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How are Hig-End Speakers Priced?

I recently (early Feb 2012) purchased a pair of Model 61 Human Speakers, intending to build a small office system with them. I've been listening to them through my main system for a few days now, while breaking them in. These were purchased directly from the builder/designer; my cost was only $675, delivered to my door.

I am so very impressed with the build quality of these small speakers and the quality of the music emanating from them (even though they are not yet fully broken in). I'm honestly surprised they are as inexpensive as they are, and have begun wondering how high-end speakers are priced.

The speakers are manufactured in the Northeast US, and (so far as I know) the builder/designer doesn't advertise and doesn't attend trade shows. The speakers are built with only one pair of binding terminals, two hand-built drivers, and a very simple 1st-order crossover using a design I believe is refined from an 1970's-era design. I'm not sure how much the designer is actively pursuing R&D currently.

I'm wondering if there is a formula that speaker manufacturers generally use when designing/pricing their products. For example, does a manufacturer target a price point, and then decide to follow an "industry-standard" formula like (say) 15% for R&D, 15% for materials, 15% for manufacturing/assembly, 15% for marketing, 15% for distribution, 15% for manufacturer's profit, and balance for seller's profit? Certainly, eliminating (or reducing) one or more of the above categories could yield a speaker that is much less expensive than the price point it was designed for.

Any thoughts?
rx7audio
edorr
714 posts
 
For a pair of $25,000 avalons, this is my estimate:

Components (electronics and cabinets)(at manufacturers cost): 10%
Labor: 10%
R&D: 10%
Marketing & overhead: 10%
Dealer margin" 40%
EBITDA margin: 20%

Very depressing: $2,500 worth of components gets you a $25,000 avalon speaker (of course, I would not dream of buying this speaker new at MSRP, but that is a different issue).

Now my Salk center channel is build to the same standards (if not better), and use the same quality components.

Because of lower overhead, factory direct sales, and probably lower margin, I estimate this $3000 speaker has about $1000 worth of components in it. A much more interesting value proposition!
jmcgrogan2's avatar
jmcgrogan2
6,346 posts
 
It appears as if most of us feel the same, we are simply stating it in different ways. My comment that the cost was 20% (1/5th) the price seems to line up with Thorman and Bigkidz saying 5 times the cost and Marty's 400% of the parts. Many different ways of saying the same thing. Yet far from the 45% that the OP thought (15% each for parts, manufacturing, distribution). I say main stream product is 20% for parts/maufacturing/distribution, except for cables, where the cost may be MUCH lower than 20%.

The key is to know yourself Rx7audio. As I previously stated, you definitely get more bang for the buck buying from a small company that cuts out retail, marketing and other fees, as long as you know that you will keep the equipment forever. Then re-sale value is meaningless. For someone like me, who likes to sample many different flavors, re-sale value is very important, so I tend to avoid small boutique manufacturers. Know yourself....enjoy your speakers Rx7audio. ;)
jtwrace's avatar
jtwrace
443 posts
 
Simple.

BOM x 5
johnk's avatar
johnk
1,973 posts
 
This all depends on what type of business model the manufacturer is going for. Is it factory direct high or low volume then price reflects this, is it going through international distribution and retail outlets then its priced for that. Also you will pay more for name brand then one not so well known this too is factored into price. So the most marked up are top of the line name brand internationally distributed loudspeakers sold in retail setting these have the most mark up.
rrog
1,958 posts
 
I know of a speaker manufacturer who's speaker was priced at $15,000. At the time the speaker was expensive, but the speakers were labor intensive with all drivers broken in prior to matching and the cabinets were custom manufactured on site then fully tested. During a show someone walked into the room and said "That's a $20,000 speaker if I ever heard one." The price instantly went up to $20,000. Several years later the same speaker doubled in price.
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