New think piece from Roy Gregory- Thoughts?

[Ron Resnick]

“… less expensive component … value at around $12,000”. Are you kidding?

No, I'm not kidding. I appreciate that all of this is rarified air.

But in the cosmopolitan world of WBF relativism, with a Boulder 3010 preamp having an MSRP of $164,000, I absolutely consider the $12,000 Trafomatic Lara to be a very good value for my personal sonic preferences.

 

[Elliot G.]

You forgot one of the great early speaker innovators-
** John Dunlavy (Duntech, Dunlavy)

Forgot a lot
Jon Dahlquist
Sol Marantz
Javier Guadalajara
Nakamichi
The CD inventors
Bob Fulton - invented the wire and cable business
Ivor Tiefenbrun -Linn
Just a few missing from Gary’s List
And if course
Harry Pearson and J Gordon Holt

 

[gleeds]

You forgot one of the great early speaker innovators-
** John Dunlavy (Duntech, Dunlavy)

“… less expensive component … value at around $12,000”. Are you kidding? That’s far more than most consumers ever spend on an audio system, probably more than the vast majority spend in their lifetimes.

His conclusion starts:
The bottom line here is that, once you reach a certain (surprisingly low) price level, the whole industry is sliding in an uncontrolled and haphazard manner towards a two-tier model, while the hold-outs and established practice means that three margins are still generally applied – and then raped for discounts. And that’s before you even start to consider single-tier, direct to customer sales, which introduce a whole new and very different cost structure. In other words, the relationship between manufacturing cost and asking price is now utterly unfathomable and ranking products, or choosing them on the basis of price is a fool’s errand.

What’s he’s saying is that the industry is moving to a manufacturer-distributor (2-tier) model on the one hand as opposed to the traditional manufacturer-distributor-retailer (3-tier) model. When there are only two tiers in the distribution model, they can agree the best pricing strategy and know their profitability per sale with certainty. There is no discounting and more certainty for customer as well, because they know the resale value of their purchase is based on a fixed new price.

Examples are Schiit and Holo Audio. Moreover, they need very few distributors (Holo has only 3 globally), so each one will have much higher sales, much less sales effort and can therefore afford to have a smaller margin. Holo distributors hardly have to sell the product, most of their effort is keeping supply up with demand.

In the 3-tier model it becomes a massive bun-fight. If the customer expects a discount, the retailer and distributor will be arguing with each other and, if the product is made to order, the manufacturer might be drawn into the fight.

The 1-tier model are manufacturers selling from their websites or Amazon, but include large brands like Cambridge Audio, who are owned by Richer Sounds, which is the largest audio retailer in the UK. They are my favourite brand - you can get a very good complete electronics package streamer to amplifier for under $3,000.

The point he seems to be making is that you can get ripped off at any level, because anyone can make or buy in a $100 cable, pile on the B/S and sell it for $3,000. However, 1-tier ands 2-tier models have the potential to offer much more value and certainty, whereas the 3-tier model is a value lottery.

RG sees the audio market moving to most people buying direct from manufacturers or distributors at low price-points (closer to $1,200 than $12,000), neither having any need for retailers, offering certainly and value. The 3-tier model will remain for the wealthy few with money to burn and the idea of value almost non-existent.

Most of the innovation these days is by the likes of Zidoo (EverSolo) and HiFi Rose, putting together very attractive and high performing products at great prices sold direct or by distributors. They are taking a lot of traditional 3-tier sales.

My idea of value is a Whest Two.2 Discrete phono stage, bought direct from Whest for £1,500 last year.

I agree with some of the points you are making. RG is not wrong that the system's discounting is deleterious to the industry's health and vibrancy. As you stated, he is speaking about Europe and mainly value-priced gear, where the continents' natural borders and dealer protections differ considerably from those of the US.

In the US, high-end luxury brands with too many dealers have exasperated the discounting conundrum, fighting for business on high-ticket items nationwide. And what do they have to offer besides a better price from 3000 miles away? No local sales tax (a 7-10% savings) and significant discounts. This happens routinely, even on heavy and expensive six-figure loudspeaker deals from some of the biggest brands in the industry.

