> The cost of building a consumer audio product is generally no more than 30% of retail. 30% COGS (cost of goods sold) is virtually a maximum for items sold at mainstream retailers.
There’s nothing wrong with this. These are standard ratios, not some dirty secret.
The cost of goods sold is only a fraction of the costs that go into getting products all the way into the customers’ hands and supporting them (customer support, warranty replacements, lost shipments, fraudulent orders, etc.). That’s not even counting the R&D investment costs that go into making the product, as the post says.
Salaries, warehousing, shipping, insurance, and all of the others costs of doing business add up.
It’s not actually realistic to expect an entire company to be selling you a $300 product that costs them something like $250 to build. Every business in existence must build in enough margin to pay the people who do all of the work to make it happen and support it.
If this seems shocking, consider that the COGS of software as a service products are much lower by comparison. Doesn’t matter, though, because you have to pay all of those expensive salaries to make it happen.
I used to be a naive DIY hobbyist who was outraged by how much more expensive commercial products were compared to the parts cost.
But of course what you say is true. Electronic and software design, physical design, productisation, marketing, distribution, packaging, support, business premises, logistics, and backup business services (payroll, accounting) all cost money. Even a nominal markup of 40% may not be enough to cover those expenses.
Selling at scale - even at small scale - is completely different to buying a bag full of bits and assembling them with a soldering iron.
Having said that - audio and music are particularly susceptible to snake oil. Never mind all the cable nonsense, you can literally buy magic pebbles and boxes full of rocks to "improve" your audio.
The people in those markets are either delusional or knowingly scamming their customers.
At some point branding and market positioning become the biggest driver of perceived value, and spending $$$$$$ just to prove you can - under the pretext of "purer sound" - becomes an exercise in consumer narcissism. In the classic Veblen mode, the product being sold isn't the item, it's the consumer's perception of themselves. And some people will pay huge sums for that.
Which is you can buy magic hifi rocks, magic watches that don't tell the time very well, magic handbags, and all manner of other trinkets, for very silly prices.
I think that response is natural especially for anyone who builds things, software or otherwise.
But my mindset completely changed after listening to a lot of economics stories on planet money. There was this dude who tried to make a simple toaster on his own, down to refining metal. None of us can make even the simplest consumer product, let alone an consumer electronic product economically.
This seems similar as the point made in the well known essay I, Pencil (1958)[1]. You can buy a box of pencils in Staples for something like $0.10 apiece. But no individual, and probaly no small businesses would be capable of making some pencils from raw material (skipping even the step of harvesting the raw material).
Ironically a box of rocks will probably "improve" (well affect) your audio more than a cable will. As sounds does bounce off objects.
That being said there are cheap, worthless cables as well. I'll pay a bit more for a cable where they connection won't fall off after two uses.
Having not watched the video but having read the 8 reasons, I’ll throw #9 on the list: I have reasonably high confidence that if I screw up, it’s not likely to explode in my face. Maybe that’s just marketing, but I’ve seen more than one low cost multimeter get turned into a puddle of melted plastic.
> There’s nothing wrong with this. These are standard ratios, not some dirty secret.
Nowhere in the original post is the word “dirty” or any implication that there’s anything wrong with the ratios. The OP qualifies their post with:
> None of this is actually secret (it would be common knowledge for anyone employed in the industry) but isn't well-known outside of it. This audience has a lot of professionals in it so a lot of this might not be news to you.
And after going into many things that factor into the retail price concludes with:
> In that sense, a 3:1 retail to COGS price is arguably very fair or even low, especially for firms that do any R&D at all. I personally wouldn't say something is overpriced until you hit 10:1 or more.
The quotes around “secret” are there in the first place to imply these aren’t actually secrets, much less dirty secrets.
Nowwhere in the GP comment is the word “outraged”. That’s your word.
So, what, you wanted to be aghast or something and misrepresented the tone of the original comment with a selective quote and addition of the word “outrage”?
Shit HN says. Sheesh.
(This comment was a copy of the one above before it was edited)
Indeed. I read the article, then I read these three comments. The first one reiterates points that the article made but seemingly doesn’t recognize the article made them. The second does recognize that but with a combative tone. The third is just combative.
Y’all can carry on as usual but none of that conflict was actually warranted.
Okay. I’ve edited my comment for tone and to stick to the facts. I still think the comment I replied to misrepresents the original piece by quoting very selectively and adding the word “dirty”.
Actually, that is what I learned over 20 years ago at the university while studying electrical engineering. Basic business class (and law) was part of the courses to get the diploma.
The general rule of thumb was, that a product in parts and production shall not be more 30% of the final price of the product. If its more, it will be a money looser. With that 30% you have 30% for marketing and distribution, and 30% for research and development. Then there you have about 10% of overhead costs for all over. Then you can play with the numbers. If, like in consumer products, marketing and distribution goes up, you have obviously less either for R&D, which means less innovation or less innovative products, or less for production, which means less quality.
That's what I learned for electronic products. Other industries maybe a little bit different. I think of these sometimes when I see a plastic box in the store for 10 bucks or so, and I know this plastics costs only a few cents in production in injection molding, of course not counting what the machine for the manufacturer had cost, what the production form cost and that it can only be used for a few 100 000 items before wearing out and so on.
For most consumers I'm not sure COGS is something that they are aware of.
The big takeaway from understanding COGS is using that to understand fast moving and disposable goods and merchandise.
In the UK a recent (last decade) thing has been fast fashion, Primark and the like are leaders at this. It is possible to purchase a pair of straight leg jeans for GBP 12. Understanding COGS means you can quickly realise that the absolute maximum amount spent on materials and manufacturing is GBP 4.
An awareness of COGS reveals to buyers unethical manufacturing, low quality, and essentially planet damaging goods and merchandise.
On a more individual level, i.e. the Beats headphone example in the article, it can also reveal when you're being ripped off. Where what you're buying isn't the goods as much as it is the sticker on the side and the status.
COGS may not be a secret to most people on HN, but they're an unknown part of the magic of how global commerce works to the majority of people.
I’m actually surprised it’s as high as 30%. Would’ve expected 10% tops.
Reminds me of that Planet Money special where they made their own tshirts from scratch, as “finding a cotton farmer to buy cotton” from scratch. The thing that added the most cost was the transport from the dock in NYC to the store.
Ah damn, I just commented about planet money. Seriously, it was totally perspective changing. Anyone who even has a modicum of interest in econ/business, especially as it pertains to the topic here, should listen to the t shirt saga. It's excellent storytelling even for those who aren't economics nerds. Still have my squirrel t-shirt I bought to this day :)
I'm sure manufacturing costs is like 10% or even less, but between the factories in e.g. China and the US or Europe, there's container transport overseas, import taxes and fees, and other such transportation and logistics overhead.
I freqently find myself in a supermarket and think that the packaging for the products there was more expensive than the product itself. Plus the logistics.
To be clear, the OP discusses COGS in an electronics/manufacturing context, which refers specifically to the cost of manufacturing the product, and excludes things like marketing, logistics, R&D, salaries etc.
It is not at all comparable to the Xiaomi Cost of Sales figure in GP which includes many things beyond the direct cost of manufacturing their devices.
COGS is completely company-dependent, there is no universal exact definition so long as it can be verified to be GAAP/IFRS compliant (which is more art than science).
This is broadly correct but specifically incorrect: cost of sales includes ex. salaries and capital investments and cost of goods sold includes the literal cost of the raw materials for a good
It's quite jarring to see someone jump in with another misunderstanding, derailing the correction, especially given this is a "hoofbeats, think horses, not zebras" situation. Any argument they're kinda sorta the same thing or it's ambiguous, they could be the same thing, leaves open the Q of how exactly Xiaomi can possibly fund itself if 83% of it's costs are raw materials
There is no standard definition for "cost of sales", or "cost of goods sold". No where in any GAAP or IFRS literate does it say that the term "cost of sales" have specific definitions other than a paragraph or two of ambiguous wording. Indeed, IAS is even careful to say "allocating costs to functions may require arbitrary allocations and involve considerable judgement".
The Xiaomi filing doesn't breakdown what it includes in cost of sales, so we're left guessing without a supplemental to fill in the details. You're welcome to make whatever wilder guesses you like, but they're still just guesses.
Like I said, you're broadly correct, and specifically correct.
It is unknowable, but, that's not helpful information.
It's sort of like if there was an accounting message board where they bickered about it's unknowable if memory usage meant RAM or L2 cache because L2 cache is also memory
I'm out, you're free to live in a world where you can't tell basic information about the health of a company because you're obsessive about ensuring anything you don't grok must be modelled as ambiguous by everyone else.
yeah, it's quite typical that wholesale = 2x COGS and retail = 2x wholesale.
for high end stuff it's likely far higher. that $75 Intel AX210 WiFi 6e upgrade is likely a $5 part at wholesale in 10k quantities. upgraded op-amps for $100? probably $4 each on digikey or aliexpress (and thats already marked up from maybe $2 COGS)
Yeah, last time I worked retail, our prices by default were 2x our cost.
People gasp when they hear that, but 2x wholesale doesn’t mean we were making bank. We were spending all that money on wages, utilities, the property itself, taxes, equipment, etc.
If people think that charging $20 for a $10 widget is too much, they can fly to Shenzhen and buy it for $10.
> There’s nothing wrong with this. These are standard ratios, not some dirty secret.
Standard, absolutely, but I think many are surprised by how much of that is profit for the company that sells the product to the consumers. I worked for a company that had 40-45% margins on most consumer electronics. Less than 40% and the buyers didn't really want to deal with it.
If you have ever whore'd yourself out as a 1099 "consultant" <=== you're typically paid ~30% of bill rate... the company claimed all this "I have to pay insurance" bullshit - but if you are paid $50 an hour, the contract is likely $150 an hour... and the company's fat margins are within....
yeah the person who suggests that COGs (or even BOM) should be more than 30% of MSRP cannot be taken seriously on any other business-related statements. That is shows a gross misunderstanding of the fundamentals of unit economics and electronics business models.
Definitely agree. People who rail against this don't understand economics much further than my mom sold yard bird eggs for less than the corner store --corner stores are opportunist capitalists with no heart who take advantage of people. If they had to sustain a business I'm afraid they could not. Every wannabe post-capital economist should try to run a restaurant (profitably).
