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"Secrets" about the consumer audio business you may find interesting

doc2c

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Let me start by saying that I love this site and ever since I've found it, it has made a large impact on my purchase decisions.

I'm not very knowledgeable when it comes to audio gear, but I'm learning.

One of the points raised in this essay is that alot of companies don't measure. We bring this up often when we see speakers or headphones deviating from the Harman curve. I'll call up the Micca Rb42s for example. It received so much praise from the likes of Zeos and Joe-n-tell but it's measured very poor here. It has fantastic reviews online. Another good example is the Stage A135c. Online reviews are stellar. Compliance to Harman curve is poor. It should sound like shit, but people like it.

I recently purchased the Akg k371, applied the eqs suggested here, and I was prepared to be blown away. I sounded great, but I still like my T-60p Argons better which are no where close to the Harman curve.

What's accounting for this ? Hearing differences, music we listen to, people not knowing what they're listening to is supposed to sound like, or could it be that the Harman curve needs to be re-evaluated?
 

james57

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QC flows downstream. People will generally work to a level of expectation, and not much more. Anytime you find garbage quality, you can probably find garbage management. And it's certainly not industry specific, for sure. And it's not country specific, either.
Agree and disagree. fyi never really intended at taking a piss at the US. Although you fill find exception and stellar players everywhere on the planet you will find some industry and even country trends. That being said you will find amazing cie that are quality and design first everywhere, just need to look and research.
 

anmpr1

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I recently purchased the Akg k371, applied the eqs suggested here, and I was prepared to be blown away. I sounded great, but I still like my T-60p Argons better which are no where close to the Harman curve.

What's accounting for this ? Hearing differences, music we listen to, people not knowing what they're listening to is supposed to sound like, or could it be that the Harman curve needs to be re-evaluated?

I auditioned a set of moderately priced Senns that got a good ASR rating. Like you, I didn't like them much. Possibilities:

1) If I was more familiar with headphones (I admit I don't use them too often) I might eventually discover through experimenting and experience that they were better than I thought. Look, ASR goes through more headphones at more price points than most people will ever be able to accommodate in their lifetime. So maybe I just got it wrong.

2) Mine were substandard, and not up to spec. Hard for a consumer to know that with something like a headphone.

3) I just didn't like them, and that is that.

Loudspeakers (and headphones) are always going to be the point of subjective difference among listeners. You find something you enjoy and then you should be happy. If you can do that you are ahead of the game.
 

nyxnyxnyx

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really cool post, thank you for sharing.
I've always wanted to hear more from people that actually work/worked in the field, instead of just countless assumptions and theory-buildings from casual listeners and audiophiles alike.

Maybe one day some retired legendary audio designers can chime in on more seasoned subjects freely once they are not in a position to hold back anymore!
 

Peterinvan

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Its sad that shops are disappearing. Always cool to do some windowshopping, listening to audio gear and once in a while talk to a knowledgeable salesman.
Then again, internet is so much better and usually if not always cheaper. Sadly with no retail stores, webshops will probably eat up the difference
SUPPORT YOUR LOCAL RETAILERS!
Some audio equipment manufacturers are successfully selling direct to the consumer to keep the retail/COGS ratio profitable (Schiit?). Some manufacturers are keeping the COGS down with plain, functional packaging (Grado?). What's with the almost fetish fascination with YouTube videos of unboxing? Big firms like Sound United seem to depend on retail distribution channels.

The smaller guys depend a lot on the magazines and reviewers to persuade us to purchase. I enjoy reading new reviews every day.
We have to trust that the reviewers are not directly rewarded or profit from ads in their magazines.

I have purchased some equipment without auditioning it, and I am mostly satisfied. But I MUCH prefer an in-store trial and the advice of a knowledgeable salesman, and I will pay a small premium for this. I really hope retail stores are not disintermediated by the web stores. My local headphone shop sells a lot on the web, but still maintains a store with equipment for demos.
 

