|At times, we in the press get peculiar correspondence. Take for example the indignant e-mails going off about capitalist profits and how audio manufacturers are robbing us blind. Why call on us? We're neither making this stuff nor pricing it. Reviewing any of it is neither a subversive ploy, an endorsement of value nor a strong-arm tactic to coerce you into buying it - unless you insist that reviews create demand and anyone penning reviews is thus complicit. But in the end, you must draw the line between fair value, return on investment and expenditure yourself. Since you make your own money, we trust your intelligence on how to spend it and what on.
There's something else peculiar about these e-mails. They stick their noses where they don't belong. Unless you're a share holder in a company, its annual profits are really none of your concern. To assess profits, you first must know expenditures. The most vociferous critics of audio pricing are often those with little or no insights into running their own business. Instead, they reference Madisound price sheets for loudspeaker drivers, crossover design software and per-sheet pricing of MDF or plywood at their local Home Depot. From this they proclaim raw build cost and then point at the huge discrepancy to actual retail pricing.
Just because you get busy on the Skil saw in your garage doesn't mean you're in business. Add employee pay roll. Workman's comp. Lease on the premises. Electricity. Phones. Website creation and maintenance. Freight accounts. Overdue receivables (many not collectable without sharing receipts with collection agencies). Parts inventories. Machine equipment either bought or leased. Machine repairs. Denied shipping claims. R&D time. Prototype costs. Advertising. Tradeshow attendance.
Only a thorough calculation of all operational costs can begin to determine what percentage thereof should flow into the per-unit build cost of each item beyond the raw parts bill. Just being able to cover all of these bills doesn't mean you've made a profit yet. You're just breaking even. And it doesn't begin to account for dealer margins, distributor margins, inflation, currency imbalances, warranty repairs, shipping costs, VAT and customs clearance costs and the whole lot of it. Never mind having to extend 30-day terms minimum to be considered by most dealers, many of whom may pay in 90 days, some not at all.
But let's say the occasional price gouging pulpit beater has managed to itemize all the salient costs. How does he now determine what constitutes a fair or reasonable profit for the maker? Let's turn things around. How would our critic react if asked to disclose his private affairs to complete strangers who insist that he somehow owes them full disclosure? How would our critic respond to being told that he's paying himself too much or accepting too fat a paycheck from his current boss? Will he ask his boss for a pay cut or donate the balance to charity? I think not.
Capitalist society is about profits. Alternatives are open to anyone displeased with our system. There's communism and the Third World for starters. Or becoming a starving artist. What is it about audio that has a certain group so cocksure that grossly inflated profits are being written left and right? I've worked for three audio companies. Two are out of business now, one smartly abandoned HighEnd audio sales altogether. That's three out of three or a 100% failure rate. Pretty lethal from a business perspective. There's little evidence to believe that, overall, things are much different elsewhere. "But someone's gotta be getting rich" is what the doubters keep insisting. "Stuff keeps selling. Clearly, profits are being written."
Someone may indeed be doing well. In which case, kudos to him or her for beating the odds. I tend to assume that once initial R&D costs have been amortized, follow-up work on refining the basic platform goes faster and gets cheaper and profits increase as a measure of success. Regardless, I doubt our omniscient critic would apply - um, self discipline if he were in such a position of rare financial success himself. Frankly, most of these arguments smack a good bit of envy. A man content with his own lot tends to not begrudge another man's success. Those with the resources and ability to DIY their own superior solutions -- or equivalent quality for a lot less -- tend to not complain either but are busy helping themselves. Those keen on extreme value will do their due diligence, explore underground options and not waste their time with an established stats quo that doesn't want to get changed.
When it comes to reviewers, it does little good to complain to them about costs - unless they focus exclusively on the ridiculously priced and you simply can't stand them having all the fun. To deliver your feelings where they should go, write the manufacturers. Organize boycotts. Approach your local congressman or woman about unfair business practices. Wear T-shirts or bumper stickers. See how much good you can do fighting the machine. Before you mouth off though, be sure to have the facts on your side. Be sure you really know how much it costs to operate a credible business to just break even so you get to pay all your bills at the end of the month - on time, not ninety days late. Or, you could decide to leave what is as it is while identifying other options. There always are options, you know. That way, you keep watering the plant you think deserves to survive and you stop giving attention and energy to the one you think should wither and die.
One of the hardest figures for the typically small cottage industry player starting out is to quantify R&D investments. What monetary value do you place on what could have been years of stolen time, energy and money to design your better mouse trap? Now that you've taken the risk to make and market it, how much of this figure should you stream into the per-unit cost? How many units will you have to sell to just recoup this upfront though somewhat intangible investment? How many can you sell if you make things too expensive while hoping for a quick recoup? If your market is limited to begin with, you may not have much time. Like a top athlete or super model, you've only got so many years. The clock is ticking. Someone will come up with a better mouse trap. The economy may take a hit. Many things outside of your control can go wrong. Chances are, you'll never recoup that investment in full. Some of it will remain a labor of love.
In the end, it takes a nerve I sorely lack to feel entitled to dictate what someone else deserves to be making for a living. Following some of the discussions associated with this topic, that's what it often seems to come down to - people making judgment calls on complete and utter strangers, mostly with a shocking lack of hard data to support their self-righteous 'cause'. Aren't there many far more pleasant and fruitful ways to spend one's time on than envy? It seems to me that focusing on the alternatives is the more gratifying solution. Here at 6moons we take pride in canvassing the paths less traveled to spread the news on smaller, lesser-known companies whose smaller scale of operation (or direct-sales model) can translate into more attractive pricing. That shifts the dialogue away from the negatives and onto the positives. Primarily from what reader feedback tells me, it seems to be useful and working as well.
It won't mean you'll always agree with us. You'll still have to trust your own ears in the end. But at least it offers alternatives. I can also tell you categorically that nothing sparks enthusiasm with most of our gang as loudly as discovering affordable overachievers. That's the real cherry-with-cream-and-sprinkles scenario. If we can focus on that, it takes the sting out of certain companies getting overly creative with their - um, gain factors of basic production costs...