Who do I blame for this practice? Certainly not consumers. IMO, the main culprits are the manufacturers or distributors that condone or turn a blind eye to this practice. A side effect of the practice is a declining number of brick-and-mortar, full-service retailers and fewer opportunities to hear smaller and potentially higher-value brands. And perhaps as significantly declining resale values when it comes time to sell your pre-owned gear. Even if a current model and relatively new, high-end gear routinely goes for 40% of retail.

As a US distributor, I consider these issues daily. Two-tier distribution can work well, especially for smaller, lighter components, as can direct-to-consumer makers of similar products like Schitt. In speakers, Buchart Audio, a maker of speakers in Denmark, offers generous in-home trials and return privileges. I believe longer-term direct-to-consumer and two-tier distribution models will dominate the audio landscape, especially once boomers have bought their last high-dollar system and a new generation of music lovers no longer wants the trophy gear so many of us (including me) on WBF covet. A recent thread on WBF considered, "Is the high-end dying?" and many contributed their views. No, but it is changing, and change is our only certainty.
.

 

[Kingrex]

People have shows to hear systems at. You don't need stores. Stores are limited selection with abrasive salesmen. Usually. I don't generally like audio sale personal. First words out of their mouths. You got ripped off. Your stereo sucks.

 

[TonyW]

Value is a perception. Look, I’m just a guy, sitting in a room, listening to music. I’m not interested in rotating gear in/out of my system. I do it out of necessity to get the sound and performance that I want. The frustrating thing for me has been compromising due to cost and then not being satisfied with my purchase and so in the long run (sometimes years) I end up buying what I wanted in the first place. I eventually learned value over price.

The biggest fault I find interacting with dealers, be it online or B&M, is their lack of respect with regards to my knowledge and experience. Their priority is to sort out how deep is my pocket. Not all are like this. I know some dealers that are great to work with. I have yet to meet a dealer for the first time who spent a moment to get to know me and learn what I know and what have done for myself in this hobby. Are some out there?

We the consumers have turned even the hi end market into a commodity. We buy with an eye on resale value. How will I do on a quick turnover. I see my real cost of ownership not as purchase price but as net cost after selling. And guess what, if I get a great discount up front when I buy, I better be ready to offer up a great discount when I sell. Don’t get something for nothing.

So value comes down to what will it cost me to get what I need or what I want. Value is fluid. The top of line CD player in 1995? I’m not interested even if it is a $9900 discount off of original retail. Others feel differently.

Henry Ford was the value king. He made millions of Model T’s cheap. Everyone loved the great value in a bare bones, no nonsense car that got them to where they needed to go. But eventually people got sick of black. They got tired of getting hurt trying to start the car with a crank. People were willing to pay more for other colors and an electric starter. They saw what was once expensive luxury as good value.

The shiny amp will always get picked first.

 

[Al M.]

People have shows to hear systems at. You don't need stores. Stores are limited selection with abrasive salesmen. Usually. I don't generally like audio sale personal. First words out of their mouths. You got ripped off. Your stereo sucks.

Unfortunately the sound at shows is usually mediocre, so it's hard to make decisions based on that sound. There are exceptions. One of them was PranaFidelity at T.H.E. Show in SoCal 2023 (there were a few other rooms with good or great sound as well). The sound was excellent and very much what I had been looking for. I spent a lot of time there and was able to test drive the PranaFidelity Dhyana speakers with all the recordings that I brought, covering very diverse music. At the end I made the decision to purchase the speakers. One of the best audio decisions I ever made. I *love* these speakers.

In 2024 the PranaFidelity room was a highlight as well, this time with the smaller monitors rather than the floorstanders. Steven Norber gets consistently good sound of his rooms, that is known. I wonder why so many others have a hard time with proper show set-up.

 

[Al M.]

The biggest fault I find interacting with dealers, be it online or B&M, is their lack of respect with regards to my knowledge and experience. Their priority is to sort out how deep is my pocket. Not all are like this. I know some dealers that are great to work with. I have yet to meet a dealer for the first time who spent a moment to get to know me and learn what I know and what have done for myself in this hobby. Are some out there?

I have had good experiences with Goodwin's High End (Boston area). They have always treated me well.

I still have the Octave preamp and amp, the MIT digital AES/EBU cable, as well as the JL Audio subwoofers, all of which I bought there and which I am tremendously happy with. All of these components aren't going anywhere.

