Justify high prices on some pre/pros (1 Viewer)

[RichardMA]

With the Outlaw 950 offering high-end build quality

(internal components) and support for most major surround

formats, I'm wondering why companies like Bryston, Krell,

Lexicon, Sunfire, etc can justify the high prices they

ask for their surround processors. Beyond a certain level,

"improvements" are questionable, such as 1/2" thick aluminum front panels or fancy looks treatments like EAD's

"depth" aluminum front panel. It seems like with a handful

of key I.C.s doing the decoding work, the only major differences are likely to be in the analog section and in all honesty, I can't see a $5000 difference there between

the Outlaw and the Krell that makes any economic sense.

I think the most compelling reason for the introduction of

more reasonably prices North American/European designed

surround preamps is that it appears the Japanese companies(who have provided the only reasonably priced surround preamps in any number) are about to bail and go strictly into receivers.

 

[Jack Kelsey]

Partial answer:

Believe it or not, there are a sizeable number of people that crave high prices and are quite happy when they are the only one in their city or county and are just happy with the 'exclusiveness' and 'qulaity can just be 'good' with the 'excellence'usually coming via 'cognitive dissonance' etc.

And it should be no surprise that there are manufacturers willing to tap into this 'Comstock Lode.'

The hotel/restaurant, auto and jewelry industries also work very much on this 'exclusivuty' ingredient.

 

[GordonL]

With the Outlaw 950 offering high-end build quality (internal components)

What makes you say this? Have you actually opened one up and looked inside? What qualifies you to make this assessment?
The biggest reason why Outlaw is able to provide equipment at down to earth prices is because they manufacture overseas where labor is cheaper. Way cheaper. Plus, the cost of designing and manufacturing the 950 is being shared by multiple companies. Compare that with "true" high-end companies that manufacture in the US, Canada, Germany, or England, where labor cost is much higher and the designs are proprietary. Some high-end companies like Bryston hand-build their equipment. It takes them 30-35 man hours to build one amp/pre-amp. Imagine what paying someone $20-$30/hour to hand assemble will do to its price. Compare that with paying someone in Asia $2.50/hour to run a machine that stamps the boards out in mass quantities.
This makes for interesting reading. It's probably typical of most other high-end companies. Somehow, I don't think this is the way Outlaw does business, otherwise they'd be charging high-end prices also.
I just noticed you live in Toronto. Maybe you should try to get a tour of Bryston's facilities.

 

[Larry Chanin]

Assuming that the latest of the Outlaw 950 production models test out okay (as you may be aware the Outlaws have just issued a newsletter discussing the problems they experienced with their first production run) I’d be inclined to agree with their advertising that their processor represents the best value on the market. That being the case, assuming their processor receives good press from professional reviewers, it is likely that they will begin to take some small market share from their high-end competition. To deal with that perceived threat the high-end folks might drop their prices a little, or they might produce “lite” versions of their processors.

However, this market strategy would only be designed to deal with that portion of their market that are more concerned about price than performance. The fact is that most of customers buying high-end gear are concerned about getting the absolute best performance available regardless of price. The Outlaw processor may be a fine, reasonably priced, piece of equipment, but it simply is not the best. Folks like Lexicon and Meridian have been designing top-of-the line surround processors for decades, and their intended market has always been prepared to pay the price that that level of experience can demand.

Larry

 

[Vishwa Somayaji]

One point that is missing from the above discussion is the dealer profit which could be as high as 30-40%. That, in addition to higher labor costs brings the price of a hypothetical 950 equivalent from a high end company to about $2000. If you hand build it that is another 500? If you put some better parts that is another few hundred dollars. That brings it to about $3000. Put a little more profit(which is reasonable if you are offering a 20year warranty). Finally, the consumer has to make a decision which price point to get in at.

 

[chung]

It seems like with a handful

of key I.C.s doing the decoding work, the only major differences are likely to be in the analog section and in all honesty, I can't see a $5000 difference there between

the Outlaw and the Krell that makes any economic sense.

High-end is not about economic sense, otherwise we won't see people raving about a $350 digital interconnect. The relationship between selling price and cost is not strong at all.

