Is it possible for a high end manufacturer to overprice their goods?
Having just read the interesting and hyperbole laden review by RH of the new Rockport Orion speakers in the latest issue of The Absolute Sound, one thing struck me..
is it possible in the high end for a manufacturer to overprice their product ( doesn’t have to be a speaker, but this example comes to mind)? I ask this, as the Orion is priced at $133k! Yes,a price that would probably make 99% of hobbyists squirm. Yet, the speaker now joins a number of competitors that are in the $100k realm.
To that, this particular speaker stands just 50.3” tall and is just 14.3” wide…with one 13” woofer, one 7” midrange and a 1.25” beryllium dome ( which these days is nothing special at all…and could potentially lead to the nasties of beryllium bite).
The question is…given this speakers design and parts, which may or may not be SOTA, is it possible that this is just another overpriced product that will not sell, or is it like others, correctly priced for its target market? Thoughts…
Who's to decide? Are you suggesting that there should be no limits? |
Very well put. Their motivation by the "intangibles" specifically referenced here place them outside of audiophilia, in my opinion, as their concern is about their power (relative social status) and that is neither about "sound" nor "music." (Nor about their soul, if we channel Pope F.)
This is really insightful. Let me see if I got the gist: the intrusion of hyperbolic price increases ("game-changer" products and prices) creates a carve-out which damages an existing market segment. That segment has high quality (if a bit more expensive) stuff. They experience a new customer drought. Here, my mind goes to, say, an expensive Hegel H30 amp which at, say, $16k may be just a fantastic amp and an end-game solution for many customers in that aforementioned segment. But now, if enough people are now chasing, say, Gryphon amps, then Hegel has a problem because the carve out is starving them. I hope I am getting that right. |
I suppose I could purchase a pair of $133,000 speakers if I want to economize a lot elsewhere in our lifestyle... If my wife would let me, of course 😎. She needn't worry. It ain't going to happen. Our values and goals are aligned. Once said, the comments made by Pope Francis and the criticism of materialistic values is a slippery slope. Consider a $133k or $3k pair of loudspeakers. If you get on his slope then you have to ask, "Why should we enjoy any stereo or hometheater system when there are poor people living in cardboard boxes?" We also would then have to ask, "Who's to decide how much we are allowed to spend, if anything, on loudspeakers?" Hopefully Pope Francis is not making the decision. Fancis sounds like he forgot the story of the woman honoring Jesus by pouring expensive perfume on Him. Some of the people in attendance criticized the woman because the perfume could have been sold and the money given to the poor. Jesus rebucked them for numerous reasons. And if I unpack this Gospel story, the economics major in me makes me see that there was a market for the perfume that honored Jesus. This means that somebody developed the perfume because they recognized the demand for expensive perfume. For the reasons cited in the Gospels, Jesus didn't have a problem being honored with expensive perfume. Implicitly, it would seem that Jesus didn't have a problem that there was an expensive perfume and a market for it. This brings us back to $133k speakers. If there is a market for the attributes the speaker offers, the law of supply and demand dictates that there will be some quantity demanded, that can be zero, by those who have the means. On the supply side, any product is going to have R&D costs that are outside of direct labor and material costs. Then there is also the general and administrative costs (G&A) associated with a product as well as sales and marketing expenses. The R&D, G&A, and S&M can be quite high relative to the direct material and labor cost. The speakers will be priced at the level that maximizes profits. Bottom line: If you look at only the material cost and direct labor part of a $133k pair of speakers, you will find the speakers over priced. If your look at the full context of a speaker's manufacturing costs, you might or might not find the speakers a fair value at market price. If your want to factor in some moral values about what people should be able to afford, all bets are off.
