why does a processor cost so much (1 Viewer)

[Rajkumar]

Hi All

I was looking into audio processors for processor + amps separates configuration. Looked into anthem which costs about > $3000 for the processor alone. My question why in the world does anybody have to charge that kind of money for a processor. The top of the line DACs dont cost more than $6 in volumes and the top of the line audio dsp chip decoders from Cirrus logic dont cost more than $20 in volume. Where the hell is the mark up in. Unlike an amp where the transformers and capacitors cost a lot of money where are the expensive stuff in a processor.

Sure, the sales guy points out the jitter handling capability, hell it cost less than $ 25 to design a 20 ppm jitter transfer PLL circuit. Unless I am missing something here isnt this a ripp-off pricing for external processors.
Any enlightenment is welcome.

Raj

 

[Michael Reuben]

Where the hell is the mark up in.

1. Intellectual property. Most of these processors have enhanced or proprietary processing modes, for which someone has to create or license the code.

2. Smaller number of units over which to spread the cost of R&D, support, maintenance of an ongoing business enterprise (salaries, overhead, etc.). If Anthem or Lexicon or any of the others could sell as many processors as Sony sells receivers, I'm sure the price would come down.

I'm sure there are additional factors that others will point out. In the end, though, it's the rule of the market. These processors cost that much because there are buyers who will pay it.

M.

 

[Evan S]

When I was a receiver owner, and I had any difficulty with the unit, I was up the creek without a paddle if there was no warranty coverage. Even if the unit was under warranty, securing timely service and making arrangements to get it shipped out and returned was a huge hassle at best.

Now that I have made the jump to seperates (namely the Anthem AVM-20), anytime I have even the slightest question about the unit or it's workings, Nick or Frank will answer my e-mail often within the hour. The customer service I have gotten from this company is second to none and has almost assuredly secured a customer for life.

For me, this is worth a very high price premium, even if I agree with you that processors are VERY expensive. But I do believe you get what you pay for in this regard as the sound improvement I have gotten since going from a receiver to separates is also worth the added cost.

 

[EdS]

Interesting point regarding why do pre/pros (and amps) cost as much as they do. I recently purchased a 57" HDTV ready RPTV for under $2000, delivered. Let's look at the content in a HDTV: 3 CRTS, 3 Lens Assemblies, 3 Screens (Lenticular, Anti-Glare/Protective), Line Doubler, Multiple Video Inputs, High Voltage Power Supply, Tuner, Lots of labor (assy, calibration, tweaking), Weight (greater than 200 lbs, must be moved individually, probably with fork lifts), Storage (a single RPTV takes up as much space as a pallet full of pre/pros). Sets are updated yearly with latest technologies and chipsets. Seems like there is so much more content and storage/shipping costs to RPTVs that they are truly bargains when compared to the content of say a $2000 amplifier. Pre/pro technology on the other hand is changing rapidly, but no more so than HDTV technology.

 

[Rajkumar]

Michael

Thanks for the reply. I perfectly agree with you on the price/volume ratio and the economies of scale. On the licensing front for proprietary audio technologies, I would assume that it would be the same for all vendors wether it is a $200 DVD player with an built in decoder or the $3000 Anthem. There has to be some fundamental Intellectual property coming from a high priced decoder vendor that is not found in other generic mass market brands. Anthem to my best knowledge does not make their own ASICS. The Audio DSP vendors like Cirrus logic also provide the software drivers that goes with these chips. So net-net what I am trying to understand is that how can the Gross margins of a separate decoder be so high and even more puzzling how does the market bear it.

If your last statement is true that these prices exist because there are people who will pay these prices then we are entering the realms of Vooddooo Psycology and not logic .



Evan

Good to hear from an Anthem processor owner and glad to know that you get great service from them. When you did your research for buying separates how did you evaluate the quality of the processor. What I am getting at is that would there be an audible difference in quality from a $1000 receiver whose preamp outputs have been connected to the same power amp as the $3000 dollar processor from anthem.

 

[Chu Gai]

Markups can be incredible on just about anything out there, not necessarily audio. For example, the margin on liquid Similac (baby formula) is over 90%.

 

[Michael Reuben]

then we are entering the realms of Vooddooo Psycology and not logic

Or in more common parlance, "economics".

M.

 

[Lewis Besze]

I would also add "artificial market demand".
There is an ever popular myth, that below a certain price point,"it must be compromising something", even if no objective evidence supports such "opinion".
and lets not forget brand "recognition".

 

[Yogi]

It costs Coca-cola a nickel to manufacture a coke can. Mark up is in everything you can think of. Some more so than others.

 

[Chu Gai]

and for someone like that, when you save 1/1000 of a cent on a can if you sell a trillion cans, you've just improved your bottom line by a billion.
rum and coke anyone?

 

[Bryce Miner]

I don't think you'll be truly satisfied without a inhome demo of both a rotel, outlaw, parasound vs Anthem, B&K, sunfire, lexicon, krell.

 

[Drew Eckhardt]

In my last company, we sold disk based-digital video recorders - like Tivos. IIRC, our inexpensive boxes were about $40K and the loaded boxes $250K.

Our niche markets (newsroom automation, commercial spot
playout, HD time delay) were willing to spend the money for the functionality we provided (up to 360 Mbps, frame accurate control, interface to their automation equipment, network transfers at greater than real-time). The volumes/startup costs involved with ASICs meant that we had to use programable logic that was a lot more expensive on a per-unit basis; although nearly all the big price tags went to pay for engineering costs that were the same whether we sold 100 or 100,000 units.

If you don't like it, buy used because high end equipment depreciates horribly ($20K projectors can be had for $2-$4K, $5K processors for $1-$2K, $600 amps $200, etc).

Or build.