Definition of yardbird
1 : a soldier assigned to a menial task or restricted to a limited area as a disciplinary measure
2 : an untrained or inept enlisted man
*"Mil.* A recruit, a newly- enlisted serviceman; also, a serviceman under
discipline for a misdemeanour; one assigned to menial tasks. Also
*transf."*First
ex.: (late) 1941.
The person who made this citation claims that comic strip “Barney Google and Snuffy Smith” made reference earlier.
Doesn’t matter. Make food people want to go in enjoy and pay for, pay the bills (ingredients, rent, insurance, marketing, labor, management, equipment, etc.) and remain profitable. No dipping into moms coffers.
That’ll put an end to “I can make myself a Reuben with store bought stuff for $3!!!, $13 at the deli is goddamned capitalist pig ripoff”
Also the cost to develop, deploy, and maintain your robots.
BTW, most fast food does use robots as far as possible; these are highly automated processes. The robot might not look like you'd expect, but that aint a problem with the robot.
Well I mean people won't order from a 100% automated fast food shop. The customers expect human hands to touch and labour over the food, even if it's financially unviable.
Corner stores also have their own expenses to deal with. They rarely have the same access to suppliers as grocery stores, nor do they have the access to the same prices for their goods. They may be paying the same for labour, but they are typically dealing with much lower volumes. I don't have a clue on how the cost of their leases compares, but it is going to affect the price consumers pay. If it really was as simple as them being opportunist capitalists yaking advantage of people, we would see far more corner stores in this world.
Absolutely. One cannot compare one’s own subsidized hobby with an enterprise that must maintain itself to survive. As my other example of making your own sandwich vs getting one at a deli. One cannot compare the naive costs vs the reality the delikatessen deals with.
> Every wannabe post-capital economist should try to run a restaurant (profitably)
I would guess most people don’t start a restaurant to be financially profitable, instead they start it for ego and status. A failed restaurant is both an example of capitalism, but also some very uncapitalist incentives.
Used to work for a hardware manufacture that did small runs of professional AV products (runs in the thousands, costs in the hundred to thousands of dollars).
The standard in the industry at this scale was and is 8x COG. That was what was required to pencil things out.
At that ratio we were initially 5x cheaper than competing products in an niche that had a de facto duopoly. Which we disrupted.
> If this seems shocking, consider that the COGS of software as a service products are much lower by comparison. Doesn’t matter, though, because you have to pay all of those expensive salaries to make it happen.
By definition, in a successful business, a significant amount of that markup goes to profit, not anything that's actually productive like salary.
Some businesses have very little profit margin; their strategy is to make up for it in volume. In fact, some of the most successful businesses (walmart) work this way.
Money that a business spends on salary, or on other products and services, continues to circulate in the economy; either the employees then spend a large portion of it on housing, food, etc, or the service providers use it to pay their employees, pay for their own services, etc.
Some profit is later spent on other things, but most of it goes is comparatively unproductive in the broader economy.
This is one reason that worker co-ops and employee profit sharing are so good for the economy; when profit is shared among workers, that profit is more likely to go back into the economy and circulate among other businesses and workers.
Removing any other expense will be detrimental to the business, that is, make it work less well. Nothing will happen to the business if the owners don't get any dividends.
>Removing any other expense will be detrimental to the business, that is, make it work less well. Nothing will happen to the business if the owners don't get any dividends.
I'd say two things.
1. A listed business wouldn't exist in the first place (or in its present form) if owners hadn't been enticed to put up capital in the hope of getting dividends.
2. The purpose of a listed business is to pay the owners, not to produce goods or services - producing goods or services is just a means through which to pay the owners.
Further, you are just plain wrong about both of your points. At least as general statements.
1. Of course there are some businesses that are created to be able to pay the owners of the capital dividends (or more common, to be able to sell the business later to someone who hopes to be able to collect dividends). But a lot of businesses are created to for people to just being able to do their job. Say a gardener who wants to work with tending gardens. Their main purpose of the business is not to collect dividends, and they may never do.
2. That a business sole purpose only is to pay the owners is a quite recent (popularised in the eighties) neoliberal idea and far from any universal truth. The purposes of any single business can be whatever the business owner wants, which range from the obvious, become rich, to serving the community with some particular goods or service, providing employment and security to the local workforce or creating opportunity for people work with some craft they love.
The stakeholders in a business are far from only the people that invested capital in it. They also include the local community, the employees and the family, and of course the customers.
Most of the people criticising my points are glossing over the key word of my post, which is listed. Not every business is listed, and those can be run for all sorts of reasons, but a listed business is a stock first and a business second. The stock is meant to enhance the owners' wealth (whether by going up, paying dividends, or both), and the business is just the means to that end. At least in theory, when that happens in a well regulated society, it turns out that the best way to make the owners richer is to give people what they want, and to allocate capital in the most efficient and productive way. Obviously reality may differ.
The ultimate goal and purpose of any economic system is to serve whole society - those people own anything because we as a society recognize that we are not able at present moment to build better system without their rent seeking behaviour. But this does not mean that they have some god given right to unlimited dividends from work of others. It all seems backwards (as in tail wagging the dog).
And don't get me wrong - I know that their behaviour is just part of human nature, that our culture tries somehow to tame and this behaviour is no different from monarchs and aristocrats of old days, but it does not mean that this is the ultimate system and there is no metaphorical guillotine waiting for them all somewhere in the future.
> The ultimate goal and purpose of any economic system is to serve whole society [...]
Sure. But that's not in contradiction to individual parts of the system having individual (and different) purposes.
Btw, not all companies have to make a profit. That's just a pretty common goal. (And if you want your business to stay afloat in the long run, you have to at least break even.)
> But this does not mean that they have some god given right to unlimited dividends from work of others.
Duh, obviously you only get dividends from businesses you own.
>> Sure. But that's not in contradiction to individual parts of the system having individual (and different) purposes.
But those purposes are only allowed because they serve greater purpose. On their own they are meaningless.
>>Btw, not all companies have to make a profit. That's just a pretty common goal. (And if you want your business to stay afloat in the long run, you have to at least break even.)
Maybe if You mean non profits like charitable fundations that holds water, but those are mostly not real businesses.
I do not think is feasible to break event for normal companies. Its like with birthrate - if You naive You could believe that with birthrate equal to 2 (one children for each parent) to preserve status quo. But in real life minimal rate is around 2.1 to prevent population collapse. The same is with profits - You need some to account for future risks.
>> Duh, obviously you only get dividends from businesses you own.
It's only obvious if You ignore platform effects (amazon anyone?) and monopolies, but that's besides the point. The point is that owners collectively as a class are able to extract too much from the system. And by owners I do not mean the hatted guy from monopoly, or rather not only him, but also german pensioner with ever increasing life expectancy crashing his hundred thousand euro camper around Europe. Even here in Poland I personally know people that are retired for decades and their work life was mostly sitting around doing nothing (my own grandma was retired for almost 50 year and before that was a housewife and got pension from my grandpa work). Meanwhile most of younger generation will probably never be able to afford to buy own house (unless someone old dies and leaves them inheritance).
> But those purposes are only allowed because they serve greater purpose. On their own they are meaningless.
This gets it backwards. In most places, we haven't arranged society as "everything is banned except for this list of allowed activities," more as "everything is allowed except for this list of banned activities."
We're not necessarily good at divining utility of actions when deciding what should be banned, either.
That any individual activity serves some greater good is a happy accident, there's no natural law that individuals will take actions that are net positive when you zoom out.
I was trying to build value framework, not legal one - it does not matters what is allowed or banned if we cannot assess its value in context of sth (I used society in this case).
The free for all strategy (libertarianizm?) may be a great diacovery strategy but it does very little for building and preservin things that works (that were discovered by it). I sincerlly believe that real freedom ends with strongest psyhopaths stomping down on week that are on their way to fullfill their desires.
So even if its all happy accident on the lowest level there is a meta game of rules far above it that prevents our world from collapsing (at least for now)
> 2. The purpose of a listed business is to pay the owners, not to produce goods or services - producing goods or services is just a means through which to pay the owners.
This is true only in the simplest of world views. Let's take this idea to the real world. Let's say all food producer would say today to stop and instead start producing toilet wipes(or insert anything here) or whatever because the can make more money that way. Now suddenly we won't have any food producers tomorrow and billions will starve. Clearly food productions companies only purpose wasn't to make money for owners, it was also shockingly to keep people from starving.
over time yes. But that assumes not every producer leaves the market in a short time frame. The bounce back effect would be devastating. In fact food production is already a pretty non-profitable endeavor and yet the companies don't stop doing it.
That the two things that the comment I answered too claimed are wrong:
1. Not paying dividends is communistic. Few people would accuse Jeff Bezos of being a communist.
2. Bad things will happen if no dividends are paid. No, nothing bad has happened to Amazon because they didn't pay dividends. Another example is Apple that didn't pay any dividends between 1995 and 2012.
Obviously, the commenter meant any returns to shareholders, whether that be dividends or stock buybacks or anything else.
Second, the commenter was obviously also talking about the economy in general. Individual companies being run in peculiar ways won't bring down the economy.
As an analogy: some companies give away some products for free. But it wouldn't be a good idea for companies in general to give everything away for free.
Of course, you can still disagree with the points that the commenter made about no returns to shareholders leading to communism (and whether that's bad or not). But please show some charity in interpretation, if you want to have a productive discussion.
You are the one that taking liberties with interpretation. The exact quote thaumasiotes argued against was "Nothing will happen to the business if the owners don't get any dividends." My italics. So, they was clearly not talking about the economy in general.
And if you go back in the thread, it was not a general argument about society. If thaumasiotes wanted to do it about that, that would be the straw man, because no one argued for prohibiting companies for paying dividends, and no one argued that society would be fine if no company ever were allowed to pay dividends.
Finally, if I show some lack of patience with thaumasiotes, it is because they are shouting "Communism!" instead of actually presenting any coherent argument. And that in discussions about economy is the reminiscence of Godwin's law.
> None of this is actually secret (it would be common knowledge for anyone employed in the industry) but isn't well-known outside of it. This audience has a lot of professionals in it so a lot of this might not be news to you.
