It’s the time of year for saving money!
At the Rocky Mountain Audio Fest a “civilian” said to me, “So, you are a reviewer. You must be rich. I mean, you can buy all this stuff at dealer cost and flip it, right? I want your job…” This isn’t the first time I’ve heard an audiophile tell me that I must be making scads of cash by selling the gear I review. But I beg to differ…
From my side of things, the economics of reference review gear looks quite different.
First off, it is true that most of us “in the industry” can buy gear at dealer’s cost. Depending on the manufacturer and their mark-up that discount can be as much as 50% off list or as little as 30% (for pro gear, prosumer, and direct to consumer lines). Obviously, that is money not spent on the front end of a purchase. When and where the component is sold determines whether it is a profit center or merely another cost of doing business.
For me buying components at accommodation has always proved to be a cost of doing business. During my 30+ years of writing about audio I have occasionally made some profit from a component sale, it has been such a rare occurrence that I can count the times it’s happened on one hand. Most of the time, buying, using, and then selling a reference component has been a money-losing proposition. And that’s not because I suck at buying and selling…
The Honorable Path
I’ve seen two scenarios employed by reviewers when buying and selling review gear. One I consider correct and the other borders on shady, in my humble opinion. Here’s the first – a reviewer buys a component at accommodation. Three years later the manufacturer announces a replacement. The reviewer waits until he has heard and compared the replacement with their owned reference before replacing and selling the older model.
When it comes time to sell the older model, it is now not only used, but discontinued! The odds are extremely good that the resale value of the used reference component will be less than the reviewer paid for it. After all, it is used and now slightly out-of-date. But unless the reviewer compares the older unit with the newer one in a controlled A/B test how can they tell what had changed or improved? If the original reference unit goes away before the new one arrives how will a reviewer manage to compare them?
The Less Forthright Way
The second purchase and sales methodology employed by a few reviewers is what I call the “jump ship” method. As soon as a manufacturer announces a new model (reviewers often get advanced notice of new models) the reviewer puts their reference component up for sale. It is still current, so it’s possible and not unusual to garner as much as 60% of new retail for mint used components. So, the reviewer has managed to retain his investment and even turn a small profit.
But the downside of this practice is the reviewer will be guessing as to any sonic differences between the new and old components. In order to remain financially whole, the reviewer trades off experience and in my opinion, competence, for financial gain.
Audio Components As Tools
In my world reference components are not profit centers. For some other reviewers, they obviously can be, but for me my “investment” in audio gear has been a portfolio of depreciating tools, not growth options waiting to be harvested…
My investment in audio gear has done nothing more than allowed be to do my job, just like a hamburger joint franchise owner…but to do my job right that’s what is required – and I’ve found that the only tried and true way for a reviewer to make a small fortune in high-performance audio is to begin with a larger one…
I have bought hundreds of thousands of dollars in AV equipment at accommodation.
Some classes of products retain their value like speakers ($30,000 and under), amps and stereo preamps. Others can end up close to worthless such as: home automation (installed and stuck in the house), in-wall speakers (also installed), digital products like DACs, AV preamps (oh, God I’ve lost my ass on so many of these) and ANYTHING VIDEO.
For example: I bought an 85 inch Samsung UHDTV a few years ago. It was $10,000 retail and I got it for $7,000. That TV new today is $2,600 at Fry’s. De-installation, transportation, and depreciation for the years of use that I put on it makes the TV pretty much worth nothing. Certainly, it ain’t a good way to get rich.
If you are smart and invest in the right categories as a reviewer – you can build a MUCH BETTER system than you could on your own. Like a car collector, you can own more varied products too which helps you talk more about different products.
Note: there is a point of no return on some of this stuff too. For example: if you go buy some BIG BIG BIG Wilsons or Focals and expect to sell them a year later for 30% off of retail – think again. There are only so many people a) with the money to buy them and b) the space to install them. Some Sopras or Sashas would be better as the pool for the people who want them is bigger.
I tend to agree with Steven here. Gear is a tool to provide a service. I don’t know a reviewer who does what they do for the money. The reviews themselves pay about the worst hourly rate EVER and as I showed you all above – you can lose your ass on most of the stuff you might need/want that isn’t blue-chip audiophile components.
Not sure about the example above Steven – the real issue is not the honesty of being able to compare new with older, it’s about selling a product you received cheaply at a price referenced to MSRP. How many reviewers ever admit, when selling, “I’m a reviewer, moving this on’? Almost none, because they know the buyer will have a sense of what the seller really paid and use that in negotiating price. Personally, I don’t ever imagine reviewers are making money selling gear they’ve paid for – but let’s not inflate the honor code here. Of course, if we’re talking about famous reviewers who ‘forget’ they had received gear and then sell it (or better yet, ‘their friend’ sells it for them — look up the case), then yes, it’s a sham. However, most normal folks are more concerned that they are giving honest reviews than covering their costs when selling. And yes, ‘accommodation pricing’ is a nice perk.