The Cost of Cables

No, it does not surprise me John.

The only "problem" I have with your scenario about R&D costs is that it is the same for the rest of the industry.

Brian

The only "problem" I have with your scenario about R&D costs is that it is the same for the rest of the industry.

Brian

Believe me, I can't justify the cost of cables at all. I'm just saying that those that I have heard try to explain it, point to the ever elusive and inexplicable 'R&D', as a coverall expense.

Maybe, since they have the same 'R&D' as say a speaker manufacturer, the cable manufacturer feels the need to make the same net profit per unit sold to cover the costs for the same 'R&D' as the speaker manufacturer.

The only ones that know aren't talking, so we are left to surmise the reasons.

John

LOL John,

Tvad, doubtful, but nothing wrong with a friendly discussion is there? Obviously it'd be great if discussions like this grew into something that made a difference.

I believe we already know the REAL reason.

I really like this post, kudos to all for not letting this degenerate as so many posts have! I think it is really telling, as jcmorgan notes, that none of the people truly in the know are talking....with all the mfrs and dealers who are members of audiogon who generally chirp in missing, I think that says everything we need to know about justification of cables, there truly is no real, definitive reason except that they charge absolutely what the market will bear.

The crux of the matter for me is, and I suspect the originator of this post, the frustration of hearing differences in cables, wanting the better cables, but knowing deep down we are not getting relative value to the other things in our system, or for that matter, the other things in life. One can buy a brand new Civic for what many of have just in cables in our systems. I bet speakers, turntables, amps all follow a 4 or 5 to 1 rule, in other words that the cost of actual manufacture per piece is one fourth to one fifth the actual retail list, whereas cables are probably around 1/20th or less than the retail sale price.

So obviously a few of us with various sytems should get together and start a cable business, write off our systems as R&D, as well as our music, and start a cable companies. WE would have no additional "r&d" costs as we already have the test beds!!! Our cables then should be much less expensive than our competitors, and we can clean up. Who's with me????

Cheers!!
Chris

Sometimes both. :)

Something I don't think I've seen as I've skimmed this thread, and countless others like it is that when it comes to audiophiles, they aren't buying cables as a utilitarian item. They are buying them as art.

Expensive cables are not just made for the purpose of moving signal from point A to point B, but for a full kinesthetic experience. Not just aurally, but visual, tactile, and ultimately emotionally. If an object moves people, whether it's dollops of paint on canvas, a lump of bronze or a set of cables, how can you put a price on that?

I'm sure Martin Heidegger would have had something to say on this subject if you had asked him.

Will anyone be happier if they know the REAL reason?

Just wondering...
Tvad

I know the real reason: Capitalism

Cable technology is Capitalism at it's finest.
Call it 'Capitalism Gone Wild'. :)

Chrisla, great idea. Though once we get started, I may want to invest more in my own R&D department. nudge nudge wink wink.

And about all that "R&D"... Since the conclusion about ALL cabling is that they're system/component-dependent, and impedance/inductance-matching so important, what or why don't cable manufacturers provide technical criteria for which their cables were designed and tested (thus claims)? Why should it be such a guessing game (trial/error) for the buyer? Most other audio equipment provide some form of specifications, so why can't/don't cable manufacturers at least provide "recommended parameters" that their cables perform best with?

chris...your statement above ...'so obviously a few of us with various systems......' is the easy part.the difficulty begins when you begin to put your ideas into actual action. my guess is that you would quickly find out why cables ..as well as audio gear in general..like most of the rest of the worlds, non-essential possessions, are priced so high.the idea is the easy part...how many people in life have great ideas about 'a better mouse trap'..but don't have the guts to follow through with that idea?..my guess is that the individuals who own the cable companies...and most of them are probably individuals..are part of that small percentage of the population that did..fortunately for me and others..have the guts to put their money where their mouth was and go 'out on a limb' with their ideas..with the big chance of complete failure..and produce cables that now populate..expensive or not..all our systems...