They said none of this is a secret in the 3rd paragraph of the article.
There's nothing wrong with it, per se, but surely if you're at all a proponent of a market economy for the typical reasons, you would like to see prices as close as possible to marginal cost.
Yeah... the COGS here is really not dissimilar to what it is across all consumer products, for the nerds out there who like to find out about these things. That's a pretty good indicator that this is the equilibrium.
> There’s nothing wrong with this. These are standard ratios, not some dirty secret.
There's a lot wrong with this, but not in a moral sense.
For all his faults, Elon Musk made a good point about the space industry near the beginning of SpaceX. He asked a team of "rocket scientists" how much a rocket cost. They said something like $100M. Then he asked them to sum up the material costs. Sheetmetal, tubing, rivets, etc... They said something like $500K.
Where did the other $99.5M get spent on, you ask? Inefficiencies such as having PhDs doing welding and riveting instead of hiring contractors with more experience. Even if you say you need aerospace-grade rivets, Boeing and co hire thousands of people with those skills at a much lower cost.
Similarly, if you look at retail prices, the majority disappears into having staff stand around the store while there are no customers, lighting, cooling, retail shopfront rents, etc, etc...
You're not paying for an "HiFi amplifier model X", you're paying for a "storefront in a shopping centre with a HiFi amplifier model X thrown in almost for free."
This issue is most obvious when in some industries, returned items are simply discarded, because they're not even remotely the majority of the total cost! Repackaging and restocking the item would cost more than manufacturing it half way around the world and shipping it across an ocean. That's nuts.
Even EBay and Amazon have only just started chipping away at this problem. There is still enormous inertia.
For example, I recently purchased a flagship TV that costs $5,995 retail. Nobody had it for more than a $500 discount, including online stores that are just warehouses! The actual TV probably cost about $800 to $1000 to manufacture and ship internationally.[1] Where did the other $3500-$4000 go!?
What's happened here is that traditional retail has forced the prices up, and then Amazon -- a near monopoly -- doesn't feel the need to compete on price because they win sales even if they're just a little bit cheaper.
True competition would be if I could buy the TV for manufacturing cost +30%, not manufacturing cost x3.
This won't happen while traditional retail is propping up prices and has no real competition. We need a "SpaceX" to shake things up. Unfortunately, Amazon wasn't it.
[1] This isn't the cost of running the machines in a factory. It's everything up to the point of getting the goods into a cardboard box and on a ship. Design, profit, staff costs, material costs, energy costs, capital, etc...
That other 3500 - 4000 is definitely not majority profit. If they could make better profit on your purchase they would, they really don't want to leave money on the table. MFG, shipping, handling, warranty, returns, accidents, fraud, R&D, operations staff, etc. It's not getting done by volunteers.
The "rocket" example is as silly as the "Moore's Law applied to vehicles" arguments that used to crop up on Slashdot decades ago.
"If cars improved according to Moore's law, they'd get XXXX miles per gallon and go YYYY miles per hour". Yes, and they'd also be smaller than matchboxes while seating thousands of people.
Exceptional situations are exceptional. Good on Elon Musk for realising that there was a large latent demand for launch-to-orbit services. Well done, that chap. But you can't generalize from that to everything else. Or anything else, really.[1]
With respect to the rest of your argument, I understood that Amazon makes most of its profit from AWS, while stories about its ruthless exploitation of its warehouse staff are legion. Those factoids don't square with your argument that Amazon is making excess profits.
1. Take luxury yachts for example, which are about as expensive as rockets. The bill of materials would be a slightly larger fraction of the final cost than for rockets, but the same reasoning would seem to apply. Why has no-one "Musked" luxury yachts?
> With respect to the rest of your argument, I understood that Amazon makes most of its profit from AWS, while stories about its ruthless exploitation of its warehouse staff are legion.
Sure, but from what I understand, businesses generally list goods on Amazon for close to MSRP, possibly for contractual reasons. Some of that certainly pays for Amzazon fees, but where does the rest of the difference from wholesale price go?
> Why has no-one "Musked" luxury yachts?
Well, for one thing, a luxury yacht is a status symbol. If it became less expensive, more people would be able to afford them, and the wealthy would feel less special about being able to own one. Certainly not the only reason, but I'm sure it's a contributing factor.
The real insight I'm gettimg here is just to curb our consumption to a great extent. The fact that shipping new products is cheaper than reinventoring used ones is an indication that we are on a death spiral. Having the move fast and break things crowd come up with a solution to consumer electronic prices is just going to accelerate pollution that much more. And I am aware of the sweet irony of typing all this on a phone whose low price depends on complex supply chains.
It’s not so simple. Many manufacturers set a minimum advertised price which would require legislation to change.
Additionally advertising a certain price and actually selling at a different price is a surefire way to get delisted from google for example. This is why the whole promotion codes/voucher concept is popular.
This seems to apply across the entire Small Plastic-covered Electronics sector. I worked for an instrumentation/sporting goods manufacturer among others and this reads like I wrote it myself.
The CEO, even of a small operation, likely has no idea what the performance characteristics of their devices are. They exist to raise capital and deal with paperwork.
We operated at about a 25% bom cost which was muuuuch higher than it needed to be but we were the aforementioned $50 components assembled by baboons case. The products were very high end meters and sensors with the electrical sophistication of a McDonalds toy, just using whatever the highest end parts Arrow et al would sell us.
Like they aluded to, ultimately it's all the little stuff that gets you. Packaging, whatever voodoo the S&M team is up to, random IT bullshit, heath insurance, random FCC compliance stuff, etc.
Ain't this the truth. If COGS for the electronic gizmo is over about 10% of retail price, and you're making boutique-scale runs (<10k units) of whatever it is, good luck with that.
I strongly suspect that, to a rounding error, 100% of new small-electronics products on, say, Kickstarter, sell at a massive per-unit loss. And yet people will still bitch about the price.
Nothing better than designing a product and actually producing a batch of it... and then finding out you have some EMI problem requiring a redesign. If you're lucky, you can remedy it by manually adding some shielding tape, if not... you might as well file for bankruptcy in the worst case.
I worked in a semi anechoic test chamber for measuring radiated emissions.
We had a few cases like this that one of the engineers was especially good at solving.
In one, we had a cheaper network switch that was failing one of the limits. One of our engineers walked in with a can of metalized spray paint, applied a single squirt to the inside of the plastic case, and fixed the issue. If you bought one and opened it, you would see a single squirt of silver looking paint on the inside, right where he put his. I've seen a few of these squirts in the devices I've taken apart, so I guess it's not a secret.
Ancient history, but the way Apple skirted around FCC regulations for the Apple II while Atari got bogged down in expensive remediations for their 400/800 systems that added to the BOM is an interesting business study.
Ha! I've seen this. We had one screw that was close enough to a trace on the board that it would lock up the device and fail ESD testing. Ended up plugging the top of that one screw hole with RTV on the whole batch.
Precompliance EMI test is cheaper than ever to put together, but a proper ESD setup is still going to be impossible to justify on a shoestring. I’ve seen other people use leak detectors and record zappers and I won’t even get into the things that won’t credibly work. I feel your pain.
They always held a lot of parties I wasn't invited to, but after being asked to change random text strings enough times to "make it easier for the customer to understand" I don't think I wanted to go anyway.
Years ago I visited a friend in emmm..., "Europe". He was not home and the neighbour let us in. He asked us to entertain ourselves until he gets back. It took little time to notice the pair of speakers: 50cm cubes, almost. I managed to turn them on and connect them to the TV. There I heard the most lifelike sound I ever heard from any speakers. I wondered: these should be some crazy European brand... no brand names anywhere on the boxes.
Later that night I asked about the speakers and he went: "What? They sound good?"
It turns out his friend works at "Insert big European brand, not only audio here" and they decided to make a great pair of speakers. Then he brings home a measurement device north of 6 figure €s, and they tune it so that you would not be able to distinguish a person talking behind you, from the recording of them being played with these speakers... Or as close you can get to that.
Then they take their product to the company only to be laughed at: "for anything below 5000€, we don't use any part above 50€. You have parts north of 500, this is not feasible for the market."
they tune it so that you would not be able to
distinguish a person talking behind you, from
the recording of them being played with these
speakers
That's interesting! I'd love to know more about how your friend did it.
It's trivial to get perfect on-axis sound (ie, the tweeters are pointed at your ears) even with cheap speaker components if you add some active DSP to compensate for the speaker's imperfections.
In professional studio audio this is more or less the norm with monitors from Genelec, JBL, etc.
In nearfield use (ie, you're close enough to the speaker that the direct sound from the speaker dwarfs the sound reflected off of the walls of the room) this will sound eerily good, basically like putting on a pair of headphones.
>It's trivial to get perfect on-axis sound (ie, the tweeters are pointed at your ears) even with cheap speaker components if you add some active DSP
Common digital room correction systems can improve the time-invariant linear components of an audio system's distortion (phase and frequency response) by convolving with an impulse response. The best results are obtained at a single point listening position, not a whole line. This technique cannot restore frequencies that were cancelled out by destructive interference, and may increase noise to unacceptable levels at frequencies where it has to apply gain. It supplements room treatment, not replaces it. It does nothing to improve non-linear distortion, e.g. harmonic and intermodulation distortion from soft clipping or asymmetries in the speaker motor, or time-dependent distortion, e.g. dynamic range compression from the coil overheating, or so-called "Doppler distortion" (better named phase modulation distortion[0]) from significant excursion of the cone.
How much distortion matters depends on personal taste and listening material. Moderate harmonic distortion can be very difficult to hear in some sounds. And as the popularity of vinyl and tube amps show, some people prefer more distortion.
As @Jolter noticed, I'm unwilling to share information that can reveal the company the friend of my friend worked at. I'm also, not aware of much of the technical aspects of what they did, as my friend was a scientist and the other guy had done much of the hard work, so he did not know most of the details. Hopefully, in another visit there I can see him and find a way to meet the engineer, maybe I can encourage him to share his designs, tuning method, and other insights he has.
I'm confused. So were they actually good speakers to begin with, or was it the measurement device + tuning that made bad speakers sound good? Mind sharing the brand of speaker?
I've witnessed some hard negotiating in the car industry about the price of a cable lug for a 6-figure luxury car. The car maker wanted to bring down the price for one lug from 0.05 Euro to 0.03 Euro at a order volume of about 100.000 pieces.
