The Internet and the Death of Rational Pricing

I got a little sick to my stomach after reading the latest Stereophile magazine. Admittedly, many men my age become curmudgeons but this was more than simply an old man’s reaction. Reading Stereophile made it apparent that my beloved hobby has become almost unrecognizable to regular people like me. The industry that I’ve been a part of for nearly 40 years has tried to adapt with disappointing results. The magazines have completely lost their way. What’s left must appear like a sick joke to all but “trust-fund babies” and lottery winners.

In his Stereophile editorial John Marks opined that it was false economy to buy $20,000 speakers if you were eventually going to end up with $200,000 speakers. He made a good argument but imagine the “value” of speakers that cost $200,000! Imagine the total cost of a system based on such speakers. In the same issue Michael Fremer reviewed the dCS Scarlatti stack, an $80,000 group of 4 components that play digital discs and files. He compared the combined performance of the dCS components to that of his $200,000 turntable system. An $80,000 CD player versus a $200,000 turntable? Makes you wonder about their demographic doesn’t it? Who are they writing for? It’s certainly not me and I’ll illustrate with a little story.

I thoroughly enjoy my audio system and I haven’t upgraded it in several years. I assembled the system from carefully chosen components. I purchased the best-sounding examples that I’d heard (and I’d heard them all under a variety of circumstances). Today when I audition a new component I compare it to what I have and have yet to be disappointed. My amplifiers are zero-feedback and my speaker system is time- and phase-accurate so my rig is far more revealing than those used by John Marks and Michael Fremer yet my entire system cost less than Marks’ “true value” speakers or Fremer’s turntable system. In fact it cost about half as much (at full retail prices)!

Now $100,000 isn’t chump change but it’s affordable by middle-class families who care about music. My entire hi-fi cost about twice as much as my car. It cost about twice as much as remolding my kitchen. My audio system is priced comparably to my other priorities. So who is it that buys the $200,000 components and other “carriage trade” products these Stereophile magazine reviewers write about? Nobody I’ve ever met—and I’ve been fortunate enough to socialize with some very high rollers. Wondering how a regular guy like me got to meet the rich and sometimes famous? Curious about why they didn’t throw their money away even though they trusted me and I was selling products?

For many years I operated a high-end audio store in an affluent area. I encountered some movers and shakers and visited some expensive (sometimes ostentatious) homes. I advised people on the basis of performance and didn’t try to simply take all they would spend. The rich folks I met didn’t get that way because they were stupid. Some inherited the money but most worked hard and had good ideas. All managed to be in the right place at the right time. They could spend whatever was justified by reason or demonstration.

The expensive stuff I sold sounded better when directly compared to the alternatives and I proved it. Looks like those days are over. So what happened?

While the Internet may not be totally to blame, it certainly has been a big factor. The Internet has had some positive effects on society but it has virtually destroyed the hi-fi business, as I knew it. The used market on the Internet has eliminated entry-level products and the profit base for most retailers. Most retailers won’t survive in this new marketplace and are destined to fail or already have. Without retailers there can be no direct component comparisons and no skilled advice to guide thoughtful consumers.

The Internet also makes it possible for anybody with a computer, no matter how unknowledgeable, to write product reviews even if they’re only messaging their own egos. Idiots can argue with intelligent and experienced individuals and the loudest often wins. Magazines can’t sell reviews of real products in competition with the dozens of (often) worthless reviews by (often) completely inexperienced Internet contributors. So instead the magazines resort to writing about products real people don’t buy and we end up reading about components that none of us are likely to ever see let alone hear.

Is this a recipe for a successful industry consisting of manufacturers, retailers and magazines? I think not. Does it offer opportunity for thoughtful consumers? Perhaps.

Today’s entry-level consumer can purchase yesterday’s high-end audio products on the used market for half what they cost new. It’s now possible to start with products capable of much higher performance than in years past because you used to have to pay retail for entry-level performance. The problem is one of understanding because; contrary to popular belief, collecting good components doesn’t necessarily guarantee good sound. Experience is necessary in order to choose components that work together in a complementary way and to set them up properly. Where can a novice turn for competent advice today?

The dealers that remain in business are vying to sell Warren Buffett and T. Boone Pickens their next system and probably can’t be bothered with you. The magazines are writing about components that nobody with any sense would buy. There may be some good information on the Internet but I’ll bet you can’t find it and how will you separate the wheat from the chaff?

If your friends are impressed by price tags you can connect your Krell amplifiers to your Wilson speakers with Transparent cables and everybody will be happy (until you turn it on). If you want much better performance for a lot less money you’ll have to educate yourself. Learn how an audio system works and learn how to make your own informed choices. I can help. Read my Audio Perfectionist Journals and get off to a good start.

Richard Hardesty