Calloway..not sure what you are trying to say? To be quite honest, I don't believe any of these cables companies started with huge R&D money and venture capital. I can only chuckle thinking of an individual starting with an idea going to meet with a Bank of America goup asking them to fund a startup for five thousand dollar speaker wires. If you note my post earlier, I freely admit that I do not have time nor inclination to start a cable company, my second post was for the very most part, tongue in cheek. I agree many people do not have "the guts to follow through with an idea". As a business owner of two separate businesses, the first of which I started with a five thousand dollar signature loan, and worked "part time" at it for four years, I understand the trials and tribulations required to get a business off the ground. I have never though, in my 17 years of owning businesses, done anything but provide superior value to my customers, the original question in this thread was a question of where the costs for these cables comes from, and my point is that it is cetainly not manufacturing cost, and very probably not R&D capital asset cost relative to most other industries. I do not intend to denigrate those entrepreneurs for their entrepreneurship, acually I am somewhat envious of what I see, and this is only my opinion, of their sheer elan in their markup over their manufacturing cost.

Cheers!
Chris

Great posts Chris.

I am certainly not saying it is easy to start a company, such as one to make and sell cables, but again, neither is it for any other part of the industry. Also, I wouldn't throw us all under the bus by saying we don't have the guts to start a company, there are myriads of reasons why people don't.

Metro04, I suspect that discussion could spin this discussion out of control.

Leedistad, maybe I don't follow your post well enough, I did have to use a disctionary a few times. :) Are you suggesting the beauty (visual appeal) of the cable itself or the performance of the cable as part of "art" of music that can be priceless? Either way, I go back to points already made, that I don't see cables different from any other part of audio gear, yet the profit margin of cables seems to me, and others, to far exceed other audio gear.

Brian

This is a truly remarkable thread. I believe you all have done an excellent job evaluating what is without question a very profitable market.

I want to make a few comments, both as a consumer of some of those very expensive cables, (Purist Dominus, Nordost Valhalla and Kubala-Sosna Emotion) and now an owner of a start up cable company. I am one of those who are freely ridiculed because I have owned cables more expensive than my system, but I must comment on why.

I have not owned these cables because of ego; I might buy a Porsche for ego, for I can think of no other “real” reason. (I once in a past life owned a Mercedes, and it turns out it was all about ego, but I was sure I deserved it!) The problem with owning cables for ego is you really need to have people around to understand what they are, and thus stroke said ego. Unfortunately, most people I know could care less about my system, its sound or what cables I use.

I bought these cables because they achieved things I could not achieve in any other fashion. Yes I could have bought a more expensive amp, but if I limit the performance with the cables, then what would I gain? The old standard of 10-20% of system cost comes from the days when there were very few high end cables, and at that time 20% would have bought the best MIT or whatever. Today there are so many cable choices; and in my opinion because we finally figured out cables matter. From the demand for better cables comes; R&D, marketing, advertising, patents, legal fees and of course construction costs.

Let’s take a look at the truly absurd. Tara Labs now has their latest greatest interconnect in a “true vacuum” and it comes in at a cool $15,000 for one meter! Ok, I buy the cost of development was high, but??? These guys do serve a purpose however; they push the envelope of what is possible. They help less creative manufactures to look outside the norm and possible they will then take the ball and move the performance even further.

I am (was) a competitive sailor. In the world of sailing the “audiophile” equivalent is America’s Cup. (Which is about to start the cutting down process as they approach the series) I remember about fifteen or twenty years ago when the trickle down from these boats hit our lake in the form of a carbon fiber mast. At that time masts were around $1000 for my boat. A carbon fiber mast, if it would have been legal in my class might have been $75,000. In some fleet, these types of developments are outlawed, where other fleets encourage the progress. (Imagine if we outlawed progress in audio)

The point is, today the entire hull of an America’s Cup boat, or the Volvo around the world race, and now many smaller fleets are constructed of 100% carbon fiber. The cost of course has come down a great deal, and we now see carbon fiber in most every boat made in some small applications where strength and weight are criteria.

Now I am sure the R&D was high to develop those early masts, but I am also sure the developers got paid quite nicely for their efforts. These developers (many from New Zealand) do not just walk away and retire on their one time discovery; they keep developing because that is who they are. For every success they discover, I would bet there is a land fill of failures.