 

[gleeds]

People have shows to hear systems at. You don't need stores. Stores are limited selection with abrasive salesmen. Usually. I don't generally like audio sale personal. First words out of their mouths. You got ripped off. Your stereo sucks.

Kingrex, as an audio professional yourself, that feels like a pretty vast generalization.

Shows are suitable for understanding what interests you but are among the worst places to listen to high-end equipment. Shitty dealers don't stay in business for very long. In larger markets, there are almost always a few retailers with good selections, three or more speaker brands at a given price point, and multiple lines of electronics, cables, etc. Like any profession, there is a range and levels of professionalism.

As a distributor and head of a leading high-end loudspeaker company sales network, we make sure our retailers have a substantial selection of brands, extensive knowledge on how to put together and set up a system, and, above all, excellent after-sale service. They should also accept trade-ins and make it easy for customers to upgrade when desired. No one should be shy about asking a salesperson about their experience and credentials. Determining the best stores and salespeople should be pretty straightforward by asking around. One easy way is to ask right here on WBF.

The bottom line is that if a salesperson does not spend the first part of a visit with you asking about your audio journey, what you currently own, and your current system, you have the wrong person. They should also ask about your room, musical tastes, and listening habits. Consumers should make an appointment beforehand, specifying what equipment they want to audition, compare, etc. Many quality dealers will also arrange in-home auditions with pre-agreed-upon terms. One should do homework to find the best retailers and not throw the baby out with the bathwater.

 

[gleeds]

Unfortunately the sound at shows is usually mediocre, so it's hard to make decisions based on that sound. There are exceptions. One of them was PranaFidelity at T.H.E. Show in SoCal 2023 (there were a few other rooms with good or great sound as well). The sound was excellent and very much what I had been looking for. I spent a lot of time there and was able to test drive the PranaFidelity Dhyana speakers with all the recordings that I brought, covering very diverse music. At the end I made the decision to purchase the speakers. One of the best audio decisions I ever made. I *love* these speakers.

In 2024 the PranaFidelity room was a highlight as well, this time with the smaller monitors rather than the floorstanders. Steven Norber gets consistently good sound of his rooms, that is known. I wonder why so many others have a hard time with proper show set-up.

Steven has lots of experience and is an authentic talent in speaker design—the real deal and the reason we collaborate with him on our own designs. Getting decent sound at shows ain't easy, but a handful of experienced hands can make great sound almost anywhere. My friend Dan Meinwald of EAR North America almost always set up his Marten speakers on diagonal walls to mitigate room modes. Wes Bender could always get great sound in whatever room he was hosting. My colleague Damon Von Schweikert is as good as one gets.

 

[gleeds]

Forgot a lot
Jon Dahlquist
Sol Marantz
Javier Guadalajara
Nakamichi
The CD inventors
Bob Fulton - invented the wire and cable business
Ivor Tiefenbrun -Linn
Just a few missing from Gary’s List
And if course
Harry Pearson and J Gordon Holt

Elliot, it was not meant to be entirely inclusive, but I'm glad you added some of these icons

 

[Elliot G.]

Elliot, it was not meant to be entirely inclusive, but I'm glad you added some of these icons

I know Gary

 

[Lee]

I do think this is part of what frustrates budding audiophiles. As astronomical prices become the norm, the bar is raised - suddenly a very good DAC is thought to cost $40 - $50k (some will say less but know they are losing the argument to the price=performance logic).

From the perspective of enjoying music, if that is the goal, one need not spend that much. Previously, I never spent anything remotely like the amounts I spend now, yet enjoyed music with every setup.

One way to mitigate that is to show how much better affordable DACs have become over time. A $2K Benchmark DAC 3 is fantastic.

 

[Lee]

“… less expensive component … value at around $12,000”. Are you kidding? That’s far more than most consumers ever spend on an audio system, probably more than the vast majority spend in their lifetimes.

His conclusion starts:
The bottom line here is that, once you reach a certain (surprisingly low) price level, the whole industry is sliding in an uncontrolled and haphazard manner towards a two-tier model, while the hold-outs and established practice means that three margins are still generally applied – and then raped for discounts. And that’s before you even start to consider single-tier, direct to customer sales, which introduce a whole new and very different cost structure. In other words, the relationship between manufacturing cost and asking price is now utterly unfathomable and ranking products, or choosing them on the basis of price is a fool’s errand.

