What makes a $20,000 cd player cost 20,000?

There are 4 factors at play that make top-end audio gear very expensive.

1. Some fixed costs are higher in absolute terms, e.g. more extensive R&D to get the voicing right and achieve the desired balance of musical virtues... the last 10% of tweaking can take an infinite amount of time.

2. Fixed costs are spread out over a production run measured in the tens or hundreds.... as opposed to hundreds of thousands for mass market gear

2. Some variable costs are higher, e.g. high end capacitors vs generic stuff; more complex circuit designs may require more parts; small production runs may require manual assembly rather than machines

4. And, in some cases, because some people equate price with quality and some manufacturers find that they can afford to be less diligent while still charge more.

A high end manufacturer make several hundred or thousand dollars from selling a single item, but how many items to do they sell? I'd like to know about their total profits or, as a proxy, their lifestyle. I expect many are comfortable, but not extravagant, and that many are struggling.

I am not implying that all high end gear represents fair prices. Some items provide much better value than others. The burden is on us to listen and decide for ourselves. Don't get caught up in hype.

Tvad,

Your comment implies that high end companies are in the business of finding fools and getting them to part with their money. While some companies provide better value than others, you can't base selling price purely on the cost of the parts used to manufacture. The time it takes to do the R&d and marketing and administrative tasks must be accounted for.

Let's look at an extreme scenario. Assume that I am a 1 man shop and I only spend $1000 in parts for my $20k cd player. Assume that I sell 2 in a year and spend $10k/yr for marketing and rent and admin costs. Assume that I do R&D myself (say 20 hours per week). Am I really making a lot of money even if I sell my cd player for $20k each and pocket $19k for each one that sells?

What I can tell you from a buyer's perspective is that you would want killer R&D and extensive attention to the voicing of the cd player if you're going to pay $20k. Whether or not you get it depends on how fanatical the manufacturer is.

I like Boa2's point. A $2k cd player may just be a $500 model with a nice case and a few upgraded op amps and capacitors. Price alone tells you nothing.