Ok, I know our cables are not quite so extreme, but the point is made. I spent the winter testing speaker cable designs. The material is not cheap; it amounted to a few thousand dollars of “junk wire,” but this does not account for the big costs. Time is huge, if this was a business, and not my hobby, and I expected a reasonable return on my time, then I would need to factor this time into the R&D costs. Let’s say I have spent six months at five hours per day. Of course this is tine listening and to me not work, but I use this to make the point. 6 months x 30 days x 5 hours = 900 hours. Now if I am an entrepreneur, what is a reasonable fee for my risk taken to start a company to support my family???

Let’s say for the sake of argument I want $100/hour for my time, so I need to recover $90,000 in my product. Now I need to patent this great idea, this will cost about $6 – 10,000 in legal fees, not to mention my time (let’s say 40 more hors) so let’s just say this costs $10,000. Now how will I sell these? If I wish to stay low profile, I will just sell them here at Audiogon. In order to do this I must become a commercial member, and the lowest member category that I can be costs me $250/ month. Then we should consider the accountant and attorney who will advise us to spend great sums of money for their worldly advice. Therefore add $0.00 for the equivalent value.

Ok, all set for our upstart company, we need to recover $100,000 in time, $5000 in material consumed during the development and $250/ month. Now as a start up, what can I sell here at Audiogon? The first year I expect will be tough, but perhaps I can average ten cables/ month. (This would be very difficult, most upstart cable companies fail, but we are being optimistic here) If I want to recoup my time investment in two years, (paying myself $50,000/ year) I would need to charge $875 per cable set to cover my time and cash investment to develop the cable. Then I need to charge an additional $25 for Audiogon, and there we go, I can sell my cables for $1000 each set and come away with a cool $100 in profit!

Oops, I forgot to build these babies. So now I need to add the ten hours for a set of speaker cable, wire, cotton, connectors, shipping, insurance… For my cable, the cost of wire is quite high; an 8’ pair has over 400 feet of gold plated silver wire. This runs an average of $2.50 per foot (cost) or $1000; plus cotton sleeve at $70, jacket material, $50, spade connectors $50, misc. cotton and thread, $10 and my cost is $1180 for an 8’ cable. If I wanted to get $50 per hour, then we need to add $500, bringing my construction cost to $1680. This means if I was to cover the $900 in R&D and Audiogon, plus the actual material cost I need to charge $2080, and if I want to get $50/hour, I need to sell these for $2580!

In retrospect, perhaps I should not start a company, at least if the goal is to make money. If the goal is to share the hobby, well then…

Now this is me, a guy trying to build a cable to sell. If I am Nordost, Purist, Kubala-Sosna I have a different level of issues. These guys sell in magazines, they build demo cables to leave for dealers to audition, they travel to establish a sales force, and they??? Add to this the FACT that a dealer network is filled with greed. If I hope to sell in the Far East, I need an agent, a distributor and dealerships. Each of these entities takes a 100% mark up (this is the standard in audio, but true in many other industries as well) as they pass the product on. This covers their exposure (they buy bulk up front) time, travel … So going back to my example cable, that I decided I was going to charge $2580. Let’s say $2500 for ease of math. Now I am going to use a distributor and dealerships, but I am going to try and go without the agent. So my cable now retails for $7500, but that is my cable. If I am Nordost, or the like, what does my business cost if I advertise nationally, have a sales force, travel…. I assume at least another 100% so my little cable that has an actual material cost of $1180 would be selling for at least $10,000!!!

Now my costs are much higher than most cables, because I use a custom 99.99% pure gold plate over a 99.99% pure silver wire. If my cables were copper for instance; I would guess my cable cost might drop to $300 or so. The $2580 I had above might be more like $1700 for copper. Then the 400% mark up and the copper cable is $6800.

These are just examples to try and help illustrate how $300 in copper can grow to $6800.

If you consider the above analogy, anyone who thought this was going to be a cake walk is seriously disillusioned. Yes you can build your own copper speaker cable for $300, and if you happen to hit the right formula right out of the gate, then you will have one great deal. If you have a lot of spare time, then you can invest the hours needed to find the right combination to make a great cable. If however you do not have the time or inclination, and want the latest thinking in cable design, then it does cost money.

