Why Buy Real HiFi...?

[E-Stat]

The personal motive of the principals of high-end companies is beside the point... But I'm talking about market dynamics.

Perhaps you may expound on what constitutes "high margins" to you.

rw

[Feanor]

Oh no! Not at all. Larger margins do not make for a bad speaker or speaker company.
I didn't mean to speak out of turn. I just thought that this was what Feanor was saying when he said higher margins. Feanor, was I close?
Higher margins are not always bad. Sometimes it's needed for a smaller (or better) manufacturer to stay in business. It may just mean that they are not spending 20% of their profit on advertising.

Any specialized manufacturer catering to a small market segment is going to need higher margins -- it's not a matter of greed but of economic necessity.

Since it's their strategy to grab a portion of the mass, as well as high-end market and because they are larger and vertically integrated, the likes of B&W or Paradigm will have somewhat lower, per unit margins. But they are no less -- possibly much, much more -- cynically pandering to the illusions of audiophiles. All makers serving the high-end market require high prices; small firms, in addition, require high markup.

In the end the issue isn't with the makers. The phenomenon is that audiophiles are willing to pay hugh sums believing that high price and/or esoteric design represent value. The audiophiles have suspended the law of diminishing returns, makers are only exploiting the fact.

[Feanor]

Perhaps you may expound on what constitutes "high margins" to you.

rw

It means a high selling price relative to the per unit direct input cost of the product.

Like I said, this is typical of manufacturers producing specialized goods for a small market. It is an economic necessity. It is not the same a profit, and it has nothing to do with greed.

If high-end manufactures are guilty of anything, is is fostering perception of a need for specialized products, not the fact that their markups are high.

[Feanor]

I think you nailed it...As I hinted at earlier, as a general rule of thumb, within an industry you can bet that smaller companies will have higher profit margins. ....

Not higher profits necessarily, but higher margins (a.k.a. markups). See my response to E-Stat: margin/unit = price/unit - variable costs/unit. Profit = (margin/unit x units sold) - fixed costs.

You can have high margins and be loosing your shirt. You can have high margins and not be a greedy bastard.

[Florian]

I think i understand you now. You feel that many High End makers have to have high prices in order to be taken seriously by the High End Honbbyists. In some ways i agree. My friend paid aprox. 8500$ for a used Goldmund CD Trasnport and commented on the Gold etc.. I told him that the unit sounds wonderfull but all the Metal, Gold and Acrylic didnt have much to do with it. You are correct that it has become a nesecity to have high prices to be taken seriously, but this does not mean that the devices are not worth it and that a company which doesnt follow that apreach is equal or better. This is very difficult to disect!

[GMichael]

I think i understand you now. You feel that many High End makers have to have high prices in order to be taken seriously by the High End Honbbyists. In some ways i agree. My friend paid aprox. 8500$ for a used Goldmund CD Trasnport and commented on the Gold etc.. I told him that the unit sounds wonderfull but all the Metal, Gold and Acrylic didnt have much to do with it. You are correct that it has become a nesecity to have high prices to be taken seriously, but this does not mean that the devices are not worth it and that a company which doesnt follow that apreach is equal or better. This is very difficult to disect!

We have a saying in the Harley world. Chrome don't get ya home. But man it feels good between your legs.

[E-Stat]

It means a high selling price relative to the per unit direct input cost of the product.

And that is where I don't find substantiation with your blanket claim. My recent speakers are serial # 50. Not 500, nor 5000. The unit cost of these hand built units is quite high.

If high-end manufactures are guilty of anything, is is fostering perception of a need for specialized products, not the fact that their markups are high.

I guess I just don't share your cynical view. Fostering a need? Do you believe that we have achieved the ability to convey the experience of a live, unamplified event?

I sure don't.

rw

[Florian]

Hello E-Stat, mine are 56 ;-)

I wonder what my second will be, i hope its 57 or something along those lines. Mine was born on September 17 at 10:05 AM from GC in 1987

[Feanor]

E-Stat,

Yes, I come across that way. While high-end does thrive on high prices, I didn't mean to denigrate the majority high-end maker who are of integrity and sincerity. They are merely willing to cater to the demand that exists and many do that well.