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The "market distortion" aspect as suggested by @hilde45 has merit in my opinion. Here’s this audio market where everyone plays nicely and introduces "new products or new versions" with incremental price increases of, say 10%-20%. Then, out of nowhere some manufacturer has the audacity to take that metric and increase it by a factor of 2 over previous "norms". This presents a number of possibilities for other manufacturers. The "sticker shock" of their top end products is has been obliterated by another company (thank you!) so their products appear to be a more reasonable cost/performance value. So, they would feel justified in raising the price, not just 20%, but 40% and still be very much in line with the perception of high performance AND high value. So, yes, a market distortion could follow the introduction of steep pricing into the marketplace. A little about the luxury market: Centi-millionaires, traditionally, don’t loose sleep agonizing over whether or not they received strong price/performance when making a purchase.. They are primarily concerned with owning something that really IS something worth owning. Sure, they’ll brag about the "guts" or "workmanship", but their true motivators may be the intangibles that can’t be measured. What is the prestige in owning the best of the best actually worth? And, if it IS expensive, wouldn’t it be viewed as a badge of honor rather than a shockingly high-priced trophy? Customers are also different. Many who engage in the ultra highend of a product category are true enthusiasts who love what they are doing and appreciate every nuiance their extraordinarily expense product does for THEM. They ARE getting great value from something they have heavily invested in. Back to the marketing considerations, I think we could look at various price ranges to see if a significant and meaningful gap exists whereby a segment of the buying public is being ignored, or has been abandoned altogether. As a result of that 2x product introduction, is there still a healthy market for legitimate high-value products at 1/2 that price, and somewhere in between? IF that 2x product negatively impacted the viability and availability of those other (lower) price ranges, then some measurable damage has been done. |
Very few of these extremely priced pieces of equipment are sold relative to the rest. Egos Drive most of these sales. Sitting in a room with extremely high priced equipment is hard to resist for those who have the funds, and many people do have the funds for these expenditures. Many of them are very gullible souls. The more seasoned and experienced listeners who really know what they’re doing can get the same Quality, and most often better, for considerably less. YouTube channels are culprits in promoting this exceptionally high priced gear, which serves to only stretch prices in a manufacturers lower end models. Even the Rich need to hold someone’s hand and there’s plenty of outreached hands. |
I only make 1 model bookshelf speaker ($9k/pair) now. Is it overpriced? Please remember my WT speakers are purist/cleanest sounding, closest to the original music, and the only no veil natural sound speaker in the world and 150 years of audio history. Alex/Wavetouch audio |
Not so surprisingly a lot of businesses fail because they didn't do basic homework on the cost of doing business like say opening a restaurant and not figuring out things like how much money I have to make just to cover all the costs at the end of the month. You would be surprised at how many simply don't do the math so when designing products with a limited economic audience, hopefully, you do some statistical analysis, and get a realistic idea of how many people are out there who can afford it but would purchase it. Though, When Dave Wilson started his speaker company with the Watt, he thought he would sell a few, 20- 30(I have the review somewhere). His business was recordings, records, but he ended up with 250 orders the first year and that was a very expensive item for what it did at the time. |
@yogiboy Actually, bears will poop anywhere, not just in the woods. So, yes, overpriced equipment abounds. More so with tweaks and cables where the cost to sales ratio can be phenomenally large. The Orion speaker was costly to design and manufacture with home built drivers yet. Whether it is sonically worth the $133K price is unknown, but it is an expensive audio product to produce from design to finish. @dean_palmer 100% @jimmyblues1959 Nope I have had the pleasure of hearing a $1 million+ audio system and it blew away any other system I've heard. My own system(s) cost me $5K and about $60K, the latter in a $150K custom listening room. The latter permits lesser cost speakers to sound like expensive speakers. I plan on upgrading from my currently valued $2500 full range Focuses to a superior speaker for reasons of greater listening area (e.g Von Scweikert) and ambiance/resolution which will cost me somewhere between $35K and $180K. I am satisfied for now but want to share with more than one or two people the sound of the center seat. There are some brands of high end, sometimes costly speakers which I do not find musically involving-Magico (heard 18+ A, S and Q series), Wilson (smaller the better), YG Acoustics, Vivid, Vandersteen, etc. I heard several Rockports and liked them. Still, I want to audition speakers in my room with my equipment to determine whether they will be worth the expense. I'm certain the the $180K VS Ultra 7s would be wonderful (I've heard the 9 and 11 and my best friend's VR35 export) but my budget does not allow that and at 67, I may be too old when I can afford it. |