Tks

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  • Most Chinese factories and engineers are perfectly capable of producing high-end equipment... but their customers don't ask for it.
    • Would you rather make $50 per unit on 100 units, or $5 per unit on 100,000 units? Yes, so would they. Niche applications are not of interest to most manufacturers, especially in China, because marketing to high end audiences isn't (at least a few years ago, it wasn't) as easy for them. They mostly operate on a B2B model focused on high volume orders. A major reason for that is switching production lines from product to product is costly. They much prefer to make 10,000 of something mainstream and fast-moving than 10 runs of 1,000 that might (or might not) sell for a high price. Many can do either, but prefer a few large contracts over many small ones.

      The factor that drives "Chinese (or insert the country of your choosing here) audio is low quality" attitudes is actually the customer. I will never forget the man who walked up to a booth attendant in Hong Kong on a sourcing trip. He skipped the formalities and brusquely said to the woman: "Show me your biggest speaker. Biggest and cheapest. I want, BIG, CHEAP and LOUD." This was actually at a booth that had some items approaching hi-fi. Too bad. But they make what they can sell.

Finally! Thank you. Anytime I see someone spew ignorant garbage about "quality" coming out of Chinese products needs to get slapped across the face with this. And if you need a specific audio industry example, take a look at Matrix Audio products (I challenge anyone to find better build quality for the cost at that tier of device). Chinese manufacturers are willing to still offer the best bang for buck down the ladder of products, but you're not going to get the best at low-end prices anymore, they have no reason to take losses like that anymore.

It's odd how anyone today could imagine a country that basically produces everything for the world currently, doesn't have the capability to produce quality products after all their expertise. Or do people imagine a small boutique company is buying the bleeding edge factory equipment to house in their basements?
 

Peterinvan

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SUPPORT YOUR LOCAL RETAILERS!

The small premium price you may pay in a retail store with knowledgeable salesmen is worth it.
An audition is MUCH better than relying solely on magazine / on-line reviews.
 

DonDish

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SUPPORT YOUR LOCAL RETAILERS!
Some audio equipment manufacturers are successfully selling direct to the consumer to keep the retail/COGS ratio profitable (Schiit?). Some manufacturers are keeping the COGS down with plain, functional packaging (Grado?). What's with the almost fetish fascination with YouTube videos of unboxing? Big firms like Sound United seem to depend on retail distribution channels.

The smaller guys depend a lot on the magazines and reviewers to persuade us to purchase. I enjoy reading new reviews every day.
We have to trust that the reviewers are not directly rewarded or profit from ads in their magazines.

I have purchased some equipment without auditioning it, and I am mostly satisfied. But I MUCH prefer an in-store trial and the advice of a knowledgeable salesman, and I will pay a small premium for this. I really hope retail stores are not disintermediated by the web stores. My local headphone shop sells a lot on the web, but still maintains a store with equipment for demos.
I kinda like shops too, and its working places for people. I do both retail and surfshopping. It usually boils down to inventory. WHERE can I get it. retail just take a backseat here. If i can just take a short ride to get some Id rather do that.
 

DudleyDuoflush

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Finally! Thank you. Anytime I see someone spew ignorant garbage about "quality" coming out of Chinese products needs to get slapped across the face with this. And if you need a specific audio industry example, take a look at Matrix Audio products (I challenge anyone to find better build quality for the cost at that tier of device). Chinese manufacturers are willing to still offer the best bang for buck down the ladder of products, but you're not going to get the best at low-end prices anymore, they have no reason to take losses like that anymore.

It's odd how anyone today could imagine a country that basically produces everything for the world currently, doesn't have the capability to produce quality products after all their expertise. Or do people imagine a small boutique company is buying the bleeding edge factory equipment to house in their basements?
Exactly. It's much more dependent on the culture of the company than the nationality. I've used good and bad suppliers all over the world. You do have to be pragmatic though. For advanced PCBs there is often a gap between what you can test and what you want. In those cases always stay local to shorten the iteration loop.
 

DonDish

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Sorry for breaking the news, but "knowledgeable salesmen" is in fact an oxymoron.
Lol +1 one for that.! On occasion you meet someone, but these are just guys like you and me. Who happen to be salesmen. So beware. Maybe its another sales strategy :D
 

tomchris

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Oxymoron? If his business works, he is knowledgeable.
The customer is technically incompetent.
Why should the vendor have knowledge the client doesn't care about?