What’s he’s saying is that the industry is moving to a manufacturer-distributor (2-tier) model on the one hand as opposed to the traditional manufacturer-distributor-retailer (3-tier) model. When there are only two tiers in the distribution model, they can agree the best pricing strategy and know their profitability per sale with certainty. There is no discounting and more certainty for customer as well, because they know the resale value of their purchase is based on a fixed new price.

Examples are Schiit and Holo Audio. Moreover, they need very few distributors (Holo has only 3 globally), so each one will have much higher sales, much less sales effort and can therefore afford to have a smaller margin. Holo distributors hardly have to sell the product, most of their effort is keeping supply up with demand.

In the 3-tier model it becomes a massive bun-fight. If the customer expects a discount, the retailer and distributor will be arguing with each other and, if the product is made to order, the manufacturer might be drawn into the fight.

The 1-tier model are manufacturers selling from their websites or Amazon, but include large brands like Cambridge Audio, who are owned by Richer Sounds, which is the largest audio retailer in the UK. They are my favourite brand - you can get a very good complete electronics package streamer to amplifier for under $3,000.

The point he seems to be making is that you can get ripped off at any level, because anyone can make or buy in a $100 cable, pile on the B/S and sell it for $3,000. However, 1-tier ands 2-tier models have the potential to offer much more value and certainty, whereas the 3-tier model is a value lottery.

RG sees the audio market moving to most people buying direct from manufacturers or distributors at low price-points (closer to $1,200 than $12,000), neither having any need for retailers, offering certainly and value. The 3-tier model will remain for the wealthy few with money to burn and the idea of value almost non-existent.

Most of the innovation these days is by the likes of Zidoo (EverSolo) and HiFi Rose, putting together very attractive and high performing products at great prices sold direct or by distributors. They are taking a lot of traditional 3-tier sales.

My idea of value is a Whest Two.2 Discrete phono stage, bought direct from Whest for £1,500 last year.

I would also add that I worry that cutting out dealers is perhaps a bit dangerous for the long-term health of the industry. Dealers add five important things imho:
1. A place to have an audtion.
2. Advice on how to put a system together and navigating various options.
3. A proper setup at one’s house.
4. Helping create a smooth process for processing warranty work and repairs.
5. Facilitating trade-ins toward better/newer products.

 

[Lee]

What innovations? These are marketing terms . How do these things move the industry ? Just because you like it didn’t make it an innovation or in fact make it significant. Why should I give them credit for their own literature, this makes no sense.
I am truly amazed that you don’t get that dropping names and spouting marketing terms means nothing when trying to advance the state of the art.
I don’t have anything bad to say or bad intentions towards any of these companies but you seem to constantly spew their verbiage as gospel. It may be to you but that is just one persons opinion

I am not persuaded by marketing speak. I try my best to learn what manufacturers are doing and understand what is truly innovative. And I try to match the technology work to what I am hearing. There is no question in my mind that dCS has one of the most talented engineering teams in the industry (many senior execs have expressed their admiration of the team to me) and that the way they implemented the mono DACs to get to an ultra-low noise floor with great linearity is correlated with the startling realism we hear on vocals on the Varese.

However, you seem reluctant to give dCS any credit on the Varese, not even acknowledging some level of innovation. I can only explain this as you being worried that Varese will take market share from Wadax and impact you financially. I see it a bit different. I think there is at this moment some very healthy competition in digital and that helps all customers. Indeed, MSB is preparing a flagship named Sentinel I have heard. I wonder what that sounds like.

I genuinely want Javier, Brandon, and you to be successful with the Wadax brand. But you should give credit where it is due even if it is owed to one of your competitors.

 

[Lee]

People have shows to hear systems at. You don't need stores. Stores are limited selection with abrasive salesmen. Usually. I don't generally like audio sale personal. First words out of their mouths. You got ripped off. Your stereo sucks.

Most dealers are not like that. At least outside of New York.

