RE: Looper development and production costs?

[Andy Ewen <andy.ewen@trace-elliot.com>]

Unfortunately, yes. Many of the parts used in the current EDP are obsolete,
subsequently very rare and expensive. This is a major contribution to the
manufactured cost resulting in the high retail price which seems to be a
major issue, (and rightly so). The software works well; the hardware is
obsolete. We have 3000 Crystal codecs in our parts store due to difficulty
in supply. These cost $15 each and that's just one small part. 
Having said that, the hardware is so tried and tested now, that the units 
we
produce are super-reliable.
Oh, the joys of manufacture in the music industry :) 

-----Original Message-----
From: Bruce Comens [mailto:bcomens@corelli.nexus.it]
Sent: 10 October 2001 19:11
To: Loopers-Delight@loopers-delight.com
Subject: Re: Looper development and production costs?


but does the edp need to be redesigned from scratch?  aren't we talking
about additions to a product that already works extremelly well?

----- Original Message -----
From: Andy Ewen <andy.ewen@trace-elliot.com>
To: <Loopers-Delight@loopers-delight.com>
Sent: Wednesday, October 10, 2001 1:08 PM
Subject: RE: Looper development and production costs?


> This is great stuff. I am totally serious about this as it is a very
> interesting subject.
> However, there are a couple of points that I would make:
> If we are talking a Looping Device here, the best ever conceived by far,
it
> would still probably not sell in these quantities and certainly not for
more
> than a few years. The competition would catch up making further R&D
> investment necessary to keep it at the forefront.
> Manufactured cost for such a device, assuming it is made in the UK, is
> likely to be at least double what you have suggested, maybe more.
> Gibson require at least a 30% return on all products bearing the Gibson
> name.
> It would then have to go through the chain of distribution and then
retail,
> probably 50% then 50%, then local taxes before the user gets it, this
would,
> on your calculations make it about the same price as a small family car.
> Oh, and the transport costs which you mention, but cannot be overlooked,
UK
> to US, UK to Europe Australia etc.
>
> Taking these points into account, how viable a project is it?
>
>
>
> -----Original Message-----
> From: Doug Cox [mailto:bickleypunk@pdq.net]
> Sent: 10 October 2001 16:45
> To: loopers-Delight@loopers-delight.com
> Subject: Looper development and production costs?
>
>
> Since I don't have experience in the audio hardware development field, I
> have to make some broad assumptions.  I'm sure Kim will let me know where
> I'm wrong.
>
> If $2 million was spent on R&D, including the labor and materials for
> development, testing, market analysis, etc... everything that R&D 
>implies,
> these $s can be put on the balance sheet and amortized over 5-7 years.
> Let's use 5 years for conservatism.  That's $400k per year of amortized
> (non-cash) expense.
>
> Let's say that following the R&D effort, the organization had an ongoing
> overhead cost of $1M per year.  That's just for executives,
sales/marketing,
> haircuts, etc.
>
> Let's say that the ongoing cost of production is $150 per unit.  That
> includes materials, labor, equipment depreciation, any licensing costs,
etc.
> "Cost of goods sold", as the beanheads call it.  Let's also say that this
> $150 per unit figure assumes that 2000 units are produced and sold every
> year.
>
> So:
>
> $400,000 R&D Amort.
> $1,000,000 Overhead
> = $1.4M general expenses annually
> divded by 2000 units
> = $700 per unit of overhead costs
> + $150 per unit mfg costs
> = $850 per unit total costs
>
> If the company wants to earn a 15% return, they'd need to charge $1,000
per
> unit
>
> All of this ignores transportation costs, which seems to be an important
> issue in the current EDP scenario.  Although I lumped a lot of things 
>into
> those 2 general expense categories, I may have left out other important
> costs too...
>
> Is this even close?  How do other complex pieces of audio hardware get
> developed and sold for less?  Obviously, if the same company can spread
that
> $1m per year of overhead across multiple product lines, each one gets
> cheaper.  Same is true for some of the manufacturing costs...  Finally,
> economies of scale kick in for wildly popular products - if I can make 
>and
> sell much more than 2000 per year, my costs per unit will drop
dramatically.
>
> Hey, you asked... and I assumed you were at least 50% serious.  At least
> Kim, Andy, Matthias, et. al. could use this as a starting discussion
point,
> and help us understand the costs involved.  Or not :)
>
> Doug
>
>