In Miami I´ve purchased a DVD player at $ 29.-, and an ESU Loksound at $ 129,90.- !!!!! WHAT´S WRONG????? I look one aside the other, and I can´t understand WHY THE BIG DIFFERENCE !!! Have anybody the answer?.
Sound decoders are playing to a very small audience compared to a CD or DVD player. Practically everyone owns one or more CD or DVD players (I have 8), but a very small percentage of the population owns a sound decoder.
CD and DVD players are all made in China. LokSound decoders are made in Germany. SoundTraxx Tsunami and Digitrax SoundFX decoders are made in the U.S. Only MRC decoders are made in China and that possibly explains why they have such a high failure rate.
Okay, let's see if I can back up cacole here with an example our OP might get, based on his user name.
Why is it that a stock Harley-Davidson costs so much less than a custom chopper from West Coast Choppers or Orange County Choppers? Well, H-D makes thousands of bikes, while OCC makes mere hundreds...and they are custom bikes built for consumers that want something more than a stock motorcycle.
Same goes for DCC vs. home consumer goods...except that the difference is even more extreme. The market for a DVD player is several billion people all over the world. The market for model railroading in the USA is rumored to be around 250,000. If you want to consider that most polls put DCC in the hands of just around 25% of the hobby, then the market for DCC is just 62,500. So to compare, that means that DVD's sell to about 3.0 billion people, and DCC sells to 0.0000625 billion. Or, 3,000,000,000 vs. 62,500. Can you see the difference?
Paul A. Cutler III*******************Weather Or No Go New Haven*******************
Paul, thanks you for your explanation, but ESU sound decoders (and so on QSI, Soundtraxx, Digitrax, etc) are selled around the world, that is far more than 62.500 modellers. Beside, after design and put it in the market, what´s the real price of a sound deco and speaker, $ 30, $40, $ 50.- ??? I feel no more than this. Thanks again.
There was another somewhat recent thread on this same subject if you are interested:
http://cs.trains.com/trccs/forums/p/151522/1676555.aspx#1676555
And probably others as well.
The people designing and building the few items that each manufacturer sells or replaces every year could get jobs easily making as much or more somewhere else...unless they were paid to be loyal and creative, and to do top notch work. When you have to keep good technicians and engineers under those circumstances, for a small market, you will expect to pay lots for those competencies. It is strictly pay and quality costs amortized over a fraction of the sales volume items in the popular markets respectively as alluded to earlier.
It would be different if there were only two cut-throat manufacturers of sound decoders and they each sold a million every year. Neither parameter is true. CD's and DVD's are produced in thousands at a 'pressing', and six months later they have another run. Nothing like that happens in the DCC industry, not for any one manufacturer, and not even in every sizeable market anywhere on the globe.
-Crandell
Harley-Davidson Paul, thanks you for your explanation, but ESU sound decoders (and so on QSI, Soundtraxx, Digitrax, etc) are selled around the world, that is far more than 62.500 modellers. Beside, after design and put it in the market, what´s the real price of a sound deco and speaker, $ 30, $40, $ 50.- ??? I feel no more than this. Thanks again.
I've got no idea what the real numbers are, but I would not be surprises if the sales of all sound decoders does not top 100,000 in a year. It would be interesting to know.
Are you implying that the cost to design the decoder isn't part of the "real" price? I would say more that it IS the real price, relatively speaking. I expect that the engineer/designer would like to get paid!
Jeff But it's a dry heat!
You simply can not look at any low production volume electronic device and base the retail price on the cost of the components. If business operated that way, they would not exist. You have to amortize the cost of running the business into the pricing calculation. The component cost becomes insignificant to some extent when there is low production levels.
Perhaps ESU, QSI and Soundtraxx are stunningly profitable business? Perhaps they could bear the 50% plus revenue drop that you propose? Perhaps the distributors and retailers can afford to drop that much revenue as well? Remember that there is a supply chain here, in most cases you are not purchasing directly off the manufacturer but from a dealer who also wants to remain in business.
What do you reckon, on a $100 retail decoder, that ESU makes maybe $50 gross. Take out some cost for parts, say $40.00 net. Do you think they might sell 10,000 of them? $400K in revenue per year? I have no idea on the actual numbers, but you can quickly see that there is no way to employ people and actually run a business if the selling prices are too low.