 

[Rajkumar]

The reason why I am intrigued by all these high end processors with high mark ups is that I am not able to figure out what distinguishes them from thier cheaper cousins. People who typically buy high end gear are looking for something better in quality. You can can tell quality in a power amplifier as Analog design is still an artform. But there is little grey area in digital design and processing. Either your logic circuits work or they dont. You can offer features in digital design, but the features I have seen in these Anthem processors are not largely different from say a Marantz or Harman kardon receiver. I would like to know if anyone has compared say an anthem processor + anthem amp with a Marantz 7300 receiver preamp out + anthem amp on the same speakers to make a qualitative A/B comparison. It does not have to be the above products but any such high end processors and a mid range receiver.

 

[John Kotches]

Rajkumar:

I'm sorry but this isn't strictly the case:

But there is little grey area in digital design and processing. Either your logic circuits work or they dont.

Your assumption here is that all logic circuits are equal.

In the case of a few of the high end companies (Lexicon and Meridian are examples) they have gone so far as to write their own routines for DD and DTS decoding, Bass Management, Time Alignment and truly proprietary modes (Logic-7 for Lexicon, Trifield processing for Meridian). In these cases, the DSP engine is nothing more than CPU cycles. Couple that with the low volume of sales, and a few details you've chosen to overlook.

The last time I checked, DSP engineers made quite good money, plus you have to pay for the manufacturing infrastructure and the workers labor too.

There is a substantial cost in up front money that must be recouped across the anticipated sales of the processor.

In addition, these are sold through the retail channel, which means you have to pay for the manufacturers profit, a distributor or importers profit and a dealers profit. This substantially increases the cost of purchase as well.

Someone else pointed out that the value of the Intellectual Property of the companies which also adds to the cost of the end product.

The prices are what they are -- the market seems to bear them, otherwise you would see the companies no longer in business.

Regards,

 

[Lewis Besze]

The prices are what they are -- the market seems to bear them,

Bingo! Those people truly belive they got their money's worth,or they just have way too much to spend.

 

[wayne p]

In addition to the costs and expenses mentioned by others, it is also the implementation of the various parts that a consumer pays for.

For example Anthem talks of the great care taken when designing the ground plane for the AVM-20. It was designed manually to insure the quietest results. Certainly cheaper solutions were available. Attention to details and TLC cost money.

Does it improve the products sound? Is it worth the extra money? The answer to the first question is yes. For myself, the answer to the second question is also yes, but each consumer must make up his own mind as to when the point of diminishing returns is reached.

 

[Dan Lindley]

As others have said, there is always a huge jump from mass production to high-end niche products. Toms of Maine or Rembrandt toothpastes; Rolls Royces, etc. Sure there are huge markups, and huge expenses. But while I don't own any fancy toothpastes, cars, or amps, I just enjoy their continued existence. Long may they prosper (so long as folks have a shot at them without special privileges they haven't earned, etc.).

Dan

And this is hilarious:

"quote:

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then we are entering the realms of Vooddooo Psycology and not logic
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Or in more common parlance, "economics"."

 

[Mark Dickerson]

I think John Kotches nailed it. Furthermore, you cannot assume that all circuits are the same, much less that the parts are the same. If you look at certain magazines and websites relating to computer equipment, for example, you will find that certain computer motherboards run faster, sometimes much faster than other motherboards, even though both are using the same CPU chip and the same supporting chipset. It is all in how they implement these digital components that make the difference. Same in audio.

In audio gear, particularly as you go higher in price, the economics change. First, the chips used in the digital end (DACs, etc.) are usually not the same. In some low end products, the DACs may be from Fujitsu one week and Samsung the next and which product the manufacturer uses depends on which supplier gave him the best price, but in a high end product, they will specify a particular Burr-Brown DAC and nothing else will do. As there is less demand for the better quality chips, they do not have the same economies of scale and thus can cost much more. Add to that the fact that a small manufacturer cannot buy in the large quantities as the big Japanese audio cartels, and they then have to charge even more to cover their overhead.

Your question seems to presume that everything is an "off the shelf" part (DACs are DACs, right?) and one need only assemble the parts to come up with a quality product. This view ignores all of the engineering that these high end companies use to make their product the best it can be. And no, I don't believe that the differences I hear in the sound is is all in the analog end. There are literally thousands of choices that a manufacturer has to make when designing a pre/pro. This takes time and effort and the cost cannot be spread over hundereds of thousands of units sold world-wide.

I would love to have high quality separates, and I am not happy with the prices I see at my local dealers, usually $4K and up for a pre/pro and amp combo. Yes, there is certainly dealer markup as the dealer has to eat, too. But this is not just a question of the sum of the value of the parts, as suggested. From the engineer who spends countless hours testing parts and designing the product, to the buyer who negotiates to purchase the specified parts and oversees any problems in delivery and returns bad batches, to the assmebly of those parts and on to the people who market and sell the finished product, there is a lot of value added by all the people it takes to deliver a finished high quality product (not to mention transportation which is usually the biggest part of the cost of each individual component).

 

[John Royster]

The only thing I can add is when it comes to design and engineering it ultimately comes down to the three limiting factors - scope, time and cost.

Most of the time cost is the deciding factor. I say this as a EE who many times knows what it would take to build or design the "optimal solution". The solution that is about as perfect as perfect can be.

But then again, that solution often costs money. So you have to make compromises. All products do. When you get to "better" processors the goal of "great product at a great price" becomes "great product, but keep the cost under the moon...otherwise design it or build it with no compromises"

You are unbound by time and unbound by cost which ultimately only limits what you want it to do.

Hence you are able to design and engineer products that are limited only by what they can do and not how much they cost.

I've been in many a project with this criteria and when cost is the lowest factor one can create incredible works of perfection.