And no, we're along way from being able to recreate a live performance. But to state the obvious, the $100,000 doesn't get 20 times closer to that goal than the $5000 system.

[E-Stat]

But to state the obvious, the $100,000 doesn't get 20 times closer to that goal than the $5000 system.

I'm sorry, I just don't use that "x multiplier better" concept with everything.

Is a steak from Outback 20 times more nutritious than a McDonald's cheeseburger?
Is a Pentel gel pen 20 times better than a Bic Stick?
Is a pair of Fiskars 20 times better than a dollar store pair of scissors?
Is a Lacoste 20 times better than a Walmart polo shirt?
Is a Mercedes S Class 20 times better than a Hyundai Elantra?

There will always be better in our society. I think the motivation for companies of all sorts to constantly improve is a good thing. Where we decide to jump on the merry-go-round is our choice.

As for your system analogy, I find one nearly capable of fooling the senses - the other not. While I don't (ever) plan to have a $100k system, I sure enjoy listening to well matched ones.

rw

[kexodusc]

Not higher profits necessarily, but higher margins (a.k.a. markups). See my response to E-Stat: margin/unit = price/unit - variable costs/unit. Profit = (margin/unit x units sold) - fixed costs.

You can have high margins and be loosing your shirt. You can have high margins and not be a greedy bastard.

OOOPS! My bad... Of course I meant "margins", not "profit margins"...profitability is a whole 'nuther discussion.
I suspect many smaller audio companies aren't terribly profitable in absolute profit margin terms. But I'm sure we can all agree there's an intangible value many of these guys would place on working for themselves doing something they enjoy...that's hard to measure in a profit margin calculation.

[kexodusc]

High-end audio is all about high prices and high margins. It is all about persuading the consumer that the law of diminishing returns somehow does not apply to audio to the usual extent.

Respectfully, I must disagree with this statement. I don't believe anyone gets into high-end audio with the intent to fool or persuade the consumers. Rather, they recognize a small, but significant market demand, and try to meet that demand, whether we recognize that demand as rational or irrational. Now I'm aware there is some "salesmanship" involved, but that's a constant at any pricepoint, high-end is no different.

This is basic economics. If you look at the demand curve, there's always someone willing to buy a product at almost any price. The only catch is the low magnitude of demand. This low demand doesn't help the suppliers any, economies of scale are practically non-existant, especially if there isn't a thriving business at other pricepoints to help support high-priced efforts.

I would submit that the high prices for super high-end audio equipment are a necessary evil for producers of these products. If they could lower costs and sustain profitability, they'd do that, it'd be in their best interest. It's just not always possible. The demand is likely inelastic after some point, and it just becomes a matter of giving the customer what he wants, regardless of pricing/value concerns.

High-end audio consumers are, of course and for better or worse, a niche market. Niche marketing supports high prices; high prices support high margins. High margins in turn support ridiculously inefficient manufacturing methods, viz. cottage industry.

No doubt manufacturing methods of many high-end audio producers are inefficient. I'm sure B&W can produce speaker cabinets and distribute their products at a far lower per unit cost than some smaller high-end companies. If anything, the onus should be on B&W and other large corporations to build better products for less money, even at top levels of performance. Of course, if everyone else is selling flagship speakers for $100,000, B&W will as well. Can't fault them there. But there comes a point for some people where the inefficient production costs are gladly accepted if the desired result can be obtained.

Judged by rationale criterion, high-end products are, (with a very few, scarce exception), are atrocious value. By extension, high-end buyers are, in general, suckers.

Feanor, I agree with what you're getting at here. To my ears, a $100,000 system sounds better than a $10,000 system, but not "much better" in my mind. It's approaching the limit where improvements are becoming harder to identify and I just get lost in the music, and don't really notice the improvements. That said, rationale criterion cannot be used to judge value the same for every consumer.

To this day, I only buy Heinz ketchup. My mom use to buy cheapo no-name ketchup and put it in a Heinz bottle to try and fool me (things were hard for mom and dad on a 1st Lieutenant's salary), but I wouln't have it. Rationally, ketchup is ketchup I suppose, but dammit, I can't stand other ketchups. I place a value premium on Heinz. It's not always rational, but it is very real. To me, the cheaper ketchup, while performing the same basic function (and I will eat it in absence of real ketchup), represents less of a value. I'm paying a bit less but getting far less satisfaction. I suspect to many audiophiles, similar thought-process exists.