Simon Modelling CB&Q and Wabash See my slowly evolving layout on my picturetrail site http://www.picturetrail.com/simontrains and our videos at http://www.youtube.com/user/MrCrispybake?feature=mhum
The components used in sound decoders are generally specific and unique - ie they are not shared by other consumer electronics and thus do not benefit from the multiple hundred thousand unit lots that cell phone manufacturers buy. In just that one area, cell phones, many phones from many makers actually use the same chips inside - so the market is that much bigger. Far bigger in units sold per year than the entire model railroad hobby - and not all model railroaders run sound snd DCC. And each sound decoder maker has its own chip. The only one using anythign approaching a 'common' part is Digitrax, which is why the Soundbug is so cheap. But it also cuts down on features, usign 8 bit sound where others have 16, and with the 'bare metal' of the chip exposed, creating sound projects for them is harder than is is for other user-programmible chips liek ESU's.
Sorry but we will never have the volume of component sales that bit-time consumer electronics has, even if everyone that is currently a model railroader would go out and recruit 2 more to the hobby. But things HAVE dropped in price - a LOT. Look at how much decoders cost when DCC first came out, and compare to today's - 1/4 or less of the price AND far more features. Sound? 10 years ago you couldn't get on-board sound AND motor control in one loco for any price.
Of course cell phones are probably not the best comparison items, because you seldom if ever see the 'real' cost of the phone - they're all subsidized to some degree by the carriers. You aren't paying anywhere near the actual price of the phone - at least up front. The carrier makes up for it in the cost of the service. Why does it cost $80 for a voice and data plan per month? Not because it costs that much to move data over the wires, it's so that after your contract is up you will have made up for getting the phone for $200 less than it really costs.
--Randy
Modeling the Reading Railroad in the 1950's
Visit my web site at www.readingeastpenn.com for construction updates, DCC Info, and more.
Since you believe we are being ripped off by the manufacturers on the cost of sound decoders - and are not really willing to be convinced differently - I suggest you go into the business yourself. You can either make obscene profits off the rest of us by selling at current market price, or sell at a lower price to benefit yourself and friends.
Or, I am pretty sure Digitrax, ESU, QSI, or Soundtraxx would welcome your investment in their business at a lower than market interest or dividend rate. Then you can indirectly participate in their unreasonable profiteering.
Or, since you don't really believe the business analysis presented by forum members, simply research and develop a business plan for making sound decoders on your own. Go price a very small staff of engineers and support, the components, and the office and assembly space and labor. Don't forget to double the salary of your employees to cover benefits, insurance, payroll taxes, etc. Allow for labor and space for packaging, shipping, billing, and accounting. Then take a guess at your annual product sales quantity. It's pretty easy to figure out how much you have to add in to each decoder sold to cover your costs. Remember, the manufacturer typically sees less than 50% of the retail price.
My best guess of actual costs is in the range of $40 per sound decoder, with annual sales of 40K units @ $50 each for a company like Soundtraxx. But run your own numbers.
Fred W
A Hornby Zero 1 decoder 30 years ago cost the equivalent of $90.
It didn't have sound either.
There is no comparison between a custom made sound decoder and a cheap mass produced "DVD Player". The "DVD Player" is made from cheap, off the shelf parts, assembled in a low wage country, and at that price, they couldn't have paid the royalties owed either.
Whereas a DCC sound decoder, while made from off the shelf parts, is manufactured in a high wage country, using custom software designed for that very decoder. A lot of time went into developing the software, getting the sound samples, processing and encoding them, and getting everything to work together seamlessly. That is not cheap either.
Ultimately, you get what you pay for.
In truth, I'm surprised that they can sell the decoders for what they do and make money. The volume is just too low, and the development cost too high. The actual cost of production isn't even relevant.
There are some very good points being made here. I have to agree with Randy...the price has come down considerably. Many can remember sound decoders that cost in the neighborhood of $300 and up, and there were few options for command control. There was the popular Dynatrol system in the mid 1980's, maybe early 90's, but I never had the luxury of running trains on it primarily due to cost.
Something else that has to be taken into consideration is the tooling to assemble them. Surface mount electronic components require a computer controlled assembly line. I heard a dollar figure of $25,000 per machine a couple of years ago to assemble surface mount electronics components. If you produce two or three different decoder designs, that means two or three separate assembly machines.
cacole Something else that has to be taken into consideration is the tooling to assemble them. Surface mount electronic components require a computer controlled assembly line. I heard a dollar figure of $25,000 per machine a couple of years ago to assemble surface mount electronics components. If you produce two or three different decoder designs, that means two or three separate assembly machines.
Or you run one model, then reconfigure the machine, run a batch of the next model, and so on. WHich is what most small DCC companies do. They may have more than one machine, but certainly not one per model of decoder. I expect that these machines are computer controlled and you can save setups for each product and load them into the machine fairly easily.