This kept about 50 people (on both sides of the deal) busy for 3 months: Engineers, CAD-Ops, Buyers, Sales, Project Managers...
It was obvious that the amount of extra-work to see if the price could be lowered was a multiple of the savings of the car maker. Yet nobody complained.
This sort of comment just isn’t necessary, doesn’t add anything to the discussion and I’d be happy to see it deleted. English is likely not the gp’s first language but we should be grateful that smart people from all over the world want to talk to us in English.
The problem with audio in general is that its really difficult to find decent reviews of the product.
I used to work as a tech in a recording studio (along with a theatre and TV studio) We have a set of nearfield speakers, and that was about it.
However audio reviews are basically:
"Its got punchy bass" and "sounds a bit woolly" or "has brilliant clarity in the upper regions" are about as descriptive as review get.
Not only that but "high end" audio is replete with proper charlatanism. Without trying the devices, its impossible to assess how good they are.
personally, I have a second hand denon HDMI decoder thing, with airplay. I have some cheap surround speakers. The thing that separates it from "high end" amplifiers is that it has a microphone to add some basic DSP filtering during a calibration stage. It gives a decent flat reproduction of what's coming into the amp (ie its not mid or treble heavy), and cost about £250 all in (the amp was second hand)
It's "funny" how sometimes the "audiophile" equipment people use for hearing music is way more expensive (not better, necessarily) than the equipment used to record said music. Particularly cables.
How come an "audiophile" balanced XLR cable is 10 times more expensive (or more) than the ones used to connect the mics in the original recording, even when using the best Mogami cable, Neutrik plugs and paying somebody for hand soldering it?
More or less same as you, the team made by my "cheap" Denon amp plus a couple of Q Acoustics bookshelf speakers (and a relatively cheap high quality bluetooth receiver) sounds great, and the whole costs just a bit more than some crappy Beats headphones.
(Now that I'm venting, brands like Bose have some nice things but overprice lots of their equipment. Not to talk about the "DSP boards" needed to run their classic 802 PA systems, that was so bad)
because the studios were pretty well booked, we had a fair few repair jobs. Cables break, normally its where they are soldered into the XLR. From what I could tell, the main difference between cheap and expensive cables was the amount of string that was bundled into the core along with the actual cable. I suspect now is both string and the woven sheathing on the outside.
sure some were copper, others were aluminium coated in copper (although they broke more often, I'm not sure because copper is more ductile and AL just stress fractures, or because they were really cheap and shoddy)
They all sounded the same, apart from when we used phantom power on long cables. Then sometimes they turned into microphones. You didn't notice it unless you were in the theatre, and people would accidentally stand or kick the cable, making a massive thud.
> It's "funny" how sometimes the "audiophile" equipment people use for hearing music is way more expensive (not better, necessarily) than the equipment used to record said music. Particularly cables.
The simple fact is most "audiophiles" are rich people showing off their wealth. It has little to do with actual audio reproduction.
On the other end of this you have serious audio reviewers who on one hand are professionals and have tonnes of experience, but then you see them review an absolute nonsense product like an audio-friendly ethernet switch(!!!) or "audiophile" NVMe drive, and write an entire article about how transformative it was to their sound(for the better, of course).
Then you start to realize that even the best ear is still subjective, and people will hear things if they want to hear them.
> Then you start to realize that even the best ear is still subjective, and people will hear things if they want to hear them.
urgh yes.
When I was recording something, I routed an (audio)compressor/gate combo. I was twiddling something on the effect and convinced myself that it was making a change.
Looked to my left, the person was vehemently agreeing with me, I looked behind, the other person had a face like I'd farted. A while later I realised that I had routed the output into a muted bus. (ie I couldn't hear the output of the effect, only the raw original)
If you want a good laugh, have a look at this forum thread - it's like these people are from a different planet. So many posters saying that the NVMe drive has improved the clarity and "richness" of their sound. Fortunately it's a harmless kind of ignorance.
Many of the systemic problems we have today are the direct result of greedy and intelligent people.
A hypothetical world where all people are one deviation smarter would probably be way more dangerous and stressful. The number of highly intelligent sociopaths would explode, leading to exponential damage.
Perhaps, but also tons of issues come from people's stupidity and shortsightedness. People become greedy and callous in large part due to bad childhood experiences, and bad childhood stems from parents being stupid or making bad decisions (like having children while 17 years old). The only way to stop the perpetual vicious circle of bad parents raising another generation of shitty parents (and shitty people in general) is to improve people, not by keeping them ignorant.
I can see your point, but it makes it very hard for new comers. I was talking to someone the other day who had bought 3 DACs for different purposes to listen to YouTube sound on their edifier speakers and headphones. Its difficult to tell them they could probably not bother with the dacs, but there's a whole echo chamber about these things that confuses the new comers.
Think of it this way: on a purely logical basis, it's better for society if money is in the hands of people who understand its value and hope to do useful things with it. I'm not claiming to be one of those people; I would definitely waste it all myself.
Of course, we can't easily transfer money like this from the frivolous to the useful for a ton a reasons. Life isn't a fairytale. But the next best thing is to have them spend their money so that at least it can power some form of growth.
It's not that these newcomers deserve to be mislead by echo chambers, but rather that if they demonstrate so little regard or respect for their money by failing to do much research or understanding what they're buying in detail, especially if they are buying something extraneous to begin with, that I don't see a moral or ethical problem to keep them spending. If anything, the money should be parted from the well-to-do fool, if only to provide macroeconomic support to the rest of the population.
Well, you're assuming that everyone can just learn electronic engineering and get the optimal solution, things don't work that way. It's an interesting viewpoint though.
The root is that at some point (late 20th century) the cheap wine became as good as the good wine. So the key differentiating metric for most of the space turned from performance to marketing. The high-end got pushed into the stratosphere (I'll never own a pair of electrostats) and everything else is good enough (hopefully, sometimes there is incompetence).
So if it's all good enough for the mass market then the audiophiles need to look in the mirror and ask what they're after. Some will say a mystical, ethereal experience. Some will say total control over the signal chain from outside the body to inside. These are orthogonal wants crammed into a single market.
The second path is harder, but it at least the end result is some form of truth. Very few engineers want to devote themselves to a pointless crusade for a tiny market of consumer goods. There's better things to do on the weekend. However, when they do it's special.
In my defence, "decent flat reproduction" is at least measurable. However I should have actually been much more precise in my language. It should have read something like "the frequency response across the full spectrum is flat, which means that what you put in is what comes out, there is no extra base or treble, despite the shape and sound performance of the room"
Should be qualified by
"since the mic is on the receiver, if you were to situate your head at the receiver's mic position and accounting for the mic's ADC circuit there is a chance that your human ears would hear something like a flat response."
But of course that can't be generalized across the room, different points in the room will have different acoustic response because of the unique positioning wrt other reflective surfaces.
The closest you can actually get is to use something like miniDSP and a umik, position the umik where you would usually sit, and then let the DSP run and calibrate.
Anyhow--I'm not knocking you. I'm all about better audio through such tricks as well. It's just we can't probably say absolute things having a flat response, because at the end of the day people hear different things (both physiologically but also psychologically). One of the things I do for fun sometimes is run a flat signal that sweeps through the frequency range and edit the equalizer until I _perceive it_ to be a flat response, then compare the EQ to the FR chart on audiosciencereview if they have reviewed it or if the product has included it in their marketing :)
I built my own speakers for under $200 and I honestly think they are some of the best I've ever heard for a personal setup. They were inspired by https://www.youtube.com/watch?v=CKIye4RZ-5k (Tech Ingredients) . I built the speakers from foam board, the subwoofer from car audio parts and the amp is a standard class D amp. The best part is whenever someone comments on how good my speakers sound I can say I built them myself.
Were there any guides or tutorials you followed? 20 years ago or so, I knew someone who built their own speaker cabinets and I couldn’t believe DIY speakers could match companies that spent hundreds millions on audio engineering. I’ve heard enough anecdotes that I would be interested in learning more.
Jeff Bagby is another big name in the DIY speaker world, although he died of COVID in March 2020 and I'm not sure there's a centralized site of his designs :(
I'd like thank you and the GP for posting these links. My daughter has a synthesizer that she would like some monitor speakers for and making them might be a fun project. These links are great.
Very important: price and sound quality are at best very loosely related in the consumer market! I mean off-the-shelf products here. Never assume expensive stuff sounds great. This is counter-intuitive but true.
Thanks for these links. Do they make kits for soundbars? I'd like to get something short to put in front of the TV and it feels like I should be able to make something. I guess the problem would be integrating ARC into it.
I have a semi-crappy Onkyo CR-N575 bookshelf receiver[1] on my desk because I wanted a small system that could play CDs, radio, Bluetooth, Spotify, etc... (there's not much out there for this anymore).
I've always wondered if buying (or now I'm thinking about making) better speakers would make a noticeable difference in the mediocre sound? I only ever play at pretty low volumes and the receiver itself is no gem.
The manual says RMS output power is 20W + 20W, 1kHz, 10% THD 6 ohms, but then a couple of lines later says THD is 0.05% line in, digital in 1kHz 1W. That's pretty bad, right? If so, then speakers may not be worth upgrading. If they are, how could I tell if these[2] are compatible?
There's a variety of books out there. Sound Reproduction by Dr Toole is a very comprehensive reference to the big picture, but doesn't really get into speaker and crossover design specifically. There's other books you can find for that, but I'm unaware of the most recent good ones as I read most of this stuff decades ago. In that era the Vance Dickenson book was a big one.
The main reasons DIY can rival hifi are:
1. Good components are available to DIY builders. Yeah there's some proprietary stuff that's cool you can't get. But there's a ton of very top quality stuff you can get.
2. Retail hifi has insanely restrictive costs. They'll save every penny possible. So simply by buying better capacitors, etc, or using a slightly more complex crossover, or building a bigger box than is fashionable you can gain an edge.
3. The digital room correction systems offered on most home AV receivers today do a lot to fix simple flaws in DIY designs, giving more slack.