I go to AXPONA every year and if you hear enough rooms you realize that some of these prices are not based on any cost formula. Made up out of thin air. I look at the Estelon speakers and they are a beautiful work of art and sound and I can see a wealthy person buying in. Some of the others not so much. For my money the Dynaudio Confidence 50 is all you could possibly want for sound. That room was my favorite. The jewelry aspect can't be denied at a certain price point. |
@thyname i will start my own post about it |
@grislybutter : Enlighten me! I am dumb, you are so smart. Thank goodness you are spreading your vast knowledge in here. I am honored |
@mihorn Try to find the you best speakers , just see small bookshelf , what s price ? more than $ 100, 000 ? |
@thyname i don't need your help, not sure when/where I gave you that impression. I was not saying a word about capitalism. Again it's more complicated than that and if you didn't comprehend it the first time, I doubt I can convey it to you. Which proves my point, if you didn't live in your bubble, your mind would be more open to the seeing what is disturbing here (NOT capitalism). |
Relax. No need to get worked up. Plenty of affordable gear available in the marketplace, at all price points. Don’t freak out. They are not going away. On the contrary, markets are flooded with cheap China Audio gear.
@grislybutter : maybe I can help you: which component are you in market for, and at what price range? Unless of course you are all set and are here to just whine and moan about capitalism 🤯🤔 |
I have been thinking about the same thing, which is very much like the OPs question, how high they can go with the price? How far they can go with the ugliness that these top of the line products’ design represent? So many are hideous looking, an absolute crime against basic design principles, for the same amount of money and effort they could be just look normal or pleasant - aesthetically.
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I am not convinced you always get what you pay for and I am skeptical of extreme prices. In 2005 the WAVAC 833A stereo amplifier was reviewed in Stereoplile magazine. Its price was $350,000. It had the grid of the 833A transformer coupled from a 300B SET. You can build this simple SET circuit yourself for less than $2000, $4000 if you use Western Electric 300B drivers. Hammond makes robust output transformers built the same way with the same materials as the most expensive Japanese transformers, all of which are not rated to carry as much DC current or signal current as the Hammond. You can drive the grids with Lundahl transformers which are arguably the best you can buy, and you can use globe 45 or 245 triodes which are built the same way Western Electric 300B triodes were built and drive them with mu follower directly coupled 6SN7 dual triodes. The power supply can have polypropylene filter capacitors when many $10,000 SET amplifiers use inferior electrolytic filter capacitors in the power supply. There has to be something fishy about selling such an amplifier for $350,000. What about speaker cables costing $27,000 a pair? How far do you have to go before credulity breaks down? Here is another consideration. A sound system will never perfectly reproduce how a live performance sounds. If a $5000 system is 70% accurate by some yet to perfectly define measure, is a system with six figure components that much closer, say $80? |
Last fall I went to the audio show in suburban DC, and I enjoy it (although pointing out to my friend who accompanied that audio is an old man’s game). I went into the many hotel rooms where speaker vendors were demonstrating their wares. A lot of fun actually, but what struck me is that with few exceptions that price had nothing to do with the quality of the sound coming from the speakers. Moreover, it was pretty clear that to distinguish themselves, speaker makers resort to outlandish physical designs to stand out in the crowd. And when I say "outlandish", it means "ugly". Finally, my observation is that most of these speaker makers won’t be around in 3-5 years, but more will spring up in their place, as long as people are willing to pay for them. It seems you don’t need a lot of capital to get into the speaker business. |
@henry53 while the example you use is unfamiliar to me, I would not want to be the guy who buys this clock and then needs to re-sell it. Here’s the thing, I don’t think we are actually discussing the value of something to someone, particularly when it comes to some high end gear, more about what is a price that even the most well heeled say… “enough is enough”. Some folks may believe that there is no price that will bring about this reaction, the question in my OP was dealing with that. Certainly, if we are to believe Dan D’Agostino, he has not gotten push back from his customers…yet. But my point is more along the lines of where does that become a problem for these manufacturers…like Rockport and D’Ag, or is it that they can push the prices up to multiples of what they currently are..and still see healthy interest and sales! |
In the U.S., the share of our population that fit the demographic for being in the middle class has been shrinking for decades and is now below 50%. Poor people do not buy expensive audio systems and America is a country loaded with poverty and near-poverty. Kids today are not doing as well as their parents, economically speaking. Not even close. So manufacturers have been more and more targeting the wealthy. When prices for components hit the mid 5 to 6 figure range, price has little to do with cost for most of those items-- like a $100,000 amp. They are accepting the sad reality that there will be fewer and fewer customers for the high end-- so they raise prices WAY UP to pad margins and live with fewer and fewer sales. A race to the bottom that feels like up! |
In business they have a similar set of equations that we used to calculate the price point that maximized revenues. Of course we had to have a demand vs price curve.
