Some thoughts about value in high-end audio


Richard Hardesty (former co-owner of high-end retail store Havens & Hardesty, and former equipment review editor for Widescreen Review magazine) recently published Issue #8 of his online audio journal, The Audio Perfectionist, which contained a section on the importance of value in high-end audio. Hardesty commented that he originally wrote the piece for publication in one of the high-end audio mags, but the mag refused to print the article.

I think Hardesty’s comments are worth sharing in somewhat summarized form. I am not going to quote the entire piece, since it is rather long, and if you are interested in reading the full piece I urge you to subscribe to Hardesty’s journal for $35 a year. The main points of the article appear below. I encourage Audiogon members to share their thoughts and/or criticisms.

“Can an $80,000 pair of loudspeakers or a $20,000 pair of speaker cables represent good value? Do hyper-expensive products really perform better? While astronomical price tags have become commonplace in high-end audio, few reviewers have questioned whether these ever-escalating prices can be justified on the basis of actual manufacturing costs or if the highest-priced products offer any real performance benefits when compared to well-engineered components which cost far less.

Instead, it has been generally assumed that those components, which cost more, are built to higher quality standards and sounds better than those components, which cost less. These assumptions are not necessarily true, and they have taken a toll on the high-end audio industry. Infact, retail prices for high-end audio components are often completely unrelated to manufacturing costs and may be used solely as market positioning tools. In the instances where hyper-expensive products actually do provide some audible advantage, the gain is likely to be small and may be achieved at the expense of some other aspect of performance.

When an industry is filled with a variety of products which are artificially priced to position them in the marketplace, that entire industry becomes suspect. Customers get less for their investment in a market where manufacturers are vying for prestige rather than competing to provide value for money.

As is true in most industries, high-end audio manufacturers used to vie for market share by trying to offer more for the money than their competitors. Originally, “more” meant audibly superior performance, but eventually “more” evolved to include better cosmetics or industrial design and/or enhanced prestige. Some manufacturers discovered that, while it was difficult to produce products, which actually sounded better, it was easy to generate lots of attention from magazine reviewers by simply claiming to offer higher performance and attaching a high price tag to new products. Many inexperienced listeners fell into the trap of assuming that a high price was a guarantee of high construction quality and high performance, just as they (often falsely) assume that an expensive car is made better and performs better than a less expensive model.

Because it is entertaining to read about the most esoteric products available, the high-end audio press has emphasized coverage of extremely expensive components and devoted less attention to the high-value, high-end products that most people are actually interested in purchasing. Super expensive audio components have often been subjected to far less scrutiny by the high-end press than these products deserve. Readers have been led to believe – falsely, in my opinion – that affordable audio components can’t really perform at the highest levels and that true state-of-the-art performance is reserved exclusively for the wealthy.

As specialty publications have focused more and more on products that most people simply can’t afford, the high-end audio industry has suffered. Many music lovers have been turned away from our hobby because they felt excluded from a club where components they own or can hope to obtain are subtly denigrated in print, and components with ridiculous price tags are accepted with little skepticism. Many readers of the high-end audio publications have become dissatisfied with components which offer outstanding performance simply because these components sell for only a fraction of the cost of those esoteric products lauded by the magazine equipment reviewers.

While designers will always experiment with components on the fringe of practicality in order to advance the state of the audio art, you don’t necessarily have to participate in their experiments to achieve true, high-end audio performance...I believe it is time to re-examine many of the products at the upper limits of the price spectrum to determine whether they are fairly priced...and whether they present a good value to the consumer in terms of actual performance.

There is an industry benchmark for establishing the fair market value of an audio component – the five-times ratio of parts cost to selling price...A five-times ratio of parts to selling price provides a lean but acceptable profit margin to the manufacturer and the retailer...

An audio component that performs at the highest level is not likely to be cheap. Less consumer demand means lower production numbers and higher costs. Products which are made in very small quantities will have to sell for much more so that the makers, and the dealers, can recoup their costs from a smaller group of buyers...Many high-end audio components are over-priced when judged solely by the cost of manufacturing. When the selling price to parts cost ratio gets to be 10:1 or more, you are surely buying something other than high quality merchandise. That “something” may have value to you...

(At this point, the article goes into an interesting comparison of several sub-woofers made by Paradigm, B&W, Aerial, and Wilson Audio. Hardesty notes that each sub-woofer in his comparison uses drivers ranging from 12” (Aerial and Wilson) to 15” (the Paradigm and B&W), and have built-in amps with nearly identical power. Cabinet construction is also very similar in each case. Prices, however, range from $1500 for the Paradigm to a whopping $10,000 for the Wilson unit.)

I believe that runaway pricing has damaged our industry. Many products are vastly over-priced based on manufacturing costs and few of the over-priced products offer better sound than what can be had for less. Often far less. In the best cases, where a hyper-expensive product actually does offer some audible performance benefit, that benefit is likely to be a small incremental improvement over products that are more reasonably priced.

Many reviewers subtly denigrate the performance of affordable high-end audio components when reviewing hyper-priced components. Reviews often suggest to the reader that extremely expensive components offer dramatically better performance than that available from components at the upper midrange of the price scale. Based on my experience, and I’ve had a lot of it, that is seldom the case...