I honestly believe crossover design is overrated these days (for DIY). It was a necessity in the past, but today we have cheap amps and great DSPs. "The age of the active speaker" I'd call it. The smallest ADAU145x can do the crossover (and corrections) for a 2-way speaker. If necessary even as a FIR. Products I have are the freeDSP-aurora (8 channel DSP, 300€) and a Beocreate (4 channel DSP+amp, 170€). Both use the ADAU145x family, but the aurora is more powerful.
Of course this only applies to DIY. Though I wonder what's the cheapest commercial speaker one can get with an ADAU145x in a crossover-less design.
Yeah, I didn't wanna just blather at people but I should have mentioned that with minidsp and all its descendants you can treat the crossover design as a software problem, which definitely simplifies.
But also what I was getting at with mentioning the common room correction systems is these days, you can do something like take a textbook Linkwitz Riley 4th order crossover, do the little bit that's necessary to match levels, and then just call it good and let the receiver's DSP handle the large scale FR response. That advice might annoy some more knowledgable people, but the blunt truth is it'll work and done with reasonable care you'll have a truly impressive system for the price.
I don't know pro gear that much but my understanding is there's a bunch of vendors now that package DSP + ClassD amps in a way the speaker companies can white label as their own. Kinda like half the AV receivers on the market are ultimately mildly tweaked Audyssey designs.
For those who want the ultimate TL;DR on Dr. Toole's book, it's something like this:
Listeners prefer objectively accurate (ie, the input matches the output) audio reproduction, with some added emphasis on the bass frequencies. Because most of the sound we hear indoors is actually reflected, it is crucial that frequency response of the speakers remains constant as we move off axis.
This might seem blindingly obvious, especially the first part, but it's groundbreaking work as far as demystifying audio is concerned.
For so many decades, the snake oil salesmen dominated the hifi industry with bogus claims. They wanted us to think that building speakers was like crafting the perfect wine. But it's not. It's engineering. =)
The alternative (or an engineering trade off!) can be doing the opposite: Only care for on-axis sound, and while at it put most of the energy on the axis to reduce energy of reflections. Drawback: Works best with one or at most two listeners, plus speakers and listener are constrained in their relative positions.
Bad for the living room, not an issue in a study.
The bundling is a matter of membrane diameter and frequency. Bigger diameter result in stronger beam forming, however lower frequencies have less beam forming.
You can see the effect very well in the directivity pattern of this 8" wide band speaker: https://www.visaton.de/sites/default/files/dd_product/B%2020...
I've a FAST/WAW with a 4" wideband (250Hz XO). As personal monitor speakers these work great with an amazing stage and "resolution" (the illusion of being able to pinpoint the exact spatial location of a single instrument).
//woah: Thanks you two (you&GP) for triggering me on this (not /s)! While grabbing a coffee I spent a few minutes thinking about beam forming in audio applications; and came up with the line array. Not so novel, I know, but I'm happy to have gotten there on my own.
Late reply so I dunno if you'll notice this, but I think you'd enjoy reading about Keele's Constant Beamwidth Transducer line array design. He passed away some years ago, but archives of his website are around, and his AES papers are still there. The TL;DR is he adapted ideas from sonar beam forming to audio reproduction.
What I love about Toole's book is it's basically the whole big picture of audio, completely sourced and grounded in real deal empirical research, but research that also worked to correlate objective measurements to subjective preferences.
All those internet arguments over the years about what matters and what doesn't, tubes vs transistors, class A vs class AB amps, you name it... Toole's book is the cliff notes of what's actually real. It's such a huge advantage vs when I first started reading this stuff in the 90s and it was a lot harder to find information that wasn't just someone's "golden ear" opinion imagined out of thin air.
No one spends hundreds of millions on audio engineering. Or at least, not at achieving the best audio experience. The company that spends the most on audio R&D are probably Bose, and their whole goal is to produce speakers that look good and sound acceptable.
The reason DIY audio gear matches really expensive factory built gear, is that the secret to good sounding audio is good sounding speakers, and good sounding speakers are heavy and big, and have intricate cones made out of expensive materials. Imagine how expensive it is to manufacture such a thing and have it marketed and shipped, and you'll realise they need large margins on something that's already expensive. Combine that with that the actual construction of speakers is very simple anyone could it do with a basic set of woodworking tools, not to mention that many people enjoy doing it as a hobby.
Of course good amplifiers are also part of the story, but their development is a sort of by product of the computer industry, as better transistors has generally meant better amplifiers, with class D amplifiers basically being the state of the art right now.
I knew someone who built their own speaker cabinets and
I couldn’t believe DIY speakers could match companies
that spent hundreds millions on audio engineering
Yeah! The good news is that in many ways, audio is a solved problem - the industry is over a century old, so all the fun tech has had lots of time to trickle down to DIY folks. =)
That said, designing your own high quality (I'm defining "high quality" as "measures objectively well") speaker "from scratch" is quite a bit of work.
Most folks, even designers, start by building other peoples' designs. If you really want to design your own speakers, then absolutely go for it. It's not rocket science, but it's somewhat involved if you want to do it right.
If you just want a pair of high quality speakers for cheap (I am one of those people!) then use an existing design w/ a flat-pack kit from Parts Express or elsewhere.
I've dabbled in this area too, both for home audio and musical instrument use. The thing I like about building my own is that I know exactly what I'm getting. I can either do my own analysis to my heart's content (of course at my own risk) or plug into the DIY community. Some of the design articles I've come across indicate that there are some very serious hobbyists out there, with interest in understanding both theory and measurements. And no marketing hype.
Articles like these make me appreciate my business degree, because this list is the basics of any business. 30% COGS, high shipping costs, outsourced manufacturing, big box focusing on low end market, etc is all very normal for almost any industry.
Exactly. I too majored in business and I read through to the end waiting to see where the "secrets" were. This is super, super basic stuff that has more to do with really simple microeconomics driving firms' investment decisions. Most frivolous consumer-oriented sectors of the economy are all the same.
I don't mean to be rude, but you don't need a business degree to understand the very basic things that you mentioned. I am fairly sure that most people using Hacker News understand those simple concepts in business.
I don't know; I've seen so many people (including my younger self) who have completely wrong intuitions about business. This often manifests as FUD and hating that can be hard to dispel.
I don’t have a business degree and yeah, I think I comprehend what was written, but before reading it I wouldn’t have guessed at much of it, a lot of my intuition or assumptions would have been wrong.
More generally, sure, you never “need” an X degree to understand X, but most people won’t have spent the time learning X on their own unless they have an X degree.
I think OP is saying that they're gaining a new appreciation for the fundamentals they learned which aren't necessarily common knowledge. Not that those fundamentals are so sophisticated that you need a degree to grasp them.
If you are in IT, and you're not a fantastic engineer. Level up your business skills.
ERP administrators are an untapped source of business knowledge, because they map all the crap business is up to and are forced to learn about all the weird metrics, acronyms, reports, and so forth a business uses to survive.
Just look at the prices on AliExpress. They are a fraction of the prices at retail stores, and it includes the sellers margins. And AliExpress products are not always counterfeits and can be acceptable in quality.
A COGS of 30% is, as they say, on the upper end. For brands that have to offer a certain amount of quality in order to sell instead of going purely for ads and brand recognition.
50% is the retail store margin. I thought it was 40%, but that's probably a global rate, with electronics being higher.
I thought the retail margin was related to (essentially) how much floor space your product takes and how often it is stolen. High-end electronics should be less than 50%. I certainly doubt that a flagship smartphone has 50% retail margin, for example.
And how often it is returned to the store because buyer didn't like it. Some things can be resold, but most of the time the seller eats up the costs. It is always amusing for me to see people being outraged by the costs and seeing nothing wrong with returning something to the store just because they can.
I was surprised to see that retail stores get 50%. I was looking at fake leather bags the other day and they really look very high quality and sells for 10USD. I can't imagine making that bag for 5USD and making a profit off of it.
I bought my current digital camera when one big-box electronics retailer had a special "we're paying your VAT" offer going on – over here, VAT is 19 %, and when the shop assistant entered the rebate, the POS system popped up a warning that the sale price was less than the shop's cost price.
I don't remember the exact price, but it does indeed mean that the margin must have been less than 16 %.
When I worked a big box retailer in the 90s, usually the stuff that had fancy displays had a more generous margin. There’s also below the line margin from paid shelf placement and other things.
You can do better if you're selling the stuff yourself, but that follows a bathtub curve with totally bespoke on one end and Apple on the other. It seems it becomes a struggle to keep up sales unless you're on Amazon and stacked on big box retailer shelves.
Lord no. I was surprised that it was as high as 30%. I was always taught to aim for no more than 20% and that was for industrial products that sold in relatively low volumes.
So when I buy an Oled tv, does the store procure it for half the price from the distributor? Sounds like a huge margin. How about from an ecommerce store, which a lot of times have slightly less but close prices to regular stores, can the distributor force them to keep prices up not to upset the other resellers?
So when I buy an OLED TV, does the store procure it for half the price from the distributor?
Generally yes.
can the distributor force them to keep prices up not to upset the other resellers?
Retailers upsetting other retailers is called channel conflict and is often solved with minimum advertised price policies. High-end companies like Apple and Sony often have this policy which is why you see the same price everywhere.
Also, the margin in Apple products for retailers is quite, quite low. I'd say 10% or less. That's why lots of "Apple authorized resellers" have either closed or expanded their business to accessories and services in the last 10 years.
After a decade working post graduation and nowadays being comfortable negotiating and managing millions-dollar projects, I still find the book covering all the fundamentals you need to know about modern business.
I'm not joking when I say this, I have no idea how business works. I get it in theory, hell I even sold one. But I still don't know. One of my space-cadet day dreams is trying to figure out just what someone could possibly learn in business school and I can't come up with anything.
Accounting (for example the poster in the link states marketing does not make up COGS, which to someone who studied accounting is obvious). Simple economics (poster reveals "secret" that Price*Quantity can equal higher total revenue when price/quantity change disproportionately). Consumer behaviour (Dr. Dre can lead people to believe crap from pile A is better than crap from pile B). This is apparent insider-knowledge from someone who spent several years in industry - or you can go to school for the first 1.5 years of a business undergrad program and learn it that way across many more industries. In the final years of business school once you've chosen a specialization, you may learn advanced corporate finance (stocks, bonds, weighted cost of capital, different types of break-even measurement like economic break-even vs accounting break-even). Or you may specialize in accounting, operations, marketing, yada yada. Then an MBA is apparently much of what is taught in a good business undergrad but perhaps faster-paced and you get a shit ton of networking value.
