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RE: I think the picture is much bigger than that

> > Rogue Audio, Schiit, Odyssey, Magnepan < <

Hi Abe,

Good questions. I know a little bit about Schiit, and they are very smart about keeping costs of everything very low. Direct sales only which has never worked for any other company before, but their price points are low enough that they seem to have made it work very well. Magnepan is interesting as they are basically made from just MDF and Mylar. So there's not a lot of the same costs that others are affected by.

Rogue Audio has been very good at offering high value products, but just recently introduced a pair of monoblocks for $15,000, so they are creeping up in price also. I don't know much about Odyssey so I can't comment on them except that Klaus Bunge is a very nice guy - I used to buy cones from him back when I was with Avalon.

There is one other factor and that is the dealer margins have gone up somewhat over the last few decades. Everything used to be 40 points except for small accessories (under $10) that were 50 points to make it worthwhile to ring up the sale. Then the cable companies came along and started offering outrageous margins - up to 70 points. After a while some of the electronics companies started increasing their dealer margins to 45 and even 50 points. That made it easier for the dealer to close a sale by offering a "discount" while still maintaining the profit margin needed to stay in business.

For a while McIntosh would offer 55 point margins on everything if you displayed their loudspeakers. I think this is when they were trying to boost their sales in order to sell the company. (Some call this "pump and dump".)

Another good example is Vandersteen. Richard is very smart and very frugal and dedicated to offering exceptional value. But if you remember the Model Two used to sell for $1200 for many years. Now they are roughly double that price. He is not ripping anybody off, it's just that the cost of both material and labor keep rising. I think the real problem is that the middle class is being squeezed out by Wall Street. Inflation is there but carefully hidden by the government. Productivity has risen by 40% since 1980, but wages have only risen less than 10%. All of the money goes to huge paychecks for CEOs of mega-corporations.

But the bottom line is that other than cable manufacturers, I don't know of any electronics manufacturers that are driving Ferraris or buying yachts or such. I'm sure you've heard the saying before, and it's true - "The way to make a small fortune in the audio business is to start with a large one." Just look at the recent demise of Classe as an example.

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