There’s not a single major company on earth that doesn’t understand the demand and price relationship. I think it’s fair to say that some of them will go to extraordinary lengths to ramp up demand. It is said that Big Pharma was making $1000 every second during the most recent p(l)andemic. With that kind of money they could afford the greatest PR campaign in history, and they did.
Luckily we audiophiles are still seem as relatively small fish compared to what happens in the art world. The fairly recent sale price of Cy Twombly’s Untitled fetched $46, 437, 500 USD back in 2017. Most of us would be reluctant to pay $50 for what appears to be slapdash broad red paint stripes on a canvas if we saw it in a thrift store. Encouraging a few well placed friendly ’journalists’ to whip up demand for high priced audio is kids stuff in comparison.
Here are some more surprising examples of what demand can do to price.
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@thyname you obviously misunderstood what I wrote, and that's the kindest way I can put it. Don't try too hard, it might be too complicated for you. |
I don't see what the big deal is, the wealthy can afford more expensive cars, houses , boats, food, and many other things. Obviously most of these super expensive pieces of audio gear are not overpriced, look at Dan D'Agostino audio, their relentless amplifiers went up in price about $100,000 since it's inception, so they must be selling quite a few of them. |
Yes indeed. This is unacceptable! Everyone should get the audio system they deserve at the price they can afford to pay. Everyone should be rewarded by their need, not their wealth. Wait ....🤦♂️🤦♂️ |
I find this a unique a fascinating hobby, almost unlike any other (maybe some extreme technical sports or car racing). True audiophiles would always look for the value and not pay for the luxury premium (I think) ~whatever makes the car faster So I don't see the danger of this scissors of reasonable and luxury segment causing runaway prices. Most companies the users deal with here can barely turn a profit, they have no capacity to build "Lamborghinis" |
While I think it is interesting and instructive to affirm the many costs that go into every product, I think this has little to do with the cost to acceptance factor that is in my OP. The question of whether something can be overpriced in this hobby to the point that all buyers say..no mas; is what I am questioning here. The example in my OP is of a speaker that has just received an absolute rave review by RH in the current issue of the Absolute Sound. I picked this example for a couple of reasons...1) it is priced at $133K, which only a few years back was almost unheard of for a piece of audio gear, and yet today, as other members have pointed out, is becoming more and more common and 2) It is a somewhat diminutive design that on the face of it does not seem to offer the glitz that a lot of ultra high end buyers are looking for...because they use their eyes as more of a factor than their ears. To that, I noticed in the new issue of Stereophile, there is a reply to a letter by a reader from Jim Austin, stating the following: " the run-up in prices at the extreme high end is astonishing and concerning. It’s also logical. .......There’s a danger this could lead to too much focus on products for the wealthy and not enough for those of more moderate means--that is to say, most audiophiles. It could even cause the industry to turn towards fancy audiophile jewelry at the cost of sonics- because how many of those shopping at such prices are serious, critical, obsessed audiophiles?"
He then states:" Fortunately, though, most companies selling to that market seem to be doing it in a serious, uncynical way, exploring what can be done in engineering terms with such large budgets. Here's hoping the trickle down accelerates and that companies drunk on luxury high end cash don't forget about the rest of us." While this may be generally true, there are certainly many companies that may not be complying with this...see my thread on the cable forum as an example. |
@waytoomuchstuff I like the way you laid out those factors and how they need to be considered when people "shoot from the hip," here, about whether a product is "worth it."