Apparently I've absorbed this knowledge via osmosis working in management at Tech Companies. All of what you said just seems mostly common sense to me. Even stocks, bonds, cost of capital and other "advanced" topics don't really seem very advanced.
For sure, I shouldn’t have called them advanced, they’re by definition broad enough to be industry agnostic and are typically taught in lower years. But if it were common sense it wouldn’t take a degree or years of experience to acquire that knowledge.
I doubt it's uncommon for people with long careers in management to gain the equivalent experience of a degree in a field so diverse and therefore generalized as "business."
22 year olds know this stuff when they leave school, right?
What I'd like as a consumer is the antidote to this.
I saw something like this trying to get a replacement plumbing fitting at my parent's house a few years back. The local hardware store with the high-quality stuff had been closed down by the big-box stores. Perusing the possibilities at lowes and home depot showed plastic and fake chrome when I would have paid extra for high quality brass or even metal. It was just gone.
In consumer audio, I fear that same - maybe we need some way to navigate away from the 7-eleven iphone headphones, from the bose/beats continuum, and to maybe find something like the moondrop blessing2.
Amazon and other high volume low margin retailers are a is pretty good antidote "for this". Good shipped from manufacturer to consumer with smallest markup possible. Of course it kills service, local shopping, city taxes, retail employment along the way but that was the overhead.
If you like Schiit and are willing to trade "Made in America" for "Best audio at any price", but for about the same price, you'd probably like Topping, too. https://www.tpdz.net
Worse selection, less organized, higher prices, and limited online presence? You might be in a local hardware store.
You might snag a deal on some dusty new-old-stock part, but for just about anything else, I much prefer the box stores or Amazon or supplyhouse.com (I can vouch heavily for these guys, who used to be called pexsupply.com)
One major difference though (at least in my experience with hardware stores in rural Northern California) is that many of the employees actually have a good amount of experience with the tools and materials and can offer recommendations and help you figure things out and make decisions.
Good luck getting most HD employees to do much beyond looking up a location on their phone slower than you can do yourself.
I'm generally willing to pay for the experience of being surrounded by a tenured team who know what they're doing rather than a rotating cast operating at inattentive high schooler levels, but I do still go to HD a lot.
And there was one store I stopped going to because the old guy knew too much and could tell I was doing things out of my depth and - while being somewhat helpful - made me anxious. At HD if you buy a weird combination of stuff or just don't have the air of a pro, nobody's paying attention or knows the difference.
> Perusing the possibilities at lowes and home depot showed plastic and fake chrome when I would have paid extra for high quality brass or even metal. It was just gone.
Both Lowe's and Home Depot sell metal faucets, taps, knobs, etc., in a variety of styles.
They could be referring to a toilet paper roller. Just had to replace one of mine and realized while shopping that I haven't seen a proper metal one of those in in years.
> Yes, that is our name. Shih-tah. It's a proud German name, host to a long line of audio engineers who slaved away in crumbling Teutonic fortresses as lightning lashed the dark lands outside, working to perfect the best amplification devices in the world...
> Or, well, no. Yep, Schiit is our name, and it's pronounced, well, like "hey man, that's some really good Schiit!" And now that we have your attention...
This post answered the one question that I couldn’t find answer for many years, that is why he did Dr.Dre get into the beats business or the other way why would the founders include Dr.Dre
Now I understand that the equipment manufacturing is already commoditized and so the onus is fully on marketing and so he provides a great value.
This was a great show. I had great respect for Dre when everyone said he should bring out a shoe and he said he wore the same shoes every day, headphones though...
Companies have long done this sort of aspirational marketing. President Cigars (made up) didn't need to be used by the president; the unnamed cowboy, on a poster, smoking your brand of cigarettes conferred some level of vicarious living and cool; etc.
But, which company/companies were first with celeb staff members/owners (ie not just endorsement)?
Planet Hollywood seems like it was an early version of this. Victor Kyam's (sp?) "I like it so much I bought the company" is on similar lines but not quite there. Thoughts?
He has a quick look at the engine, then hits a specific spot with a hammer. The car was fixed.
Then Bob asks for 100 bucks and Alice replies that it is quite expensive for one single hammer strike. Bob then says, the hammer strike is 1 buck, knowing where to strike is 99 bucks.
I sold a very limited run electronics once. Less than 1,000. Most of this is true. The key is to make something niche enough that you can justify that fat margin. Pre-pandemic, it was quite cheap to produce even proof of concept products in Shenzhen IF you knew where to go for quality. Not anymore. 2016-19 was a special period for hobbyists.
Components shortage. It's a hit and miss - you created a design, all components are available. You come to order e.g. 100 unit run, turns out the manufacturer already ran out of stock on one crucial component. Ok you can source that component elsewhere (and someone asks 5x mark up), but that manufacturer won't take your stock of components. So you order 100 units anyway, just without that part assembled and you will finish the assembly locally. That complication might have already wiped off any profit you could get on that unit.
Alternative example - one crucial component is out of stock, but manufacturer has a different model of a microcontroller, that is pin compatible but has half of the RAM. You run an analysis and your firmware should run fine, but you may need to do some tweaks here and there. You place an order with an alternative part.
Suddenly you have to support multiple versions of the same product. Then imagine your product team comes up with a new feature that also users ask for. Problem is that it may not work with the revision with half the RAM. Would you offer an update only to a section of customers? Would you replace the boards for free once they become available? Or do you make a completely new version of a product (which is going to piss customers who just bought the "old" version).
Etc. Etc.
These supply chain problems make any planning not possible.
The common "solution" is to only start making a product once you have all parts physically available. But this can be an enormous upfront cost, as you can't order parts as pre-orders for the product come in.
Then let's say you created 1000 units, sold all. In the meantime 5% of crucial components go out of stock and lead time is 52 weeks and growing.
You can probably sustain the company for a year and re-design the product to use different parts, but experience shows that they may get out of stock too.
You are going to have to focus 90% of your time chasing components than developing the product. This is not viable.
Many businesses are closing now because of this.
> Most Chinese factories and engineers are perfectly capable of producing high-end equipment... but their customers don't ask for it
You can also get cheap and really good Chinese gear now. I bought KZ-ZS10 Pro IEMs for $45 on Ali Express and they are fantastic. Very clear sound and isolation that beats my Sony XM4 around ears. Unfortunately the bluetooth adapter you can buy for them is static-y garbage.
I don't know if you are interested in this, but for anyone who wants the audio quality of wired headphones while also using bluetooth, I can highly recommend a bluetooth DAC, like the Qudelix 5k[1]. It has excellent audio quality and their app is quite nice and allows for some very in depth customization.
HiFiMAN has really destroyed the audiophile market for other brands. Every single bracket of their products perform like any other company +50% extra price product
Sundaras were amazing, but the new edition XS were just the last straw for competitors, never a headset of that quality was so affordable, the equivalent from other brands can even cost 2x the price.
The world of consumer audio makes very little sense. The beats headphone mentioned is often poo poo'd by anyone interested in sound reproduction, they are very over priced, but most people don't pay for the technical reproduction its the brand they want, and the belief that because its expensive its better.
It used to be that more expensive was better, but that has decoupled now with many products, now it's a lot of marketing you're paying for.
Sound is one of those things that used to be you'd pay more and get better stuff - in the days of record players and onkyo amps. Now you can get a class D amp for peanuts that's as good as anything else on the market, all sound is digital so there is no real need to spend more. The only thing where you can spend more on is speakers, there's still some engineering there. The world of audiophiles and golden ears is a crazy place, where you can spend as much money as you want on things that don't make a difference.
I work for an old, but small pro-audio manufacturer, and I just started watching AudioScienceReview's YouTube videos. Amazing stuff. I love his commitment to the consumer end, audiophile products, actually testing out many of these, with industry standard test-equipment and test procedures that we use.
A few years ago I decided to move up from what I'd call "good consumer" receivers to something high(er)-end. So I shelled out $1400 for an NAD A/V receiver.
This thing is unmitigated trash. It's riddled with design defects and bugs that render it unfit for purpose, some of which are acknowledged by NAD but with no solution. For example: You can't watch 1080p content through it because it reports incorrect EDID info to the source player, saying that the max resolution of the display device is 720p.
Another: Dirac audio processing is well-regarded by many to fix room acoustics, so that was a major factor in the purchase. Welp, the NADs will simply "lose" or stop using your laboriously-sampled Dirac EQ curve at random. Another defect admitted by NAD, but "we don't know why it happens."
An authorized repair guy said NAD simply contracts out their designs, and the gear is often built by a hodgepodge of suppliers out of low-grade components. This was after driving two sets of speakers from one set of terminals apparently caused on over-current condition... which didn't throw a circuit breaker or blow a fuse, but rather destroyed the entire amplifier and rendered the receiver permanently inoperable unless the main board was replaced. Brilliant design.
I have replaced it with a Pioneer, which only suffers from one insufferably stupid design flaw that I've discovered so far (also shared by the NAD): You can't play digital sources through secondary zones ("zone 2" speakers). I mean... WTF.
Possibly the problem is the "V" in "A/V". AFAIK NAD was always an audio components company. Introducing video adds a huge amount of complication they were probably not prepared for. But that's just a guess.
As a counterpoint I have an NAD integrated amplifier I bought because it has a Chromecast built in. Even though it was a floor demo model it has never once put a foot wrong for me.
Then they shouldn't advertise what they can't deliver.
As time goes by you realize that what you thought were solved problems are not, and precious few people actually demand that they be solved. Precious few people (and almost no "reviewers") actually exercise the features advertised by vendors, and that they checked off on comparison shopping lists.
When you sell an A/V receiver that can't handle HD HDMI signals in 2022, you suck. You suck at the level of fraud.
There is a lot of talk about DIY here, which sounds cool, but I'm also pretty lazy and I have started way too many projects. What are some really underestimated systems that you can buy?