Some people believe that a piece of gear cannot possibly be great unless it is expensive. It is marketing suicide if a high-end audio company lowers its price to the mid-fi level. It has to charge the high price for the high-end image.

 

[Frank_S]

quote: With the Outlaw 950 offering high-end build quality (internal components)

How many people have this pre/pro other than Beta testers?

I think it's a little premature to say anything about build quality until the 950 has actually been used by average consumers in their homes. I've never seen any product on this board receive the hype of this pre/pro, who knows, with the problems that have been uncovered recently, maybe the cost of the 950 will go up. Maybe their low ball approach to bringing their product to market caught up to them?

 

[Larry B]

Richard:
In general, the higher end companies have been able to charge more for their products because they have better sonic properties. As I haven't heard the Outlaw, I am not in a position to comment on it. (Though I'll be happy to speculate, if anyone's interested )
In response to Chung's statement

Some people believe that a piece of gear cannot possibly be great unless it is expensive.

I will add the following comments, based on my own exepriences.
Of the many individuals I have met in the "high-end" audio community, the only consistent trait I have observed is the desire to get the most realistic playback equipment each can afford (and of course, a deep-seated love of music). Some of these individuals are rolling in dough; by far most are not. While some of the richer folks buy a brand simply because of its cache, most make their purchases based on the way a product sounds, and these individuals usually listen to many, many makes and models before shelling out their hard-earned cash.
The first time I heard a really high-end system I was quite naive about audio equipment, and didn't know one brand from another. However, what I did know was that I was hearing something quite unlike anything I had heard before, and it knocked my socks off! Thus began what ultimately became an almost 2 year quest to put together a system. Like many, I started at the bottom and worked my way up. While there were some real bargains out there, and also some expensive stuff that I didn't like, the general trend was that each successive price tier brought greater realism to the music.
Which brings me full circle to how high-end companies get away with charging so much for their product.
Larry

 

[ling_w]

Richard,

I think you got it backward, especially with the popularity of 7.1, you have to have a processor with 7 DAC stages, 7 analog stages, 7 ADC stages. We're not talking about a 2ch preamp where you could get low cost due to the small number of channels.

Audio Alchemy and MSB are deemed a bargain in DAC, and those units only had 2 channels.

Imagine if the high companies puts their 2ch DAC systems in their HT processor, or utilizie the same circuitry as in their 2ch analog preamp.

Besides parts quality and design, the decoding, steering and music surround algorithms vary in quality between the implementations. Some companies like Lexicon and Meridian goes to great length to rewrite the whole algorithm so as to make theirs sound better than the generic stuff.

 

[RAF]

Good question!
And the short answer is, "Because enough people are willing to pay for them." If there was no market, there would be no products.
We could debate until the cows come home whether or not there is a significant sonic or visual difference in high priced gear and lower priced equivalents. Look at the fervor with which the "Wire Wars" are waged. Some people think $400 or more per meter of cable is justified, and others are convinced that this is sheer lunacy.
There is no one answer because people have different perceptions, either real or imagined, as to what constitutes "good" audio or video. And no amount of discussion will change the minds of some people or convince them that any way except their way is the true path to nirvana.
And you know something? That's perfectly fine because everyone has to set the bar at a height that makes them feel comfortable in all ways. True, there is probably a bit of psychology involved here where "expensive" is unintentionally equated with "great performing" and "inexpensive" is equated with "crap" but that doesn't always hold up in practice (assuming that any objective measuring method can be applied.)
What it all comes down to is what you like and what your goals are. And that's where the HTF and others like it are a great place to congregate to gather ideas, resources, etc.
In my own case, I'm a typical middle class American with a certain amount of discretionary income to feed my habit. Some would say that a $35,000+ HT (+ software) does not constitute normalcy, but I always point to my "nice car" analogy when justifying the total expense of my hobby. Different strokes for different folks. My goal has always been to get the biggest bang for the buck within reason. If you look at my choice of components over the years you'll see a trend here. For those things that will be permanent parts of my HT environment I'm not afraid to buy the best. (Thus my justification of a Stewart screen.) And for those things that will be transitory I look for price/performance. If I can get something that provides me with over 90% (sometimes much more) of the performance of a unit costing several times more (often many times more) then I seriously consider it.
That was the philosophy that led me to my M&K 150 speakers, my Sony VW10HT Front Projector, my SVS 16-46PCi Subwoofer, my MA700 and Outlaw 755 amplifiers, and now my Outlaw 950 pre/pro. Some of you are familiar with the performance of at least one or more of these products compared to their more expensive counterparts so you know where I'm coming from (and where I'm headed.)
Not that my choices are the only choices out there which offer a great value for the money. These were my choices and there are many, many other great speakers, projectors, subwoofers, amps and pre/pros out there to complete your own personal system. As I see and hear the results of my choices I truly believe that I've put together something that can go head to head with systems that run well into six figures without having to venture beyond five figures at most.
But if you have endless financial resources and are really convinced that a $100,000 speaker or a $30,000 amplifier is the only way to go, then that's just fine. Just don't look down on my "modest" system as something that just doesn't cut it. For this same reason I never bad mouth people who have chosen a "Home Theater in a Box" solution because, if it meets their needs, who am I to tell them that they can't possibly like what they are hearing. (And, for the record, whenever I use the term "Joe SixPack" I'm referring to an attitude rather than the amount of money that someone chooses to spend on home entertainment. The two are not synonymous and, in my opinion, are often linked incorrectly.)
There will always be $10,000 (and up) pre/pros just as there will always be $200 receivers. Something for everybody.
My 2 cents (or maybe someone else's $2 million)