I agree that the costs are completely out of control, and yet I demand the best possible. I am one of the consumers who have demanded the R&D, and I have been willing to pay for it. Can you imagine an America’s Cup boat from twenty years ago, (steel hull and aluminum spars) racing against today’s all carbon fiber hull and spars? If we all simply stayed where we were, well the world would be a very different place. Perhaps the Scott receiver I had was good enough. Surly the zip wire from the hardware store is good enough too.

I am sorry, but pushing performance in audio, sailing, skiing, car racing… is something we choose to endorse, or not. I choose to be involved with the elite portion of the hobby. No one is forcing me to strive for the best, but if I want to be in the elite of any sport or hobby, then I will be the one who supports the R&D. The mass market enjoys the fruits of this labor, to a lesser degree. My Mazda is no Mercedes, but a lot of what makes it a good car comes as a direct result of the Mercedes $250,000 racing prototype. I want the best I can get, and therefore I buy the silly expensive cables. But are the prices silly, or simply the result of furthering performance that we the consumer demand?

jd

PS, please understand I wrote this to add insight and not promote a product.

JD, excellent post.

It's amazing how people don't factor in actual business costs (rent, etc.), ROI, marketing, salaries for employees, margins for dealers and distributors, etc., not to mention sales volume which has got to pretty insubstantial given the niche market. It's usually a business necessity to rake purchasers of halo products to recoup costs and continue development (as we have seen, technology progresses, those products that do not improve are eventually superseded). At the end of the day, those that afford halo products (don't feel too bad for them, they have the cash) make the technology available to all the rest of us down the line.

Frankly, if it were so cheap to build and market cables why aren't we seeing companies make a superior product to the ultra-expensive cables and then market it at 75% of the cost of the current ultra-expensive crop of cables. That way, it would still be expensive (if you believe that's why people buy certain cables) and protect the company's profit margin but the product would kill the competitors on price with superior performance and the company would clean up.

Jd, as someone who has dealt with you in the past, I purchased speaker cables from you, and as someone who admires your review that you wrote a few years ago on cables, I greatly respect your comments and thank you for taking time to write a lengthy post.

As to your point of why you purchased expensive cables, purchases above 20% of system cost, I don’t argue your reason at all, never have, but rather why these cables had to cost you what they did. (I don’t think this escapes you, but rather you are clarifying something that may be lost by some.)

You mention a $15000 cable by Tara; is it your opinion that possibly a reason for (some) of the high cost is that they are pioneering new ground and it is costly?

Allow me to question some of your costs in starting a new company. Generally someone starting a new company does so at some sacrifice, hopefully temporal, whether it be their time and/or finances. Example, a friend of mine opened a restaurant, he did a lot of labor himself; in this time he was not paying himself $100 an hour (using your example) but rather counted it as part of the cost of starting a business and hoping to reap the rewards down the road, which he has.

You gave a lot of numbers in your cable making scenario; is this to make and sell just one set of cables or can those costs drop dramatically when done on a larger scale?

My sense from your post, correct me if wrong, is that you feel cables are breaking new ground and this costs money. In this thread, I have repeatedly compared cables to the rest of the industry, so in that theme, in your opinion the rest of the industry is not breaking new ground to the level of cable manufactures?

Let me present another angle. A company makes a $300 IC and a $1000 IC, both are “basic” cables, that is, nothing cutting new ground like the Tara cables; the $300 version are copper and the $1000 are silver. This seems plausible in regards to many makes on the market. I’d like to know what makes the $700 difference.

An area that I struggle with, hopefully I can articulate it well. Look at a set of cables, there just doesn’t seem to be much there in comparison to say an amp, CDP, speakers, etc; so how do they do it? A CDP for example, you have to source a transport, DAC chips, electronics, a case, etc., quite a few things cable making doesn’t have to deal with.

This has my head spinning, time to go watch the (re-aired) F1 race. (Don't tell me who won!)

Brian

Brian, I do hope to keep this discussion on track, so I will very briefly comment on the $$$ amounts in my analogy. I used the numbers as an illustration, not a formula. Your friend opened a restaurant and expected to recoup his cost over time. For the sake of argument I put a dollar value to a person’s time, and spread the re-cooped time over two years. The amount could be $50 an hour, and spread out over four years, the point is the same however.

For real life application, I expect a person in the business of audio, which owns his company and feeds his family from the income; $50 would not be worth the effort. Perhaps I am wrong, I am sure my idea of what time is worth is not necessarily accurate, but with attorneys charging $400-500 an hour, and accountants at $300-400 I think $100 was a reasonable number.

