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Sennheiser Profit Margin - Page 2

post #16 of 47
Don't forget to take into account overhead costs such as:

Packaging. There's a materials cost, as well as the cost for graphic artists to design the packages.

Real estate costs. I'm sure that Sennheiser is not producing its entire product line in someone's garage. Surely, the company has significant costs for leases or purchases of property for office space, warehousing, production facilities, etc.

Legal costs. Sennheiser needs to develop distributor agreements, register and protect its intellectual property, litigate products liability lawsuits, negotiate leases for office, warehouse and production facility space, etc.

Insurance. Any major manufacturing company needs a variety of insurance coverages, including liability coverage, directors E&O coverage, workers compensation, etc.

Advertising and promotion. There are significant costs associated with designing and maintaining a web site, producing product literature, advertising in trade publications, etc.

Salaries. All of these other pieces don't fall into place by themselves. Therre are people running the company, and they sure as hell don't work for free.

... and there are many others.

There is a lot more to what a product costs than the costs of parts and labor associated with actually putting the thing together.

And if after all of these costs, Sennheiser is making a profit, good for them! That's what business is about.
post #17 of 47
Senn like any other manufacurer amortizes the R&D and tooling costs over the production run. The first one off the assembly line costs $xMillion, each one after that costs what, $20? Ongoing costs such as marketing and promotion plus physical plant overhead, pensions, salaries, etc. of course are always figured in. So say they set their cost at $100. Top-tier channel partners can buy large lots for whatever markup, then each level below gets taxed a markup percentage until they reach you. MSRP is what, $449 for the HD650? Nobody pays that of course, at least not the forum folks here. But when Joe Clueless pays "only" $409 at a super-savings blowout at the local mall he thinks he got away with highway robbery.

PS: What's the quote from the Pharm. Exec? "The first pill costs $5 Billion, the rest cost 5 cents each."
post #18 of 47
Sennheiser in terms of headphone manufacturers are quite a large company. Lets ignore Sony as their headphones aren't a big part of their business.

I think the HD600 line probably has quite a large profit-margin in comparison to other brands?
post #19 of 47
An easy way to guesstimate a (non commodity) product's cost is that is ~25% of the MSRP. Most retail stores look for a 30-50% margin and the factory is also expecting the same. This can fluctuate depending on industry, competition, etc but it is decent rough estimator. Each additional chain introduces a similar level of inflation - hence, the very low cost of some Chinese products when purchase directly (ie, Zhaolu DAC).

IOW, Senn likely spends ~$100 on each HD-650 including ALL costs involved. Mind you that this is average across the lifetime of a product run since at the begining there are R&D, tooling, etc costs to offset and at the end of the run it goes to profit.
post #20 of 47
Quote:
Originally Posted by Chri5peed
Sennheiser in terms of headphone manufacturers are quite a large company. Lets ignore Sony as their headphones aren't a big part of their business...

I would think Sennheisers headphone sales are very secondary to their microphone sales as well, pretty sure thats where their real business is.

Same thing for AKG and specially Shure.
post #21 of 47
Quote:
Originally Posted by Icehawk
IOW, Senn likely spends ~$100 on each HD-650 including ALL costs involved. Mind you that this is average across the lifetime of a product run since at the begining there are R&D, tooling, etc costs to offset and at the end of the run it goes to profit.
Hmmm, where have I seen this before?

But you're right, by now the 600 is pure profit above fixed costs. Any development and tooling expenses have been paid down, otherwise they wouldn't have released the 650. Remember there is actual cost (materials and manufacturing), fixed cost (plant overhead, pension, etc) development cost (RD and tooling). The first 2 are fixed costs while the 3rd is amortized over the production run, and probably front-loaded, IOW it is paid down rapidly so profit goes up on that line even as the price goes down. This makes investors happy.
post #22 of 47
Yup, I think we had the same professors
post #23 of 47
Quote:
Originally Posted by Icehawk
Yup, I think we had the same professors


That made my Friday. Money is the universal language, no? The old flourescent bulb started flickering in my head reminding me of some mostly forgotten business class freshman year (1986). Can't really even remember why I took the class.

LJ
post #24 of 47
Well, I don't know much about headphones, but when they do development video cards and so forth, R&D kills them, and most of all, the tools needed to create something like a cpu are unbelievable. They have such complex processes, it really doesn't matter what the supplies cost them to create it. I used to wonder all the time how much things cost to manufacter, but now that I realise everything required, it doesn't really matter. It would be a lot more important if somebody could just go and assemble there own cpu or whatever you may have themselves by buying the materials uesd, but the machines used to create the cpu and run them cost so much it'de be a joke for anybody.
post #25 of 47
Oh thats quite funny. 'Hey there, take a look at my new desktop fab. It cost a trifling $5000' You never know, though. Maybe in 100 years time such an item may exist.
post #26 of 47
Quote:
Originally Posted by Screamager
I would think Sennheisers headphone sales are very secondary to their microphone sales as well, pretty sure thats where their real business is.

Same thing for AKG and specially Shure.
Nowhere did I say headphones were Sennheisers main concern. I was just indicating headphones make a much much bigger percentage of their profit than headphones do for Sony.
post #27 of 47
And also considering, that the HD650's are directly derived from HD600's. They have the same form, slightly different materials and the drivers are comparable also. That is also true for Beyerdynamic, AKG and Grado also.
post #28 of 47
The drivers of the HD600 and HD580 are identical, but employ closer matching (ergo better tuned manufacturing processes). The HD650 uses a new driver.
post #29 of 47
Quote:
Originally Posted by Daroid
I think they have to throw a lot of mismatched drivers away which makes it take more time.... I.e. if they don't follow specs they should be thrown out. Maybe that is one reason why the HD25-1 costs what it costs (120 dB SPL, tested by some other website to 138 dB SPL).
More of the profit lies on the replacement parts, not that it is cheap to keep that much stock, but.....

EDIT: Apparantly this was true with the AKG K1000 and is why it is discontinued - too many mismatched drivers + Harman = discontinued.

EDIT: There's profit marking on anything - right now TFTs are grossly overpriced. It costs about $10 to make a 1400x1050 14" TFT, which sells for $700. This is the LCD display only. Imagine the gross markup on 32" LCD tvs with a lower resolution
you would think that a company like sennheiser and akg would be able to better control their processes to that there would be less losses during manufacturing while holding tighter tolerances. was it manufacturing issues or lack of sales of the k1000 that led to their demise?

as for $10 to make a 14" TFT LCD module, that cost is very unlikely. the backlight including all of the enhancement films, reflector, ccfl, light guide and assembly costs easily add up to more than $10. where did you get the $10 number from? display search?
post #30 of 47
Hey, I'm doing my english paper on this! Do you guys know where would be the best place to secure actual data? Should I just contact Sennheiser directly?
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