Why do you assume that clients do not care about technical or quality issues? Why do you assume that customers are technically incompetent?

I presume that salesmen may be proficient in the business of sales, because - obviously - that is their job. However, if you rely on salesmen to be technically knowledgeable or rely on vendors to be trustworthy, I am afraid that you are likely to be taken advantage of, to put it mildly.

Ask yourself this, what are the revelations of this thread, or even what has this site revealed about numerous products?

BTW, you wouldn't possibly be interested in buying a bridge?
 
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Crosstalk

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Let me start by saying that I love this site and ever since I've found it, it has made a large impact on my purchase decisions.

I'm not very knowledgeable when it comes to audio gear, but I'm learning.

One of the points raised in this essay is that alot of companies don't measure. We bring this up often when we see speakers or headphones deviating from the Harman curve. I'll call up the Micca Rb42s for example. It received so much praise from the likes of Zeos and Joe-n-tell but it's measured very poor here. It has fantastic reviews online. Another good example is the Stage A135c. Online reviews are stellar. Compliance to Harman curve is poor. It should sound like shit, but people like it.

I recently purchased the Akg k371, applied the eqs suggested here, and I was prepared to be blown away. I sounded great, but I still like my T-60p Argons better which are no where close to the Harman curve.

What's accounting for this ? Hearing differences, music we listen to, people not knowing what they're listening to is supposed to sound like, or could it be that the Harman curve needs to be re-evaluated?
the problem is when you are used to a "wrong sound" even the right sound would sound wrong to you.
 

Vacceo

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Nice overview. Thanks.

1) The idea of local factories? Not a factor as long as I can remember. And the few companies that do 'manufacture' locally (I mean here in the US) are getting their components from overseas.

2) Most folks likely have a very parochial view of the Far East, have never been there, and don't very well understand the sheer scale of both manufacturing sophistication and consumer penetration of high tech 'gadgets' that are available to locals. When I was a kid, Japanese electronics were considered 'junk'. Imports were mostly cheap products, not built to last. Those cheap imports eventually destroyed local production. A low 'quality factor' was, however, not intrinsic to the country of origin. Probably the first Japanese consumer oriented manufacturer that turned American heads around was Toyota.

I will not link to it, however if you want to get an idea of a labor intensive, yet machine driven manufacturing operation, take twenty minutes to watch the PT Cort factory tour on YT-- Cort's dedicated factory responsible for making PRS SE guitars in Indonesia. Here, quantity is necessarily limited because of the hands on skilled labor required, but efficiency remains. Then imagine a less labor intensive production operation stamping out circuit boards 24/7. Think about the quantity available and the machine repeatable quality derived from the automated process. Here, the limiting QC factor is parts selected in OEM specs--which is often not too high, as you point out.

3) Shipping is always a major factor. When I began the hobby, loudspeakers made on the East coast were more expensive if sold on the West coast. There was always a price differential. I don't think that is the case, anymore. But consider automobiles. Every brand charges a 'destination fee' --a pickup truck (the US equivalent of a luxury automobile) might have a destination fee twice that of a European lux sedan. Why that is I can't say.

Generally, shipping can be considered a 'one shot deal'-- unless you require a return. This is my big complaint about much of the stuff sold direct, from the other side of the planet. Now, not only have shipping costs gone through the roof, but shipping times are inconsistent.

4) From another (but related to audio) context, I'm familiar with a 'boutique' guitar pedal maker. Hand builds them. He has product, but can't ship anything because he can't get shipping boxes. They are backordered, probably listing in a container on a ship out in the ocean, somewhere. Think about that next time you throw away your shipping box! :)
Add the elephant on the room: governments taxation and exoticism on dealers. I have joked several times over here that I should get a container full of used McIntosh gear from the US just to resell it over here. To give you a comparison, an MI347 in the US is around 5 grand (dollar), over here it's more than 7 grand (euro).