 

[Scott Oliver]

Why do so many on this forum ask others to prove something to them?

For example, this question and some others like: Are separates better than receivers? Why spend more on a sub than what SVS has to offer? Why buy cables costing more than Ratshack's offerings? So on and so on.

If you are skeptical about cost vs. performance issues the best advice anyone can give you is to go listen to the stuff. This is why there are A/V Conventions. This is why there are A/V Dealerships all around. This is why there are home demos available.

No one should be able to convince you through chatting on a forum like this, at least they shouldn't because there is going to be a lot of biased attitudes. For example on this forum if I were to start a thread saying Brand X sub is better than SVS, that thread would go on for about 4 pages with primarily people arguing against me. It is amazing how staunchly defended all mail order products are on this forum. People here I guess like to cost out the cost of a dealer, but by doing that you also cut out the chance to hear stuff, to compare stuff. Two years ago I bought a Theta Casanova processor, this was after making a huge mistake with a previous processor purchase the year before. With the Theta, I knew more and did more research, and did a whole of listening and comparing. My previous processor, I was in the same boat as you, I bought it without truely hearing it. I figured well it has all these features and doodads, specifications seem similar to other stuff, must be a good one. What a mistake, I am not saying that the Outlaw is a mistake for I have never heard it, but I do think it is a mistake to generalize that since its build quality and parts seem good it must be as a good as anything else out there. Listen to it and other stuff and find out. With my Theta, I listened to Classe, Lexicon, Harman/Kardon, Acurus, Denon, and Parasound processors. After listening then I decided that the options, flexibility, upgradability, usability, looks, and sound were a winning combination for me. Should you go and buy a Theta based on my experience - NO, but you should consider demoing it.

 

[TheLongshot]

Why do so many on this forum ask others to prove something to them?

For example, this question and some others like: Are separates better than receivers? Why spend more on a sub than what SVS has to offer? Why buy cables costing more than Ratshack's offerings? So on and so on.

I think it is mainly to learn wheter or not spending more money is worth it, and get what other people think. Most of us here aren't made of money and would like to get the best value for our money. Some people can't see paying $3000 for a receiver. Others can't see paying less.

As for demoing products, it is fine and dandy when you can. Not everyone can. For example, I don't know how to really test out an amp or a receiver without having your speakers connected to it. Often, the place you buy your speakers and the place you buy your receivers are different places (at least it is for me.) The only way would be home demos, which isn't always possible.

One thing I am solid on is that I won't buy speakers unheard. I have to listen to what they sound like before I can buy. That puts a company like Swan or SVS behind the 8-Ball. (Luckily, I have heard SVSs locally here, so they are a possiblity.)

Jason

 

[Bob-N]

I'll comment only once at the last thought about demoing before getting back to the original question.