 

[Lee]

Steven has lots of experience and is an authentic talent in speaker design—the real deal and the reason we collaborate with him on our own designs. Getting decent sound at shows ain't easy, but a handful of experienced hands can make great sound almost anywhere. My friend Dan Meinwald of EAR North America almost always set up his Marten speakers on diagonal walls to mitigate room modes. Wes Bender could always get great sound in whatever room he was hosting. My colleague Damon Von Schweikert is as good as one gets.

Dan Meinwald is fantastic. Learned so much from him and Tim de Paravicini.

 

[ssfas]

I would also add that I worry that cutting out dealers is perhaps a bit dangerous for the long-term health of the industry. Dealers add five important things imho:
1. A place to have an audtion.
2. Advice on how to put a system together and navigating various options.
3. A proper setup at one’s house.
4. Helping create a smooth process for processing warranty work and repairs.
5. Facilitating trade-ins toward better/newer products.

Generally agree, but:
1. The 1-tier and 2-tier products RG is talking about, you can usually get a home loan sent to you and here in the UK you can buy and return inside 14 days no questions asked. It's the law (Sale of Goods Act 1979).
2. Dealers can provide this advice, but it is available elsewhere.
3. My local dealer delivers and sets up. He even delivers and sets up loan items.
4. Not really an issue with the UK/EU, where there are clear statutory rights.
5. There are some dealers who use trade-ins as a big selling strategy. It varies.

People have shows to hear systems at. You don't need stores. Stores are limited selection with abrasive salesmen. Usually. I don't generally like audio sale personal. First words out of their mouths. You got ripped off. Your stereo sucks.

Here in London/South East UK there are plenty of stores. I've not counted, but probably 10 seeing high-end or so within an hours' travel and plenty of others selling mid-market hifi. The salesmen are generally first rate, polite, pleasant, no-pressure, on occasions charming.

Shows here are pretty dismal. There is on annually in Bristol that is packed out. Another one held at Ascot near Heathrow airport recently was hosted by the UK's leading high-end distributor. Almost no one turned up.

I agree with some of the points you are making. RG is not wrong that the system's discounting is deleterious to the industry's health and vibrancy. As you stated, he is speaking about Europe and mainly value-priced gear, where the continents' natural borders and dealer protections differ considerably from those of the US.

In the US, high-end luxury brands with too many dealers have exasperated the discounting conundrum, fighting for business on high-ticket items nationwide. And what do they have to offer besides a better price from 3000 miles away? No local sales tax (a 7-10% savings) and significant discounts. This happens routinely, even on heavy and expensive six-figure loudspeaker deals from some of the biggest brands in the industry.

Who do I blame for this practice? Certainly not consumers. IMO, the main culprits are the manufacturers or distributors that condone or turn a blind eye to this practice. A side effect of the practice is a declining number of brick-and-mortar, full-service retailers and fewer opportunities to hear smaller and potentially higher-value brands. And perhaps as significantly declining resale values when it comes time to sell your pre-owned gear. Even if a current model and relatively new, high-end gear routinely goes for 40% of retail.

As a US distributor, I consider these issues daily. Two-tier distribution can work well, especially for smaller, lighter components, as can direct-to-consumer makers of similar products like Schitt. In speakers, Buchart Audio, a maker of speakers in Denmark, offers generous in-home trials and return privileges. I believe longer-term direct-to-consumer and two-tier distribution models will dominate the audio landscape, especially once boomers have bought their last high-dollar system and a new generation of music lovers no longer wants the trophy gear so many of us (including me) on WBF covet. A recent thread on WBF considered, "Is the high-end dying?" and many contributed their views. No, but it is changing, and change is our only certainty.
.

Dealers in the EU/UK have legal protection (The EU Commercial Agencts Directive = EC/86/653). Essentially it recognises that if an agent builds a business selling a manufacturer's product, the manufacturer cannot terminate the agency at will and take the business. If they do, they are liable to pay the agent the value of the business goodwill. There are a few cases where manufacturers have paid €millions to dealers to terminate a distribution/retailer agreement.

Because the UK/EU is small, manufacturers have to be careful to avoid overlapping distribution and it generally seems to work.

I think RG is talking more about the US market than the UK/EU, which still work pretty well. The 3-tier model here is still pretty robust for higher-end audio.

