You are probably wondering how a speaker could cost $100,000 dollars or more. A $20,000 dollar DAC? How about a six-figure amplifier?
These prices, while sometimes exorbitant, are not always a result of pure greed and a desire for ultimate profit.
Many of these companies making expensive products sell low volume while the cost of product development is high. In order to stay in business, they need to be rewarded for their efforts. It is very similar to the luxury car business. Additionally, expensive products tend to be made with more luxurious materials because the customer expects a certain level of luxury when spending tens of thousands on a product. For example, some speakers allow you to customize the paint job, just like a sports car.
See these Kharma speakers here?
With specialized carbon drivers, silver and gold wiring, diamond tweeters, and bulletwood cabinets, these look and feel like a speaker worth a staggering $1.5 million dollars a pair. The point is that there is a certain aspect of jewelry that adds to the price of these products.
Speaker, or Science Project?
Another aspect of the price is that these products are built by hardcore nerds with a hefty R&D budget. The process that goes into making a speaker can be as simple as a kindergarten experiment or as complex as a NASA science project. Some companies take their R&D to extremes, and use specialized in-house techniques and exotic materials that substantially ramp up the price of the product. If you want to see just how complex speaker design can be, watch this video below:
For these ultra expensive products, you are sometimes paying for a science experiment as much as you are paying for the finished product.
The Business of Audio
Perhaps the most common component of the cost of high end audio gear is the simple cost of doing business and the desire to make a profit. Manufacturers have labor costs, shipping costs, and other expenses that need to be covered, with additional profit to keep them in business. There are very few audio companies that are making a fortune from their products. For example, a company might spend $200 dollars to source materials, build the speaker, and ship the speaker out to a dealer. They might charge the dealer $400 dollars, to make a $200 profit. The dealer, wanting to make a profit themselves, marks up the speaker by an additional 100% for a retail price of $800. Many of these expensive products are sold through dealers, and the consumer pays the price accordingly. Some companies sell direct, which cuts out the dealer, but these are few and far between. The original markup still exists.
Going the DIY Route
A good illustration of the value proposition of retail products emerges when you compare to the price:performance ratio of DIY kits. There are kits from companies such as CSS Audio and GR-Research that offer speaker kits that need to be assembled yourself. The downsides of DIY are threefold: It takes some level of skill to build, it often will not look as good as a retail product, and you cannot demo the product in a store before purchasing. Still, these DIY kits, if built properly, can give you much more bang for your buck in terms of performance because there is no dealer, and there is no labor cost that the manufacturer is trying to cover. For those on a budget, DIY kits are a great way to achieve performance comparable to products several times their price.
Conclusion
The costs associated with audio equipment are often justified, and when shopping, it is important to understand what you are buying, and what audience the manufacturer is trying to capture. While it may seem difficult to find high-performance audio equipment on a budget, with a little bit of knowledge, you might find that you can get a lot more for your money than you think.