[Florian]

ROFL!

To this day, I only buy Heinz ketchup. My mom use to buy cheapo no-name ketchup and put it in a Heinz bottle to try and fool me (things were hard for mom and dad on a 1st Lieutenant's salary), but I wouln't have it. Rationally, ketchup is ketchup I suppose, but dammit, I can't stand other ketchups. I place a value premium on Heinz. It's not always rational, but it is very real. To me, the cheaper ketchup, while performing the same basic function (and I will eat it in absence of real ketchup), represents less of a value. I'm paying a bit less but getting far less satisfaction. I suspect to many audiophiles, similar thought-process exists.

I told my mom yesterday that this cheap ketchup just doesnt cut it! It has to be Heinz, and nothing else. I look at Audio the same way and the differences are not huge after the first 20K but the differences are there and for me personally they huge but in a "global" view they are small.

[kexodusc]

ROFL!



I told my mom yesterday that this cheap ketchup just doesnt cut it! It has to be Heinz, and nothing else. I look at the Audio the same way the difference is not huge after the first 20K but the difference its their and for me personally the differences are huge but in a "global" view they are small.

Ketchup actually can be a good analogy to audio. My brother actually uses a different tomato sauce thing, (also made by Heinz). I can't stand it. He loves it - chili sauce...yuck. The othe sauce is more expensive. Which one is better? Neither really, just different tastes appreciated differently by different people. Speakers and audio equipment can be the same way.

I have to be respectful of his taste preferences, especially when he visits...I try to buy that stupid tangy stuff. He does the same for me when I visit him...if he remembers.

[Feanor]

...
This is basic economics. If you look at the demand curve, there's always someone willing to buy a product at almost any price. The only catch is the low magnitude of demand. This low demand doesn't help the suppliers any, economies of scale are practically non-existant, especially if there isn't a thriving business at other pricepoints to help support high-priced efforts.

I would submit that the high prices for super high-end audio equipment are a necessary evil for producers of these products. If they could lower costs and sustain profitability, they'd do that, it'd be in their best interest. It's just not always possible. The demand is likely inelastic after some point, and it just becomes a matter of giving the customer what he wants, regardless of pricing/value concerns.
....

For starters, you're right the high-end makers are not, in general, frauds or crooks. They are simply exploiting the demand that exists. On the other hand, these makers like are like firms in most industries: they target the well-heeled, up-market consumer.

Why skim the market? I think you know, and comes back to my original point. The price elasticity for the rich consumer is much greater. They are much less constrained by a strict concept of value. And sometimes the contrary applies: things that are rare, unique, or just expensive become sought reason of exclusivity rather than performance. All this means that the maker can charge high prices giving himself a cushion against inefficiency and/or less than hoped for demand.

The problem with audio equipment today for the audio-loving but constrained consumer (like me), is that too much of it is aimed at the top market segment. This means value components are more difficult, (I didn't say impossible), to find.

Some of us are concerned that there is a decline in interest in hi-fi among younger people, (of whom I'm not). What to do? More makers need to create value components instead of just trying to skim the old, rich, foolish audiophiles.

[Bernd]

Some of us are concerned that there is a decline in interest in hi-fi among younger people, (of whom I'm not). What to do? More makers need to create value components instead of just trying to skim the old, rich, foolish audiophiles.

Good point and I am one of the concerned. Not one of our youngsters shows any interest in quality reproduction. It drives me nuts. They have been exposed for years, but no cigar.

Value is all relevant really.

A point I discovered recently, when I took a young friend of mine to help select his first system. Most of the budget equipment we auditioned was dire.There are however some gems out there. And there are manufacturers who make value pieces. Rega, Cambridge and Wharfedale spring to mind.

Peace

Bernd

[Florian]

I cant speak much about youngsters at 22

I got my buddy (25) into Maggies with an old pair of MGI's for 200 bucks that sounds pretty cool.