I think part of the discussion is that there are no 'hidden gems' at fair prices. You have cheap products sold for cheap, and cheap products sold for a lot, and then you have expensive products sold for much much more. There is no good products sold for a fair amount, just bargains on commodity gear. I could be wrong, but it seems to me that the 'middle market' is only such in price, not product quality.
I would say though that Audio Technica, while still commodity products, do seem to get better the more you pay up into the middle market. I think you get diminishing returns in their higher end range though.
I've had the same Audio-Technica ATH-500's for perhaps 14 years now. I drop them all the time too, like daily. I had to buy some replacement earpads as the pleather wore out, but that's it. Still perfect audio. I'd wager they'd have 10,000+ hours of use easily.
Most marketplaces are like that including food, lumber, fasteners (screws and nails and stuff) and clothing.
Cheap junk at cheap prices, cheap junk at medium prices for the aspirational shopper, good stuff at luxury brand prices, nothing else.
If you do woodworking you can buy inconsistently zinc plated insta-rust steel for $1 online, $5 (of which $4 is pure profit) for the same junk at big box stores, or about $50 at a specialty store for stainless steel and solid (not plated) brass that looks nice and will last a lifetime.
Another example: Cell phone chargers. The one apple ships with their phones actually follows all FCC/UL specs and is legal. Dollar store charger, not so much...
As an example, these $50 headphones just released, co-designed by respected headphone reviewer Crinacle - he measures headphones on an expensive rig simulating the human ear, which can then be used to EQ the headphones to comply with a standard target response (typically, the "Harman curve").
This is why I like Monoprice, they have a limited selection of high-quality products at reasonable prices.
I just wish they would make an AV receiver – that seems like a space where they could bring the price down but still have good room correction and Atmos. The Monolith is a good start, but something for the average consumer is what I'm thinking of.
This doesn't at all surprise me. I consider myself a enthousiast with a limited budget. For instance I have a pair of Sennheiser HD 25-1 II for maybe 15 years now and I still enjoy them. Same goes for my KRK Rokit monitors. But recently I wanted to buy some Bluetooth headphones, since you know, the 3.5mm is absent from my new phone.
For those headphones I just went to the local MediaMarkt. First looked at crazy expensive Sennheisers, than at some boomy JBL's (Samsung) until I finally settled at some House of Marley Positive Vibration II - Bluetooth. It was the least expensive set of Bluetooth headphones in store with the poorest reviews online. But for me the sound was great. At that moment I realized that I had forgotten an important lesson for audio devices: Choose with your ears. Especially when you have a limited budget, like myself.
My gut feeling for headphones is that the $40-$80 price point is optimal and everything above that is smoke and mirrors. (or more charitably "a difference without a difference" - something that is perceptible but which doesn't improve the pleasure derived in any meaningful way)
I think that $40-$80 is ideal for most. However like I said my Sennheiser HD 25-1 II was about $120 when it was new, so a bit over. But everything on it is repairable. So when I replaced the foam bits last year, it felt like a new pair of headphones.
And of course $300 or $600 or even more expensive headphones probably sound better. But IMHO the difference doesn't justify the cost.
Major consumer speaker vendors don't make it easy to compare speakers. When I was looking for a portable speaker to play outside I was surprised to see that for most of the speakers you'll find at big box stores, there are no statistics for loudness or how it sounds. The best we get is size and rarely amperage, which I found through trial and error are dubious measures at best. I ended up returning two overpriced soft sounding speakers before the third one was sufficient. Price doesn't make as much of a difference as I thought it would either.
As a consumer, I don't know what to trust because the marketing on these things can be pretty useless.
There's no great way to measure power output for an amp, surprisingly. The old FTC rating system was something like continuous wattage at a fixed voltage at all audible frequencies. This was decent, although actual music isn't anything like white noise. =)
So manufacturers give absolute BS "power ratings" like "40W" which usually means the amplifier can produce that much output, at a single frequency, for a zillionth of a second at 10% distortion which doesn't much resemble real music either.
But even if they were truthful about the rest of that, it wouldn't matter because knowing the power output of the onboard amp is useless without taking into account the efficiency of the speaker drivers themselves.
So am I. As someone that doesn't use Facebook or Reddit it's sad as hell when you join a club or society and they don't really use the forum on their own site any more.
I've often wondered if there's something not quite good enough with open source forum software that Facebook is getting right. I suspect it's push notifications, but it's just a guess.
I don't know about facebook, but reddit's killer feature is consolidation. The ability to have one account and access communities for everything is what holds me there.
I bought some cheap "chinese" (very odd named brand) bluetooth headphones on Amazon, and they sounded great. Eventually they died, so I went with Sony which was twice the price, and the sound is quite noticeably worse. Unsurprisingly my previous headphones aren't for sale any longer [1].
As the owner of a pair of high-end Audeze, this article makes me wonder how much of the cost is marketing, as opposed to going towards "quality", for whatever definition of it. It's nicely built, sounds great, very neutral for production work, but.. $1000 great? Could I have gotten comparable performance for 1/10th the price?
Is there an objective way of measuring "quality" in this space for premium products?
Be aware that measuring FR and THD is just that: measuring FR and THD: it's not a measurement of how good or bad something sounds. It's the equivalent of measuring a car's quality by looking at 0-100km times: it doesn't even tell us how fast a car will be.
There is of course room for individual preference, and one's hearing and the physical headphone fit play a role.
But essentially: yes, to a reasonable degree we absolutely can tell how good or bad a set of headphones will sound via measurements.
It's the equivalent of measuring a car's quality
by looking at 0-100km times
The "quality" of a car is the sum of hundreds if not thousands of factors.
Audio reproduction has basically a single input, and the output can be well described using a small number of metrics.
We know what sounds good to people. It would be a miracle if we didn't, given the fact that the business and science of audio reproduction have been around for 125+ years. It has been studied and is something of a solved problem.
Sean Olive and others have published some great research that's worth reading. The TL;DR is that headphone listeners prefer accurate sound reproduction that is fit to what is sometimes called the Harman Curve, which in turn correlates pretty well with the Fletcher-Munson equal loudness curve.
It's interesting that these debates pop up around audio but not video. We know what "looks good" in a television: objectively accurate color and motion reproduction. This can all be easily measured. Audio can easily be measured as well, and yet....
30% seems a bit off, though yeah dense metal magnets in transformers and speakers are probably what keeps these products >= $100. Transistors, etc, are cheap as hell though. Some of this assembled gear is thousands of dollars and beyond, per single unit... So if you can build your own magnets, cases and push shipping off to the customer while providing 2x greater than behringer *quality*, I want to believe.
If anything 30% is already high and the company will have problems staying in business as the article notes.
The rule of thumb used to be 1/5 of retail should be COGS.
Source: 25 years ago my father co-founded a pro audio company that later pivoted to prosumer/consumer space. 4 VC rounds later the company was sold to major manufacturer for 9 figures. My father had less than 1% left after dilution.
PS The biggest source of growth for the company was a massive ad campaign by Apple that also featured device by the company. Another key factor was being next door to a major channel for distribution. Of course the hardware was nice too but for the first 10 years the company had less than million in sales.
I have an inexpensive surround sound system from Sony with a soundbar on my TV. I enjoy it a lot when we're watching movies.
For everything else I use a JBL plastic covered bluetooth speaker. I used to be really into speaker quality, swallowed all the audiophile pills. Wired my first home for audio. You know what made the difference for me? Portable, water proof, long battery life, and good enough sound to play music while hanging out with my friends or cooking in the kitchen. I know I'm no longer the target audience that I was in my 20s, but comparing the small 150$ unit I have now to literally anything made 20 years ago at that range is crazy to me.
I think the most interesting is that brands that claim to have the best R&D and most advanced technologies are simply picking supplies from 3rd parties.
The 3rd parties and universities are actually doing the research&development and manufacturing.
I guess I'm the worst type of customer for audio retailers. I recently switched from buying $50-$100 gaming headphones to $5 wired earbuds with a built in microphone.
They are still working perfectly after months, and I got a spare for another $5.
The reason I decided to try that is because the wires in my headphones always get partially broken after a few months and so I end up with only one channel. And the cheap Bluetooth earbuds I had which were great for several months eventually went to a single channel also for some reason.
If that happens again, $5 is no big deal to get more. Assuming I can find those cheap earbuds again.
>They are still working perfectly after months, and I got a spare for another $5.
Jesus. "After months".
I have been using my Sennheiser HD600 for 5 years now. They don't even seem to show any sign of age. Should anything ever break, they're modular and the individual parts can be bought separately anyway. But what's most important is that they sound really, really good. To me and to a very comfortable majority of audio equipment reviewers. Subjectively (ears) _and_ in objective measurements (i.e. accurate FR, low distortion on a pro head-shaped measurement stand). And there's no shortage of these, for a set that was released in the late 90s and has been popular audio equipment in the hobbyist/pro markets since. To top it off: They're even extremely comfortable to wear.
And the worst part: Is, it is, by now, near impossible to do even cursory research on what headphones are good and not hear about them.
It remains a mystery to me, to this day, why it isn't the case that everybody owns a pair already. Particularly, as they're not even expensive. They cost only a little more than the average gaming headset everybody seems to own. Instead... utter crap sounding, ear-exploding "cordless" trash from "popular brands" do sell well, alongside awful-sounding, fickle, gaming headsets.
Consumers are this easily misled by marketing, and seem incapable of doing even the most basic research.
Lol, sure of course, everyone should spend $300 on headphones. And, of course they will never have to replace them. Otherwise, they will have no idea what music actually sounds like.
Jesus.
Watch out, I had a favorite earbud that disappeared from the market, imo for being too good too cheaply, and cannibalizing the new (at the time) category of high-end earbuds for Sony.
I luckily realized very quickly that they had gone out of production, and managed to find a case of 24 of them on Mexican Ebay. Each pair probably lasts a little more than a year, so they'll get me through this stage of technology (for around $100.) So instead of buying $100 gaming headphones, buy $100 worth of those (hopefully with a bulk discount.) If you get sick of them one day, they'll make great gifts.
Actual Mexican ebay. It's just ebay. You can get Mexican hits on US ebay searches as long as you allow international results. If you think you're charming, you can try to convince people that normally don't ship internationally to ship to you, but people who don't ship internationally won't come up on US ebay searches.
