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How are Hig-End Speakers Priced?

I recently (early Feb 2012) purchased a pair of Model 61 Human Speakers, intending to build a small office system with them. I've been listening to them through my main system for a few days now, while breaking them in. These were purchased directly from the builder/designer; my cost was only $675, delivered to my door.

I am so very impressed with the build quality of these small speakers and the quality of the music emanating from them (even though they are not yet fully broken in). I'm honestly surprised they are as inexpensive as they are, and have begun wondering how high-end speakers are priced.

The speakers are manufactured in the Northeast US, and (so far as I know) the builder/designer doesn't advertise and doesn't attend trade shows. The speakers are built with only one pair of binding terminals, two hand-built drivers, and a very simple 1st-order crossover using a design I believe is refined from an 1970's-era design. I'm not sure how much the designer is actively pursuing R&D currently.

I'm wondering if there is a formula that speaker manufacturers generally use when designing/pricing their products. For example, does a manufacturer target a price point, and then decide to follow an "industry-standard" formula like (say) 15% for R&D, 15% for materials, 15% for manufacturing/assembly, 15% for marketing, 15% for distribution, 15% for manufacturer's profit, and balance for seller's profit? Certainly, eliminating (or reducing) one or more of the above categories could yield a speaker that is much less expensive than the price point it was designed for.

Any thoughts?
rx7audio

Showing 2 responses by edorr

edorr
714 posts
 
For a pair of $25,000 avalons, this is my estimate:

Components (electronics and cabinets)(at manufacturers cost): 10%
Labor: 10%
R&D: 10%
Marketing & overhead: 10%
Dealer margin" 40%
EBITDA margin: 20%

Very depressing: $2,500 worth of components gets you a $25,000 avalon speaker (of course, I would not dream of buying this speaker new at MSRP, but that is a different issue).

Now my Salk center channel is build to the same standards (if not better), and use the same quality components.

Because of lower overhead, factory direct sales, and probably lower margin, I estimate this $3000 speaker has about $1000 worth of components in it. A much more interesting value proposition!
edorr
714 posts
 
The problem is you are looking at just component costs. from the point of view of the manufacturer overhead, labor, dealer margin, R&D are all cost. The fact of the matter is, I don't think any of these speaker manufacturers are operating on absurd margins.

Check Apple's income statement - how much do you think it cost to build an iPhone? The only difference is, the iPhone does not have that - I could just buy the components and build this myself feel to it.
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