Retailing is about getting the most sales from your available retail floor space. Smaller brands are small because they don't sell much stuff. They are therefore a bad retail proposition because they take up space and generate few sales. Two examples:

1. My local dealer stocked a great brand for close to 50 years. The brand expanded their range and wanted the dealer to take the full range. The dealer refused because of the space required. They stopped stocking the brand completely.

2. The same dealer decided to stock RCM from Poland. A small brand few have heard of. In fact it is a side project of a large business and they don't want to increase production. They only have 3 products, all phono stages. I bought one. It's brilliant. He brought one round to my house to try out, no obligation, no payment. An easy sell.

 

[ssfas]

No, I'm not kidding. I appreciate that all of this is rarified air.

But in the cosmopolitan world of WBF relativism, with a Boulder 3010 preamp having an MSRP of $164,000, I absolutely consider the $12,000 Trafomatic Lara to be a very good value for my personal sonic preferences.

WBF relativism is one thing, but that’s not what RG was discussing. WBF to the real world is a bit like asking someone how much they spent on their latest superyacht. It’s not very relevant.

He concluded: The bottom line here is that, once you reach a certain (surprisingly low) price level, the whole industry is sliding in an uncontrolled and haphazard manner towards a two-tier model, while the hold-outs and established practice means that three margins are still generally applied.

The “suprisingingly low” might be floating around the $1,000 mark. Look at the products he refers to. The Rega P3, an excellent turntable system that costs under $1,000 (and Rega have sold them in vast quantities over decades) and LS3/5a like the Harbeth P3ESR XD, that costs $3,000 (again, a product sold in vast numbers, including to me).

These are long-established high value items that people will increasingly buy direct.

Thanks to the internet, the value proposition is quickly identified. I suspect RG also had in mind products like the WiiM Pro, a very good streamer sold 1-tier for $220 on Amazon. It is as much as most people need, very popular amongst audiophiles who don’t have $164,000 pre-amps on their shopping list.

 

[Al M.]

I suspect RG also had in mind products like the WiiM Pro, a very good streamer sold 1-tier for $220 on Amazon. It is as much as most people need, very popular amongst audiophiles who don’t have $164,000 pre-amps on their shopping list.

The WiiM streamer is excellent, I was shocked at how good it is when I heard it. Beats lots of more expensive streaming that I had heard over the years.

 

[Lee]

I am a big fan of Roy's and I like this think-piece.

Roy expresses the view that price is not necessarily correlated with sound quality. I agree with this point.

But maybe his actual words go a bit too far?

The sad truth is that price and performance were never really equivalent and that any relationship they once enjoyed is long gone. . .

Perhaps I am quibbling unfairly, but even I think there is a positive, if weak, correlation between price and performance. I don't think the correlation between price and performance is zero, as Roy suggests.

I think the more valuable part of the article is to explain to consumers and hobbyists the reality of and the practicalities of pricing and mark-ups in the high-end audio industry. Explaining the underbelly of the high-end distribution and dealer model is very valuable.

On the dichotomy between the biggest and most established companies versus smaller innovators I don't even understand what you guys are arguing about. Both types of firms exist, and the industry is better for it!

New inventions by innovators at all sizes of companies and small companies pressuring large companies not to become complacent and differences in pricing levels between big companies and smaller upstarts all accrue to the benefit of us hobbyists by giving us more options at different price levels.

Purely personally as a hobbyist I think it's fun to try to find a less expensive component from a smaller upstart company which I enjoy sonically as much as or more than a more expensive product from a more established company. For example, I think the Trafomatic Audio Lara is an amazing sound quality value at around $12,000. At the next price level up I am really enjoying the Aries Cerat Incito S. There is an element of fun about this to me, as opposed to paying four times or five times these price levels for a preamp from the biggest and most established manufacturers. (Yes, there are differences in build quality and consistency and other things, but at four times and five times the price there damn well better be!)

Good post but a couple of observations…

1. I also see a correlation between price and performance. But there are products that are affordable and offer astonishingly good sound. And there are over-hyped expensive products that don’t offer good sound. But the economics of making components and speakers also create an environment where you can do more with better parts and more labor.

2. Competition from newer brands does create pressure on more established players to keep innovating.

3. It’s also fair to point out (like I did earlier) for audiophiles that lesser brands can be problematic on service and resale and they stand a greater chance of going out of business.