Why are upscale home theater and audio products so expensive?
People who buy upscale audio products are surprised when they learn just how small the sales dollars are of many high profile audio and home theater companies. It is very common for most of these manufacturers to be under $5M in sales (many are under $2M) for their entire product line. A lot of expenses come out of this revenue which quickly swallows the profits including labor, parts, rep commission fees, NRE fees (Non Recurring Engineering), advertising, and warranty expenses. Most of the larger audio companies ($10M+) have the same issue as they have multiple products and each model has these same issues. We will start with an example of high-end home theater amplifiers to show how pricing can get out of control having a price tag from $5,000 to $12,000. We all remember from economics that the more expensive something is, the less you sell of it (the budget curve) and if you start to sell fewer amplifiers you need to amortize your expenses over a smaller quantity. When you buy a sma