Anyway, let us not let the discussion fall to factious numbers. Instead, you asked some very good questions regarding R&D and pushing the level of performance of our equipment. I do not believe cables are the only area advancing; it just happens that cables are the topic here. Cables have however made strides that have resulted in quantum leaps at times, where the components may have been less impressive. The research money and time has gone into power conditioning and cables, because these have been the least understood, and have hardly received any attention until fifteen years ago. They therefore had a lot of ground to make up.

But if we want to look at components, LAMM introduced a new amp at CES this year. It was $250,000. I doubt they expect these to sell too fast, I assume this is more a statement of the time and materials that have gone into pushing the design beyond what was possible before. Wilson Audio has poured copious amounts of money into design of cones, and into resonance research with materials. This has led to new cabinet materials that are completely non resonant, and these materials show up in their $75,000 speakers.

We could find countless examples of multi-hundred thousand dollar components that have pushed the industry to continue to develop. Audio Note for example not only have amps well over $100,000, but they sell quite a few of them! So if the top of the top is $100,000 plus amps, $50,000 pre-amps, $100,000 front ends and $100,000 plus speakers, than the top of the top system must be nearly $500,000. If this is true, and these components represent “The America’s Cup” development, or the F-1 circuit, or… then $100,000 in cables is not out of the range of believability.

I think the problem we quasi audiophiles have is a $5,000 cable is almost in reach, where a $100,000 component is not. It is possible to hear how the best of the best sound in our systems through cables, so we stretch to buy them. Later we are ridiculed for having as much money in cables as we do equipment.

All of this needs to be kept in perspective. To some, money is either spent or used as toilet paper. For others we can get into serious debt trying to chase our passions. I know more than a few people who have taken out large second mortgages to pay for a boat, a car, you name it, is it so crazy to expect some might want to try the best possible in audio too?

Yes it all costs a lot of money, yes the amounts are staggering, but to simply claim it’s all profit and these guys are making a fortune is wrong. This trend is in every passion I know of, why are we so critical? I recommend if the prices do not make sense, then do not pay the price. But please do not criticizes those who what the best they can afford, and please be insightful of how these great advancements have come about.

Jd

Tvad, you had me going, then I look to see who it was. Good one ;-)

Excellent reply Jd.

I think the problem we quasi audiophiles have is a $5,000 cable is almost in reach, where a $100,000 component is not.

Good point and I think there is truth to this.

That said, I continue to struggle with $5000 for "wire", especially if one were to compare it to say a $5000 amp. (Again, I am not denying their performance.)

You have given some very thought provoking responses to this discussion Jd.

Brian

why is there so much of an obsession with the cost of cable ?

consider cable as you would any other expensive object of consumption. if you consider cable "over" priced, don't buy it. why spend so much time and energy on a topic which really is not that important ?

aren't there more significant subjects to discuss ?

Mrtennis....You say "why is there so much of an obsession with the cost of cable ?"

It's because the function of a cable is so simple...Provide an electrical conductor from point A to point B, with insulation on the outside. People can understand that, and question why it costs so much. An audio amplifier is a bit of a mystery to many audiophiles, and they are more easily convinced that it is rocket science.

Provide an electrical conductor from point A to point B, with insulation on the outside. People can understand that, and question why it costs so much. An audio amplifier is a bit of a mystery to many audiophiles, and they are more easily convinced that it is rocket science.

Good point, cables and amplifiers are hardly rocket science. As in most consumer products, each "rocket" is a marketing pitch to create tiered products for customers willing to part with more money to have something slightly better. The key word being ***slightly***.

In all honesty, most mid fi gear is extremely good (at modest SPL levels, of course). However, stoking enthusiasm through hyperbolic testimonials and pseudo-science works wonders.

Only a child might believe that the Ford Fusion can be parked on the vertical face of a building. Unfortunately, the line between fantasy and reality is not so obvious in the jargon cluttered world of high end audio...and the truth is we often want to believe the hype (especially after spending lots of hard earned $$$'s)!

As Tom Petty sings "It's Good to be King" and high priced exclusive products can help make one feel that way...so believe!