There's a sweet spot for electronics. I got a pair of €7 Bluetooth earbuds, with a mic. Sound quality was good enough to listen to podcast, but not music, the mic didn't work well enough for phone calls, and they lasted maybe 3 months. After that I bought a pair for 6-7 times the price, but I had those for 4 years now, to their clearly the better investment long term.
Just make sure it is standard cable. And not something slightly different.
Not that I also haven't had bad experience with general quality of headphones. That is other parts just breaking with only slightly careless use. Thankfully the wireless Pioneers I bought seem to have lasted with Boses I alternate with.
V-Moda is a bit pricey, but I've had my Crossfade LP headphones for somewhere between 6 to 8 years. The cable is standard 3.5mm, detachable from the body of the headphones.
They also have a few accessories like a detachable cable with a mic on an arm, which I used for a while until I got a desktop mic. The carry case that came with the cans is also very nice.
Many, many mid-to-high end headphone manufacturers offer headphones with detachable cables, both for exactly this reason; and also sometimes to allow it to either be bluetooth or cabled.
You probably have to spend more than $100 for that, though.
This is actually true of many businesses/industries.
There was an article just like this about the clothing business, and how at the high price points the quality is equivalent - any price delta is due to branding.
Once you use the highest quality material, the highest quality stitching for the price point, well, you're stuck. That's when you sprinkle the magic fairy dust on it to raise the price, which usually consists of a nameplate or logo.
> Most Chinese factories and engineers are perfectly capable of producing high-end equipment... but their customers don't ask for it.
For cheap ish stuff, for example: do you want a test done in the factory? That will raise the manufacturing price by 50% or more, depending on how cheap your widget is.
So you get your DOA widgets from the store and just return them instead.
Source: I worked for a company that did direct manufacturing in China.
> Many companies don't even employ any engineers or design their own products. Many audio execs would be totally lost reading threads here, and have the critical listening skills of a shriveled potato. They're in the role for business, not functional reasons.
As for most companies in most industries. It's still worth repeating over and over again.
Any time this comes up I wonder: isn’t the ideal setup aimed at giving you a flat frequency response curve? Why reviews? Why experts and subjective opinions of online reviewers? Sure other factors can be a part of it like longevity of the product, price for performance, power, but at the end of the day sound quality can be objectively measured, no?
If you look at measured frequency response of any audio equipment then you never see a truly flat response. At least I haven’t. And the phase shift of often far from flat.
So if you have two systems that have near flat responses it’s possible that one sounds better for certain inputs.
Also Bose plot (frequency and phase plot) is a type of analysis that assumes the system is linear. If the system is not linear, what is the plot showing you? I imagine many systems are very close to linear, but at the edges of dynamic range they can’t be.
With our current technology it's impossible to make a flat frequency response speaker. It's possible for amps, mics, DACs, but not for speakers, unless you talk about million dollar facilities.
So you need to pick from different non-flat speakers, which means listening test if you really care. You can't figure out which one you'll like just from looking at the frequency response graph.
Flatness is a curve, not a number. If you try to distill it into a number (by integrating the error for example), you can have two speakers with the same "flatness number" which cost about the same, yet sound very different.
This is not theoretical, I've experienced it - two professional speakers (or monitors as they are called) from different manufacturers, which cost the same and the frequency plots look the same to a human eye if you put them side to side, but sound very different.
Which is why it's preferable to listen them if you really care. But there are "safe" recommendations for every price range.
In addition to "secrets" there are "mysteries" - like why doesn't anyone make an "Amp" except Sonos, and why is it that one so darn expensive? I guess because they are the only one.
What do you mean? An amplifier that can drive speakers that's also a streaming device? That exists at various price points. Anywhere from a raspberry pi taped to a "dumb" amplifier all the way to various Roon streamers. Although at both super-low and higher price points, things tend toward individual components for flexibility and diy reasons. But that's easy enough to work with to get something that both looks and sounds good.
Sonos's one plays nice w/ Sonos's ecosystem, but if you don't need that there are other solutions.
I mean an amp with only: HDMI eArc in, 5 speakers out, sub out, power button. And <$500. I don't actually want or need the Sonos ecosystem. I also don't want or need a huge, visually intrusive box with dozens of knobs and seemingly hundreds of rear connectors - as is the case with the AVRs. I guess it's too niche for Apple to make one.
Other companies make streaming amplifiers of various types -- Bluesound's Powernode immediately comes to mind, and one could argue virtually any AV receiver that has streaming services built-in can do the job (e.g., any Marantz or Denon with HEOS, any NAD amp with BluOS). The Sonos's price is actually pretty middle-of-the-road in this category, though.
If I were looking to undercut it, I'd look for a two-part combo, like a $99 WiiM Mini streamer coupled with something like the $329 Emotiva BasX stereo amp. That's not going to get you any of the Sonos-specific ecosystem woo, of course.
Any thoughts on how you would price a HaaS product. Would you aim for 30% of LTV?
I've been looking at Whoop, and I think they have a great business model.
Based on my estimates, the COG of their product is probably $8-12.
The monthly cost is $35 - but you have to subscribe for a minimum of 12 months so $420.
I think you're looking for a business/economics hybrid field called "unit economics". Its all about churn, customer acquisition cost, etc. There's a guy who works for Microsoft named Tren Griffin who tweets case studies of this stuff - might find it interesting.
I recently purchased a bluetooth speaker from “ultimate ears” which is a logitech brand. It’s great and seems to sound better than what you can get from marshall or beats.
Logitech make good products, their speakers have always been quite good IMO.
I'll never forget in high school a buddy and I had two of the same Logitech X-540 speakers. We plugged the speakers together and pumped it through effectively a 10.2 setup.
Like $400 "Logitech Z-5500 THX-Certified 5.1 Digital Surround Sound Speaker System" released 20 years ago?
"The Z-5500 will consistently give you great sound on a daily basis and was tested by THX experts as well as our audio team."
"The Logitech Z-5500 is the best all-around PC speaker system we have used to date."
"Incredible sound and tons of amplifier power (505-watt (RMS), total peak power output of 1010 watts)"
All from a box fused at 120V 3A :-) and with 10% THD when even a low end home stereo systems were usually 0.1-0.9% THD. You open it up and find four dual channel TDA7294 powered with 2x26V giving maximum of ~30W per "62-69W" channel and ~60W for "188 watts" subwoofer. Logitech was always good at scamming unwashed masses and unsophisticated computer reviewers unable to read labels and small print.
I've been having terrible luck with Logitech, and decided to never buy from them again. An $80 speaker set's audio input jack broke, and Logitech absolutely refused to fix it or help me in any way since it was a month or so past the one year warranty. I live right down the street from Logitech and could have just driven out to their HQ, but they completely stonewalled me.
FWIW, I've had the opposite experience with Logitech for mice:
2010: replaced a ~18-month-old MX400 with an MX620 under warranty after the left mouse button became unreliable (without proof of purchase)
2013: replaced that MX620 with an MX705 after I asked if it was possible to buy a replacement wireless receiver (part of the USB connecter had broken off IIRC) - I had assumed it would be well out of warranty as the original purchase was back in 2008.
I can't say if the difference is because I'm in Europe, they've changed their practices more recently, or it's just luck of the draw.
I think it's because nothing has any meaning anymore. Brands used to pride themselves on quality, but then they realized that the listener perceives quality based mostly on price and aesthetics. Even people who know better.
I remember about 30 years ago, my father was shopping for a stereo receiver. The salesman happily let him listen to them all, and he said, "You know, there's two people in this industry. There's the guys with the lab coats and measurement devices, who say that there's no difference in the line output quality between these amplifiers, and there's the guys who smoke a lot of weed and they say they can tell the difference." My dad, a CS professor, didn't really like that description of reality and still wanted to hear each one, of course. Past a certain level of amplifier fidelity, the speakers, their placement, and their wires are responsible for all of the sound quality.
My dad even used to tell a story about how an acoustics professor at his school used to take a car stereo speaker (cheap, think 1962) and he would put it into his own enclosure, and it would sound better than the expensive store-bought speaker. So he was well aware of this.
But, still, he listened to each receiver and considered its sound quality. But I bet he bought mainly on functional features and his perception of the brand.
Unfortunately, in these days, where the brand can be sold randomly, and old quality brands are recycled by formerly generic suppliers, our perception of the brand is way off. So many people choose based on price.
And, yes, they do think we are idiots. Remember when Sennheiser was selling identical headphones for two different prices, and the $300 ones actually had something added to make them sound worse than the $500 ones, which when removed gave you the same sound? Not only did this happen, but people who presumably were happy with their Sennheiser gear were on here defending the practice like any fanboy.
>My dad, a CS professor, didn't really like that description of reality and still wanted to hear each one, of course. Past a certain level of amplifier fidelity, the speakers, their placement, and their wires are responsible for all of the sound quality.
That should really be obvious to anyone knows how amplifiers work. The total distortion of any decent stereo amplifier is minuscule, and the difference between any two decent (or better) amplifiers is really tiny. But speakers, and the environment around them, make an enormous difference in sound.
Even 30 years ago, the real differences between amplifiers ("receivers" really) was the features included, not the distortion level of the amplifier. Also aesthetics: people wanted their stereo systems to look good and for the components to match. The power level was important too: if you were driving 6-feet-tall speakers, you needed a higher-power amp than one for driving bookshelf speakers.
Are any of these observations "secrets", or simply naive observations that have come home to roost?
(Disclaimer: I spent two decades in the hi-fi industry, from tech to sales mgr to product consultant, and I currently work in consumer electronics technology on the software side.)
There’s nothing wrong with this. These are standard ratios, not some dirty secret.
The cost of goods sold is only a fraction of the costs that go into getting products all the way into the customers’ hands and supporting them (customer support, warranty replacements, lost shipments, fraudulent orders, etc.). That’s not even counting the R&D investment costs that go into making the product, as the post says.
Salaries, warehousing, shipping, insurance, and all of the others costs of doing business add up.
It’s not actually realistic to expect an entire company to be selling you a $300 product that costs them something like $250 to build. Every business in existence must build in enough margin to pay the people who do all of the work to make it happen and support it.
If this seems shocking, consider that the COGS of software as a service products are much lower by comparison. Doesn’t matter, though, because you have to pay all of those expensive salaries to make it happen.