[samspotting]

Grados look extremely cheap but go up into the thousand range. This got me thinking in general, how much does it cost to manufacture a nice set of headphones?

 

[krmathis]

It certainly depends on the headphone.
Anywhere between $50 and $1000 I would say, and probably even more.

 

[rhfactor1]

From having friends in the Audio Specialty Industry throughout the years and knowing what they paid for certain audio items. There would probably be a markup on most headphones of possibly up to 60%. So a $100(MSRP) headphone would cost a dealer approximately $40, so for the manufacturer to make any profit the manufacturing price is probably between $15-$20 possibly less. In defense of Grado Labs all of there items are manufactured in the U.S.A. and I'm sure their manufacturing costs are higher, but I still say even though there markup may be quite a bit less their manufacturing costs are probably less than many people would realize. And I also do not believe it is a bad thing to make a profit especially in these economic times.

 

[subtle]

It really is a shame so many people judge a book by its cover, never allowing themselves to experience things in life that might truly make them happy.

 

[mbd2884]

Quote:

Originally Posted by rhfactor1 /img/forum/go_quote.gif From having friends in the Audio Specialty Industry throughout the years and knowing what they paid for certain audio items. There would probably be a markup on most headphones of possibly up to 60%. So a $100(MSRP) headphone would cost a dealer approximately $40, so for the manufacturer to make any profit the manufacturing price is probably between $15-$20 possibly less. In defense of Grado Labs all of there items are manufactured in the U.S.A. and I'm sure their manufacturing costs are higher, but I still say even though there markup may be quite a bit less their manufacturing costs are probably less than many people would realize. And I also do not believe it is a bad thing to make a profit especially in these economic times.

Wrong. Their cables are made in China and I suspect as others the drivers are made in Singapore/China. They seemed to only assembled in the USA, which apparently to Grado means build in house.

 

[Gamerphile]

MSRP for typical head-fi HP's are 3-6 times raw production costs on due to r'n'd costs, logistics, marketing and the last links in the chain that takes the biggest part: distributor and stores. Even the most top end typically follows this pattern but have used ridicules expensive parts or architecture compare to medium range - the diminishing returns law. Well of course there is also the ocational techincal evolution where a new tech is found and the company behind needs atleast some of thier large investment in R'n'D back - big returns but still very expensive.

 

[subtle]

Quote:

Originally Posted by mbd2884 /img/forum/go_quote.gif Wrong. Their cables are made in China and I suspect as others the drivers are made in Singapore/China. They seemed to only assembled in the USA, which apparently to Grado means build in house.

Wrong. No need to make yourself look like a fool when you can clearly see the drivers being produced in the Grado Labs Tour thread.

 

[El_Doug]

If youre talking cost of parts, peanuts.

When taking into account cost/volume profit, unit variable costs (overhead, engineering, labor, etc.), sales mixes, and all that other jazz, i'd be willing to wager that most headphones, besides the most exotic top-tiers, are priced perfectly.

Without studying the audio industry's cost accounting (which no company would ever expose), it is anyone's guess how much headphones cost to produce.

 

[rhfactor1]

Even if the Grado Labs phones are only assembled in the U.S.A. the manufacturing costs will be greater. You can make an educated guess what the audio industry's cost accounting is if you know what a retailer is paying for purchase price compared to MSRP. And I believe that "samspotting" was only asking a question concerning manufacturing costs. I would have to agree with "gamerphile" that the MSRP would have to be close to the 6 times the raw production costs. But like I said before-this is not a bad thing-as for the build quality of Grado Labs headphones I have two sets that I have had for over ten years each which are the SR-125 and SR-60. My wife uses SR-60's almost every night and I use my SR-125's probably once or twice a week, the only thing that had to be replaced is her headphone covers that I replaced about about two months ago, Grado Labs headphones mat look cheaply made but if they are properly taken care of they may be the toughest that I have ever used and I have had ownership of quite a few manufacturers over the years (Sennheiser, A-T, Denon, Beyerdynamic, etc.). All I can say if at all possible audition your purchase on the portable or home system you may be using to see if you will be happy with them and happy listening.