I guess you guys have similar issues over there with brands such as Primare or Genelec.
 

Operandi

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There really isn't any revealing or insightful here to be perfectly honest. Aside from the figures which are sort of industry specific this describes how all product design and manufacturing works in the 21st century.
 
OP
kemmler3D

kemmler3D

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Add the elephant on the room: governments taxation and exoticism on dealers. I have joked several times over here that I should get a container full of used McIntosh gear from the US just to resell it over here. To give you a comparison, an MI347 in the US is around 5 grand (dollar), over here it's more than 7 grand (euro).

I guess you guys have similar issues over there with brands such as Primare or Genelec.

Actually that's a great point. People forget about tariffs and quotas, and worse, don't know how they work in the first place... but they still pay for them!

There really isn't any revealing or insightful here to be perfectly honest. Aside from the figures which are sort of industry specific this describes how all product design and manufacturing works in the 21st century.

Fair point, if you already know anything about how product design and manufacturing work. Audio isn't special, it works the same as anything else that is mass-producible.

I wouldn't say that covers the majority of people though. Especially if you work in (say) a service industry or the software world, you may not get exposed to even rudimentary cost structures for physical goods. There was a time in my life when I didn't know these basic facts either.
 

tomchris

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There really isn't any revealing or insightful here to be perfectly honest. Aside from the figures which are sort of industry specific this describes how all product design and manufacturing works in the 21st century.

Thanks for joining this site and letting us know with your first post that you are well aware of how capitalism works and that the OP's revealings are rudimentary.

Joking aside, when people tell me about their experience working in an industry, I appreciate the effort, even though I am well aware. It is like honesty vs silence. Silence implies complicity.

There is a difference between knowing, understanding and experiencing.
 
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craigenputtock

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I worked for a consumer audio business for several years, from 2012-2015 and 2017-2020. It was a tiny company and we aimed directly for the middle of the market, say $100-300, which for our target customer, was expensive. Mainstream. (I won't say which one but you can probably figure it out if you're good with Google.) So much of what I say won't apply to bigger companies, or higher-end ones.

However, it might be good to know a little bit of what goes on behind the scenes. I see some assumptions about the biz that are not quite on the mark here and there, so maybe my experience can "lift some veils".

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. Also, I only worked at small volumes. Our company was a startup and about 10 people. My view of the industry would pale in comparison to someone who worked for Bose, Logitech, UE, etc. But these were some of my observations.

  • 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.
    • Our company's COGS were higher than this, which was a problem. It didn't allow for us to recoup our costs, make enough money to pay our expenses (like salary, electric bill), and also leave something for the retailer. The rule of thumb for us in the US was retailers will ask for half of the retail price, or more. That leaves us to make our cut from the remaining half.
  • Retail price is free to deviate upward from COGS in an unlimited fashion.
    • We all know Beats headphones. Undoubtedly they don't cost more in parts than an MPOW or Anker set. But people will pay more, so they charge more. What people will pay is much more important than how much something costs.
  • Except for outlier brands, marketing expenses don't have a lot to do with COGS / product quality.
    • It's common to attribute high cost / low performance equipment to "too much spent on marketing, not enough on R&D". This is only true for the absolutely massive brands that can afford to saturate the airwaves. You can name all of them because there aren't very many, and their advertising works.

      When a small brand (sub-$100M in revenue at the lowest) spends money on marketing, they generally intend to (need to) make the money back in short order. They can't make the sale on name recognition alone. (I can go further into the math on this, but the numbers don't work unless you can shovel money at your audience for years at a stretch before making the sale.) Unless you can outspend Sony or Apple for 2+ years without going under... forget this strategy.

