularly I refer to a significant segment of the market as audiophile jewelry... and while it's half joking, there is truth to the fact that many details which have become expected in "high end' products does add significant cost with modest, if any, performance benefit.

 

[RBFC]

Regardless of which product market is under consideration, there will always be a desire for profit-taking. Goldman Sachs, for example, made billions as the housing market collapsed. Interest in personal profit can always become a factor, even if the end result is killing the actual market for your products. So, high-end audio may be in a profit-taking phase, where concerns over longevity of the market are secondary to short-term gain.

Lee

 

[Mark Seaton]

Second factor that is important and basically is fact of life is how this equipment is sold. They go through a retail channel with a very "high touch" way of selling. You all are a picky bunch . You don't walk in and walk out like you are buying something at K-mart. Typical conversation with an audiophile in a showroom is measured in hours not minutes . Then there are privileges such as letting you take equipment home and then bring it back if you don't like it. Massive gear that is a pain in a neck to ship and deliver. And the huge cost to put in the showroom as Gary eloquently talked about in another thread. Even at our dealer discount, we are talking huge sums of money tied up in demo gear. All of this means a healthy margin is put forth for the dealer and acts as a multiplier to increasing base cost. Add to that the fact that these companies use a manufacturer's rep model where they also have to get paid as their "sales force" and the retail price keeps climbing up against mass market products sold online or in big box stores.

A long time ago while a slave to a boutique audio retailer I came to the conclusion that 2ch audio would mostly remain a hobby and fun add on to whatever I was doing, and something I would never anchor my income with. The reason goes far beyond the "high touch" aspect of such sales. It comes back to the fact that this is a hobby focused as much on the chase as the end goal. As such, those wandering into a store look as much for someone to share their passion for the hobby with as they do someone to aide them in a purchase. The fact is that since most enthusiasts find the discussion and experimentation so enjoyable, it becomes very hard for them to place value in someone's time. The 2ch world is all about the gear. Way too few make it on to tackling the acoustics where things finally shift into a search for solutions where someone's time and knowledge is valued. This is also unfortunately where the super-salesman type thrives, and you see the sales/distribution models which make for big margin items.

I also didn't see any mention of the need to artificially inflate the MSRP and margins to allow all the enthusiasts feel "special" in that they got a 10-25% discount.

On the home theater side and in the larger areas of integration and installation, the focus is much more on the solution than indulging a hobby. There is room for very different business models aligned with the value being added by each business or proprietor, be it designer, reseller, installer or manufacturer.

 

[KeithR]

only the 2 channel audio market seems to get more and more expensive, by rates multitudes of inflation, for "technology" which is usually far from any new design.

one prime example is today's cable market. they just keep doubling prices for the hell of it and now cost more than cars (FOR CABLES!!!). Please tell me Karen how you can really defend Transparent top of the line cable prices compared to BMWs?

i think its pretty easy to see who is overpriced by looking at Audiogon. the gear at 50k for example regularly sells for less than 50% of value---many of the time, 60-70% off MSRP.

 

[Steve williams]

Please tell me Karen how you can really defend Transparent top of the line cable prices compared to BMWs?

That's why Karen drives a Rolls

 

[microstrip]

High-end by my definition means maximum performance. Or at least striving for it. I don't know personally how to make maximum performance products cheap.

Amir,

Excellent definition. Hi-end is an engineering product and and the price should reflect research, manufacturing, distribution, sales and support.

Surely state of the art products follow the law of the diminishing returns.

I do not know exactly in which of the two last parcels my friendly dealer includes the nice dinners ...