For me, this statement raises the question, "How many services are critical for a piece of audio gear?" It's clear how complicated this gear can become -- internally, but also with the elaborate casework, etc. |
It is also possible to under price an expensive product. Many audiophiles feel if a product seems to cheap for what it does there must be something wrong and won't buy it. I know that about 20 years ago the now defunct company Melos produced triode tube monoblocks rated at 400 watts(they did more) for $10,000 a pair. The dealers told the manufacturer to put a new thicker front plate on and call it a Mark II version because they could sell more amps at the higher price than the lower one. Melos kept the price the same. |
Very good points. Well stated. I think it is interesting to point out that, typically, "high end" audio is sold thru a dealer nietwork. So? The dealer is the manufacturer’s "customer". And, the end user is the dealer’s "customer". While the manufuacturer is on "stand by" for tech support, etc. it is the dealer who displays, demos, delivers, sets up, and supports the end user. The dealer, being the "customer" also has to make smart decisions about what he purchases. The dealer must determine if a product has a high degree of certainty for sell through or he will be stuck with it. Or, risk selling it below what he paid for it. The penalties for the dealer for bad choices could be severe. So, there’s another "value proposition" in the equation, whereby, the dealer must (literally) buy in to the propostion. No dealer orders. No sales to end users. The manufacturer must FIRST convince the dealer that the product is worth the money. Then, it’s the dealer’s job to create value in the product to the end user. So, there’s another cost/performance filter (the dealer) in the mix before the product is presented to the end user. From an economic perspective, the dealer pays wholesale costs, so the manufacturer’s selling price to the dealer is far south of the $133k the customer pays.. I am thinking about presenting a topic somthing like The Myth of Manufacturer and Dealer "Profits" to take a deep(er) dive into this subject. To this point, let’s take, as an example, a major contributor to the design team who makes $200k per year (could be low?). If the manufacture sells 2 million of the item, that’s $10 of the retail cost of the item for engineering. When only 200 are built, that’s $1,000 of engineering costs of the retail cost for each item. Some end users place a lot attention on parts costs vs retail priicing. Okay. Fair enough. But what about services we obtain that are purely intellectual with no parts costs? Should attorneys, consultants, etc. offer their work for free becuase their "parts costs" are free? It doesn’t take long to see how silly the parts cost vs selling price argument is. So, what is a product segment’s most gifted designer’s talent worth relative to the ultimate selling price? This is hard (impossible) to measure. |
My daughter is a freshman business student. I am a physicist. She called me for help with calculus. She was doing the standard first calculus problems for first and second level integration and differentiation. In physics we do x, v, and a (position, velocity, and acceleration). In business they have a similar set of equations that we used to calculate the price point that maximized revenues. Of course we had to have a demand vs price curve. So in business theory, the price point where revenue will be maximized based on unit sales and price is easy to calculate. |
This industry may be the exception to the rule, but in most sales based industries, if one prices the product too high, the result is simply a no sale situation. I believe this applies to luxury items, but perhaps there are exceptions to this rule…and maybe high end gear falls under that category. Do we believe this? |
@8th-note Some excellent points. Which is why I asked the OP, when is the price simply too high? Perhaps the answer is at a far higher price point than has been entertained by the industry so far. Question becomes what that price point is..and for what product? This led to my thread about some very pricey cables on the cable forum..and which segues into this thread. @whart while it is true to say I have not heard the Orion speakers, I doubt many have, I don’t think this is a requirement to have an opinion on my OP. Even if these speakers are as RH reported in his review in The Absolute Sound, with all of the hyperbole being justified, the question can still be asked, and that is…at what price ( to some there may not be a price, although I have a somewhat hard time believing this, given the size and impression that the speaker makes) is a product priced out of the market…and the result will be an absolute failure for the manufacturer and dealer network. For example, if we use the Orion again, the price is set at $133k…which to most folks is not going to be palatable. But, and here’s the thing, what if the same speaker was priced at say ten times this number…does that do the trick and now result in essentially zero sales, or is it twenty times ( hopefully by now you are getting my drift). Or, is it that there is someone out there that just has to have this product..and the price (any price) is irrelevant. |
