What makes really expensive headphones so expensive?

Q: What makes really expensive headphones so expensive?

A: Essentially there are 4 aspects to the cost of any product [1] R&D [2] materials [3] manufacturing and [4] marketing. These costs may be either fixed (eg payroll) or variable (eg sourcing raw materials).

R&D is variable, so calculating the cost of R&D for an individual headphone model is difficult. Newer models still haven't seen a return on ROI costs, while older models (for example HD600) have probably recouped their R&D costs, and then some. R&D costs may be hard to figure out accurately because one technology may be used in multiple products, or may be responsible for the development of other innovations, for example the design of the HD580 enclosure and drivers directly influenced the design of the HD600 and 650 enclosures and drivers. Another great example is the Q701 -- it is in essence a K701 with modest changes. Most of the R&D cost was for the K701, and the Q701 reaped much of the benefit.

Material costs vary over time, often wildly, and are subject to supply and demand constraints. For example the price of copper, used in headphone voice coils and wires, has changed dramatically over the last few decades, and copper futures are still often volatile.

Production costs also vary, for example Q701s were made in Austria, but AKG wanted to save costs and moved production to China. But moving production to China does not necessarily make things cheaper, for example some Audio Gd amps probably cost more to make than equivalent Schiit amps, even though Schiit makes its stuff in the US and Audio Gd in China.

Many companies OEM some or all of production, which again affects costs depending on who they OEM to. And it's not just a case of folks using cheap Chinese OEMs -- some Denons for example were OEMd by Fostex, for example. And keep in mind that OEM companies typically conduct their own R&D, have their own design costs, have to retool equipment for specific products, etc, which changes cost calculations.

And finally marketing: some companies spend more on marketing (e.g. Apple, Nike, Beats) and make huge profits, while others spend very little on traditional marketing and still manage to do very well for themselves. One way to get around substantial marketing costs is to engage in direct marketing (eg Emotiva, Schiit) or to depend on word of mouth (like HiFiMan depends on HeadFi).

But eventually, keep in mind that companies will try to make as much profit as they can, so the price may be determined by what the market can support. For audiophile products, there may be a substantial markup in price just because companies know they can get away with it. A classical example of this is the Grado RA1, which has been substantially marked up when you take into account its design and materials/manufacturing cost.