      Smaller brands have to compete on actual product features, reviews, and quality in general - which means that taking significant budget out of COGS to buy ads is often self-defeating. These brands do spend a good deal on marketing, but it tends to come out of profit margins, not COGS.
  • Very few audio brands operate their own factories.
    • You can probably name most of them. Even big reputable names do not manufacture all of their own parts. Almost all consumer brands are simply re-selling or contracting out to overseas factories.
  • Most Chinese factories and engineers are perfectly capable of producing high-end equipment... but their customers don't ask for it.
    • Would you rather make $50 per unit on 100 units, or $5 per unit on 100,000 units? Yes, so would they. Niche applications are not of interest to most manufacturers, especially in China, because marketing to high end audiences isn't (at least a few years ago, it wasn't) as easy for them. They mostly operate on a B2B model focused on high volume orders. A major reason for that is switching production lines from product to product is costly. They much prefer to make 10,000 of something mainstream and fast-moving than 10 runs of 1,000 that might (or might not) sell for a high price. Many can do either, but prefer a few large contracts over many small ones.

      The factor that drives "Chinese (or insert the country of your choosing here) audio is low quality" attitudes is actually the customer. I will never forget the man who walked up to a booth attendant in Hong Kong on a sourcing trip. He skipped the formalities and brusquely said to the woman: "Show me your biggest speaker. Biggest and cheapest. I want, BIG, CHEAP and LOUD." This was actually at a booth that had some items approaching hi-fi. Too bad. But they make what they can sell.

      In truth, this man did understand the mainstream western consumer pretty well, but it's not nice to say it out loud. :)
  • Economies of scale are really important.
    • Speaking of factories. Factories that are willing to do small runs are often less established, working with new suppliers themselves, and therefore can run into QC issues. This combined with low quantities pushes up the price of small-run products even more. Niche products are more expensive in large part because the cost per unit goes way up when you fall below 50K or 10K units per run.
  • Audio companies are not all as sophisticated as you'd like to think.
    • You don't need a degree in anything to start an audio brand. 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.

      If you find yourself wondering "Did they even measure XYZ before shipping this" the answer could actually be "no".

      This is far from all companies, and I do think it speaks to the sophistication of ASR and DIYaudio and similar forums, than it speaks to laziness or malfeasance on the part of manufacturers. Although, that is a factor too.

      The people who do actually design and build speakers tend to be quite sophisticated and skilled. You don't drop $100K on an injection mold on a hunch. The people making decisions about speakers, what to sell, how to price them, etc - often have less knowledge than a serious hobbyist. They may or may not follow the advice of knowledgeable people. They may just ask their golf buddy what they think of the sound. So, I'm here to confirm that your thoughts of "I could surely do better" are sometimes correct.
  • Shipping costs are a huge factor.
    • This won't surprise anyone, but keep in mind that the manufacturer has to ship all the big / heavy parts of a speaker at least once or twice before they ship it to you. This adds up and there is a disproportionate incentive to keep the size and weight of a mainstream speaker down. Really everyone knows that heavier parts tend to work better (housings, magnets, etc.) but the cost explodes due to logistics costs, not just quality / tolerances.
  • Packaging costs are probably a bigger factor than you think.
    • There are undoubtedly mid-low-end IEMs where the package costs more than the IEM. In fact it's not even hard to do this. You can source a low-end IEM for $2 and put it in a $3 box without going out of your way. It goes on Amazon for $20 or so and oddly enough everyone seems happy.

      However, it's possible to spend a significant fraction of COGS on packaging even at the higher end. $10 worth of box (printing, foam, nice manual, etc.) is not hard to do. When the COGS of that product are around $100 you're actually ultimately paying nearly $30 or $40 for the box. Best to keep it for resale value, then... ;)

Edit: Cliche: "wow, this blew up". I will update later with some clarifications and responses to comments here! Glad this is interesting to read.

Note: COGS doesn't include R&D or other costs of running a business. Some have noted that the Genelec teardowns don't reveal any unobtanium or incredibly fancy innards. Sure, but they have spent decades learning how to put those things together properly - at significant cost. I would personally rather pay $100 for $10 worth of parts combined in the best way possible, than pay $100 for $50 worth of parts assembled by drunk baboons. YMMV.

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. If you try to list all the costs (other than parts and R&D) that companies need to bear, you will get bored of writing before you think of them all. From employee health insurance to RoHS certification, it all costs money, and either you the consumer pay for it, or the company goes under eventually.
All of which is why a DIY kit can be a great bargain?
 
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