@8th-note no doubt, lots of big spenders out there. I don't see a lot of new hifi stores in my town, but a lot of new record stores and I assume hifi stores will follow. |
@grislybutter Good point - "millionaires" may not be a good measure of the disposable wealth in our society. I was trying to make a point about the market for ultra high end luxury goods being very deep and I would make the same point by saying that there seems to be a race in the high end audio industry to introduce extremely expensive products. All of the evidence I see indicates that there is no limit to what people will pay for ultra expensive stereo gear. Is seems that every month a company introduces a new six-figure audio component. There must be a selection of at least 50 speaker models that cost over $100k and dozens of other components that cost over $50k. The anecdotal evidence is that wealthy audiophiles wait in line to buy this stuff. In an interview with Dan D'Agostino he said that he is selling his Relentless $250,000 amplifiers as fast as he can make them. There are other similar anecdotes from manufacturers including Wilson regarding their top end speakers. They sell out their entire production run shortly after the model is announced. The other piece of evidence is the number of new high end audio stores that have opened in the last decade. They seem to be thriving. To go along with this, the two surviving audio publications seem to be very healthy with each issue getting thicker with more advertising. So I guess my answer to the original question is to say that boutique audio companies haven't found the upper limit to how much money some people will pay for audio gear. I don't know how many people have $1 million+ in disposable income but there sure seems to be a lot of them. |
@mitch2 that's why some (more practical) definitions exclude the primary residence because you have to live somewhere. Audio-spending-wise, your salary and liquid assets will matter infinitely more than what your house is worth.
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remember too, we are looking at worldwide sales, and Rockport has a significant presence in Asia and elsewhere..,.probably most won't be sold in USA...and again, we are discussing their second most expensive speaker, and many companies make much more expensive ones...so Yeah, how do they sound...seems no one commenting has ever actually heard one. .. |
@daveyf - I don't know how you can judge price/value without listening to the thing. That price point is not even close to the top these days --not justifying high prices but my limited experience with Rockport gear- both table and speakers- was top notch. Look at the competition- Wilson, Magico, YG, all the other big inert boxed dynamics, let alone some of the more esoteric systems from MBL, various new horn manufacturers. If the question is why anyone would spend X on a piece of gear, I think that's all relative, not only to the person's wealth, but their degree of passion/insanity whatever you want to call it. A lot of the uber high end stuff owned by some of the folks here is well past that mark and while they may have money, they aren't super rich. The folks I've known that fit into the crazy money crowd for the most part aren't hi-fi nuts. They may have a good system, but nothing over the top. And often, have lots of other passions, collecting art, cars, whatever. I just don't see an argument here- if you told me you heard it and it sucked for 130k dollars, that would be a different story. |
Uh, assuming their houses are mostly paid off, actually they are millionaires, based on the commonly used definition:
More interesting information:
and,
Of course, as you observed, being a millionaire based on assets is different from having a million dollars. |
@8th-note what is a "household worth a million"? The house is worth a million? With the mortgage paid off? Or they have 1 million in assets? Liquid assets? Otherwise it’s worth ZERO as far as disposable income - they can’t buy speakers from their 401K. I live in a city of 2 million people where a third of the houses are valued over 1 million and these people are not millionaires in any sense. They can’t afford a 10K system let along 2K. They are happy to pay their bills and late fees by the end of the month.
... and so I looked it up. Net worth includes equity in the home. By that definition 4 out 5 of my neighbors are millionaires. Yet they can't afford dental work and new tires on their 15 year old Corolla. Let alone a pair of decent speakers. |
@tomcarr Yes, I've seen the 22 million millionaire figure also. I believe that the 5.3 million represents the number of households worth a $1+ million and 22 million is the total number of people in those households. Since each household would probably have a maximum of 1 ultra expensive stereo system I used the lower number. |