[kexodusc]

The problem with audio equipment today for the audio-loving but constrained consumer (like me), is that too much of it is aimed at the top market segment. This means value components are more difficult, (I didn't say impossible), to find.

Some of us are concerned that there is a decline in interest in hi-fi among younger people, (of whom I'm not). What to do? More makers need to create value components instead of just trying to skim the old, rich, foolish audiophiles.

I dunno about that. I dont' think it's any worse than before. In fact, I think audio in general has been helped quite a bit by the home theater explosion of the last decade.

Hard core audiophiles weren't affected by HT at all, and presumably, a certain amount of the population would develop into hard core audiophiles anyway.
But now with everyone having home theater, and it being "vogue" to own a good one, people are listening to music on better systems than they would otherwise (hey, most sub/sat combos with a/v receives sound far better to me than boomboxes and mini-systems). The increased demand for speakers has prompted more competition and more efficient and higher quality production techniques at the lower level.

The demand for inexpensive speakers has skyrocketed. And modern CAD software has made speaker designing faster, easier, and cheaper. I honestly believe the entry-level has improved greatly in the 10-12 years since I bought my first Hi-Fi system. What's available today is better than what was available to me then. Look at all the start-up "factory-direct" companies that are selling glorified DIY speaker designs at entry-level price points using drivers that were found in yesterday's mid-fi (or better) gear.

I think it's the middle-of-the-pack that's become more stagnant. It hasn't gotten worse, just hasn't kept pace....

[Feanor]

I'm sorry, I just don't use that "x multiplier better" concept with everything.
.... Where we decide to jump on the merry-go-round is our choice.
...
rw

1. I suppose the simple 'X multiplier' is simplistic, but perhaps we can agree that there is diminishing incremental value.
2. We are all guided by some sense of value but we have a different sense depending on our personal circumstances.
3. We each decide how we will spend our own money.

[Feanor]

I dunno about that. I dont' think it's any worse than before. In fact, I think audio in general has been helped quite a bit by the home theater explosion of the last decade.....

HT has definitely drawn away from hi-fi. I think its the video/multi-media aspect.

I got into hi-fi in the early '70. Think of it! There was television but no recorded video entertainment. There was no VHS much less DVD. On the other hand there were plenty of great music recordings, (on LP mostly ). So for distraction, we wanted to better enjoy what was available.

Yes, you're right that inexpensive speakers are better than ever. Then again, you need six or eight of them instead of only two

[kexodusc]

Yes, you're right that inexpensive speakers are better than ever. Then again, you need six or eight of them instead of only two

Well, I grew up in the late 80's and 90's...VHS was around but it took a few years after DVD for the mainstream to buy into Home Theater.
But it happened.

You're definitely right about needing 6 speakers instead of 2. There's a mismatch that way. I do believe, however that most people use their HT's for video and music. Some of those people will then discover 2-channel stereo and hi-fi (or multi-channel hi-fi) and get "the bug", and start upgrading to better equipment. It's this exposure that HT can offer to people who may otherwise never have been introduced to the possibilities that I feel is the benefit.

Then there's the rest who will be content to watch Gladiator on their little cube HT systems...and maybe play the latest mp3 on their computer speakers. Can't win 'em all.

[GMichael]

Then there's the rest who will be content to watch Gladiator on their little cube HT systems...and maybe play the latest mp3 on their computer speakers. Can't win 'em all.

How could you ever win over people who already have the best?
How can you teach someone who already knows everything?

[Florian]

Well it depends on what you consider the best :-)

I personally invite people over which so far changed the audio life by 100%. I dont think the problem is the interest, i think the problem is money and dedication and goals and the problem is that young people dont even know what a violin sounds like.!

[GMichael]

Well it depends on what you consider the best :-)

I personally invite people over which so far changed the audio life by 100%. I dont think the problem is the interest, i think the problem is money and dedication and goals and the problem is that young people dont even know what a violin sounds like.!

I was referring to Bose. I call it sarcasm.

I know, I'm a baaaaaaaaaaad poster.

[Florian]

I was referring to Bose. I call it sarcasm.

I know, I'm a baaaaaaaaaaad poster.

I should have gotten that when i read the "cubes"

Oh well...funny anyways