Value is not a forgotten artifact of the past. There are many audio products available today that are fairly priced based on manufacturing cost, and some of these products provide performance that was unattainable at any price just a few years ago. The very best performance is often provided by components that are affordable by common folk like you and me. If you listen and compare before you ask for prices you may find that you can afford a lot more performance than you expected.”
sdcampbell
The price basis of high-end audio is not necessarily related to the cost basis. Not do I think it is a supply/demand equation. I think it is a maximizing profit equation. For some lucky few at the pinnacle of high-end audio the aquisition of stuff becomes a money no object proposition (and a very wierd value equation). In this case the supplier needs to price his goods such that he can preempt the market until a newer, better, product becomes available. This, generally, is a very short-term process once competitors realize what the market will bear. Then the resale of what was one the pinnacle of high-end drops precipitously. I think this interesting article was pointing to the crazy price equations of the highest of high-end. Dropping down to the next tier of products becomes much easier to analyze, but then these prices may generate an adder based on the marketing, and availability, of the highest tier. I have failed to find an analogy for this pricing behaviour (preemptive pricing) in any other consumer field, showing how crazy we must be to get involved.

As an aside how can we even get close to reproducing original sound that was recorded. Just look at the recording chain. Anyone seen what a real-world microphone cable look like, compared to our audiophile XLR interconnects ?
Lucy (or Barney): There are lots of reasons why we can't get close to reproducing the original sound (starting with the four walls of your listening room), but microphone cables ain't one of them.

This all reminds me of a story I once heard of a cable company that one day decided to double the price of each of its products--and it's sales went UP. Probably apocryphal--but not implausible!
I'm a consultant. The more I charge the more work I get. The reason I charge more is that I need (want actually) to work less. Is it supply/demand, cost basis, or something else that causes this pricing anamoly ? I'll give you a clue - it's not reviews in the specialty magazines in my case. And, again similar to high-end gear, the flasher the specialty title I use the more work I get. Someone, somewhere, must have done a study of marketing in the 'hi-fi' industry, perhaps as part of an MBA program.
This is a ten thousand years old story. If we don't buy them the price will drop till we are will to pay. The problem is that we are in all different places.
I think one of the central issues here is the fact that the high-end is catering to, and in some cases conning, a very obsessive group of people. (Not that its easy to feel sorry for someone who is willing to spend many thousands of dollars on cables!) Sound quality and 'musicality' are very elusive and subjective things. There are so many variables involved: state of mind, background noise, rooms, combinations of components that are all 'voiced' differently, quality of cables, power, etc. Add to this that the value of 'specs' has (correctly) been dismissed as a meaningful determinant of quality, - and the wolves are loose in the henhouse… er, maybe that's a little strong, but at least it is extremely easy for marketers to seduce people with false or exaggerated claims that are almost impossible to disprove.

I once contacted an esoteric cable manufacturer to see if they could convince me that their cables were worth buying (for their weight in gold). They could not, in fact their reasoning and justification for their prices did not even make sense. Even if their cables do sound good, (do cables make sound?!) what could they possibly do to a cable to make it cost as much as a car, honestly!

And consider active amplification (there are several Audiogon threads about this at the moment). It is a more efficient and logical approach to loudspeaker-amp design, but few manufacturers do it – and why would they? Why start extolling the virtues of active playback to a crowd of people who love-to-love their gear – to have all that tasty stuff up there on the rack or glowing on its throne-like plinth on the floor. Oh, and to play with cables! Moreover it’s all the variables that help to maintain the confusion that leads to compulsive gear swapping and upgrades. Buy a pair of active speakers with perfectly matched amplification and the quest for perfection is over - you can't even try out different speaker cables - because you don't need any. Hmmm...

Back to the old debate: Is gear a means to and end or is it the end itself?

For me? I will accept that it’s a bit of both. Having a system that can bring me musical bliss is a kind of freedom - almost like having the peace of mind in knowing that I can go off on an adventure whenever and wherever I want. Except with music I don’t have to take time off of work or quit my job. It’s like having a window to another world – and the better the system the better the view. So in addition to playing music wonderfully, it’s the POTENTIAL of the system to open up musical worlds to me that is important.

I would really hate to think that the manufacturer of my system was taking me for a fool – that they were determining their prices based on what the market will bear rather than on materials and on time invested in paying good people to research, design, develop, and build, high quality products, plus perhaps a little for advertising - as long as it is discreet, informative, and in good taste.

The kind of people who obsess over the quality of music reproduction (sound reproduction?) to the extent that many audiophiles do, comprise a finite market in a competitive industry. I believe that it will debase the industry if companies are out there peddling products that are priced according to anything other than the factors mentioned above. I have no doubt that some of the more expensive gear out there is not worth a fraction of what it sells for and that the only reason it sells at all is because of questionable ethical standards in the audiophile press. Some companies have to sell their gear for thousands in order to survive – but that doesn’t mean that it represents good value, is solidly engineered, or that it has the priceless touch of a gifted designer. It may just mean that the company has figured out how to exploit the myth that high quality means huge dollars. Let’s face it, how much has tube amplification evolved in the last 20, let alone 50 years? Can manufacturers justify charging enourmous sums just because of how their products are voiced (read: equalized)?

But I guess that’s what Audiogon classifieds are for? - Determining the 'real' value of goods? I must admit that I get a certain satisfaction when I see a pair of $2000/metre cables sell for 300 bucks in an auction (swweeet poetic justice). This doesn't always work however. Sometimes you see excellent products, often made by European companies with no established reputation and little exposure to the US market, but who are trying to make inroads, sell for what must be a huge loss. I’m sure there are many excellent projects that have been started and abandoned because solid new companies can’t compete in an industry where myths and false claims are the norm. This is where it hurts the industry as a whole. Not to mention that just about every time I am forced to listen to music outside my own house it makes my ears bleed.