Most of those "mail order" companies like Adire, SVS, Diva and Outlaw have 30-45 day money back guarantees (minus shipping) to allow for an in-home demo. IMHO, that is well worth a home demo for that length of time so I disagree that you cannot demo those types of equipment, it may be just a bit more inconvenient than your local HT store and a bit of $$$. I'd hate for someone to rule out these great "bang for the buck" companies because they don't have a store right around the corner.

Now back to cost: I think it was only mentioned in passing about the distribution network and that every step (at least one or two "middlemen") within the network gets their "cut". Roll up typical profit margins (10-50% per step) and the $899 950 price could easily balloon up to $2k and possibly even more.

One more thing is that the volume for separates is much lower, indirectly affecting manufacturing costs to run a bit higher than mass market receivers.

Of course, all of the other things people have mentioned above factor in to the additional costs.

 

[Larry B]

Jason:

One thing I am solid on is that I won't buy speakers unheard. I have to listen to what they sound like before I can buy.

I'm with you on that one. To me, buying a speaker without extensive auditioning is like an arranged marriage: It might work out, but I like to know what I'm getting in advance.
Larry

 

[GordonL]

I think it was only mentioned in passing about the distribution network and that every step (at least one or two "middlemen") within the network gets their "cut". Roll up typical profit margins (10-50% per step) and the $899 950 price could easily balloon up to $2k and possibly even more.

This is true for mass market equipment but not typical for high-end. It is more common to deal direct with the manufacturer for high-end gear.

 

[Larry B]

GordonL:

It is more common to deal direct with the manufacturer for high-end gear.

Not in my experience. Could you provide some examples?

Larry

 

[Bob-N]

Gordon,

Possibly, but whether or not there is a middleman or not (I believe at least there is a regional rep who gets a cut from every sale), controlling distribution (even direct to stores) is fairly costly.

Bob

 

[GordonL]

Not in my experience. Could you provide some examples?

If you go to the manufacturers site, if they are able to provide a dealers list for you, then chances are, they don't have an n-tiered distribution network. Usually, if a manufacturer has an n-tiered distribution network, they can't tell you who their dealers are. They will tell you to contact their distributor for your region to get the dealer info. However, the larger the company, the more likely it uses an n-tiered distribution network. Its just more efficient. Companies like Harman, parent of Levinson, Proceed, and Lexicon, and does over $1B in sales, probably does. Small companies like Conrad Johnson probably don't. Also, exceptions exist where the manufacturer is overseas, for instance, Tag McLaren. In this case, dealers do have to deal with the US distributor. Does that make sense?
As an example, in my case, when I bought my Bryston equipment, the shipping label indicated it came from the factory to the dealer to me. Plus, I've had access to various dealer's price lists at one time or another and ordering instructions were thru the factory.

 

[Tony Lai]

This is fairly spurious argument.

Everyone knows that audio goes by the 99% rule.

That is a $1,000 preamp goes close to 99% of perfection as shown by the 950 and the 1066. To get to 99.5% might take 2 or 3 or 10 times the price.

You know that is the same for cars, speakers, cameras etc.

Many people will find that double or triple the price of a 99% product like the 950 is worth the money.

I might ask how Mercedes can justify 5x the price of a Japanese car but you know there are intangibles to owning a Mercedes much like there is some glamour to a Krell or McLaren.

T.

 

[John Kotches]

Tony,

Agreed.

Some of it is "pride of ownership".

There are other aspects such as "fit and finish". Look at the cases for gear like the Tag, or Theta, or EAD, or Jeff Rowland or Krell or any other number of high end companies.

Using a more utilitarian packaging could certainly save a decent portion of the cost of a product at retail.

In another thread I talked about a "personal value equation", wherein every person assigns their own particular "breaking point" -- ie some people draw the line at the Outlaw price saying 'This is much as I care to spend', and any additional performance or improved cosmetics are not worth the capital expended.

Others might scrimp and save for months on end to pick up that Krell, Theta, Lexicon or Meridian piece, because the fit & finish and improved performance are still worth the expense of the purchase (to them).

There are extremes at both end, always inexpensive or always very expensive -- but they are the ends of the bell curve, and most people lie somwhere between the two.

Regards,