 

[Germancub]

While Grados may last a long time they just don't have that quality feel of Sennheiser or AKG's. When I pay over 200 dollars for a pair of headphones I'd expect them to be built better than 70 dollar ones (SR60 vs. SR225). I wouldn't be surprised if they had the highest profit margin in the headphone industry.

 

[BigTony]

The costs are quite variable, and not linear, so the profit/markup is small on entry point items, and then runs to several 100% on the more expensive ones (the technique is called 'the switch sell', have a well priced entry item, it gets good reviews/kudos - then fill out the range with more expensive versions of basically the same item, then 'persuade' the buyer that they're the sort of discerning customer that would appreciate the 'more refined' version.. and 'kerching!').
And don't forget, Grado (and every other headphone company) don't make headphones - they make money.

 

[FooTemps]

headphone margins are in the several 100% range once you get into the mid-fi range. Development can be done now these days by running simulations. The only headphone which warrants higher R&D costs would be the HD800 I believe due to the ring driver design. Thing is, once they finish the manufacturing engineering for it, they can pump out those drivers for dollars on top of the parts costs. The ring-type driver will eventually trickle down into more economically viable solutions if Senn wants to make the most profit out of the design sans royalty fees.

I would say that super-high end headphones probably have a smaller margin due to ultra-low volume sales. The cost of the likes of stax, r10, hd800, ps1000 are due to tooling and manufacturing costs if they dedicate machines and workers to the manufacutring process. If you have to retool machines/buy new machines/build new machines, retrain workers, and build at low volume, the per unit cost has to compensate for all those very price baseline expenses to even manufacture the headphone. I'm sure if companies had the marketing clout and balls, they could just build Orpheus quality headphones in the millions and sell them at $150 price point. The thing is that there has to be a customer base that is knowledgeable about the product and willing to buy (new ipod shuffle anyone?). I'm sure if skullcandy wanted to, they could probably sell mid-fi level products for 50% cheaper than any competing headphone because they have a huge customer base.

 

[fatcat28037]

Quote:

Originally Posted by rhfactor1 /img/forum/go_quote.gif From having friends in the Audio Specialty Industry throughout the years and knowing what they paid for certain audio items. There would probably be a markup on most headphones of possibly up to 60%. So a $100(MSRP) headphone would cost a dealer approximately $40, so for the manufacturer to make any profit the manufacturing price is probably between $15-$20 possibly less. In defense of Grado Labs all of there items are manufactured in the U.S.A. and I'm sure their manufacturing costs are higher, but I still say even though there markup may be quite a bit less their manufacturing costs are probably less than many people would realize. And I also do not believe it is a bad thing to make a profit especially in these economic times.

In your example the markup from $40 to $100 is 150% not 60%. A sixty percent markup would raise the MSRP to $64.

 

[samspotting]

I mean if rs1's cost only maybe 50 to 100$ to manufacture, couldnt grado just make up for R&D from bulk sales?

I was hoping someone here knew how these things work.

Not that I am upset over the large margin, I am just really curious at the economics of headphones.

 

[Uncle Erik]

Quote:

Originally Posted by BigTony /img/forum/go_quote.gif The costs are quite variable, and not linear, so the profit/markup is small on entry point items, and then runs to several 100% on the more expensive ones (the technique is called 'the switch sell', have a well priced entry item, it gets good reviews/kudos - then fill out the range with more expensive versions of basically the same item, then 'persuade' the buyer that they're the sort of discerning customer that would appreciate the 'more refined' version.. and 'kerching!'). And don't forget, Grado (and every other headphone company) don't make headphones - they make money.

This. Even if you could see the books, there are a million ways to manipulate the costs. Things will be categorized depending on taxes, possible government credits for certain things, depreciation of the manufacturing machinery, and lots else.

Though keep in mind that the most expensive models don't cost a lot more to produce than the cheap ones, but most of the profit is loaded into the expensive models.

If you're looking at bang-for-buck, go DIY and build your own gear. That's not terribly feasible with headphones (though it has been done), but you can get excellent performance from DIY speakers. When you consider just the cost of parts, you can build a very high performance system for not that much money. It might not have the prestige that marketing lends products, but it can sound good.