Accommodation pricing for the industry reviewer's ...your opinion?

[Bruce B]

So has anyone actually refused to buy a piece of equipment because they weren't offered a discount?

I ran into this about a year ago. A speaker manufacturer refused to lower the price even 1 cent below MSRP. I really wanted those speakers in my room, but that scenario really turned me off from the whole company.

Another thing that people may not be aware of is that speakers and electronics have a typical 50% accomodation price. Things such as digital components and especially cables are much more and can be as much as 70% off!!

 

[rbbert]

so because everyone does it, that makes it OK?

I don't know. But there's a LOT more money involved in most of those other industries, so I would suspect that if the practice is actually a problem, we would see changes somewhere else before high-end audio. JMO, of course.

 

[mep]

I won't buy any audio product brand new without getting a discount. We are already paying too much as it is in my opinion. There are damn few audio products where demand outstrips supply. And when you know that dealers are paying 50% of what they are charging, you should expect to get a discount. It pains me to know that manufacturers only need half of what the MSRP is in order to make a profit on what they are selling and be happy and consumers are subsidizing the rest of the distribution channel to the tune of another 50% mark-up. I wish we could turn that model on its head. And I say this as someone who does not benefit from local dealers because I don't have any where I live and why should I pay a 50% mark-up to some dealer in another state that is merely taking my order and shipping me a product?

 

[Steve Williams]

That's a forum all in itself! Unfortunately, I don't think that there are enough manufacturers here to discuss this.

I have two typical customers - the audiophile and the rich music lover. With the audiophile, my products are unlikely to be the first loudspeaker that they have bought. Which means that they will need to trade in their old loudspeakers. Without the dealer, they will have to sell their old speakers themselves - the manufacturer is unlikely to be able to take in trade-ins. In the days of easy credit, they could probably but the new, and then take their time to sell off the old. But nowadays, it is down to the dealer to sell the traded-in loudspeakers, and he is likely to only make a profit when he manages to sell off the old speakers (which may be a dog and may have to sit in his warehouse taking up space for years.)

The second customer is the rich music lover (probably not on this forum). All he wants is to have lovely music in his home when he hits the PLAY button. This customer needs the service and set-up that the dealer typically will provide but the manufacturer can't.

With both cases, without dealers I don't think that sales will increase, and may even fall. International sales (which I rely on) would go to ZERO.

Back on-topic, as a manufacturer, I could write off the accommodation pricing or gift" to marketing costs - not that I can afford to provide the reviewer with a pair of Genesis 1.2's. A full page ad costs in the region of $18k, a multiple page review would be worth at least that. I've been told by many of my dealers that they wish I would get a review in one of the major magazines, but like many of you on this forum, the practice troubles me.

Hi Gary

I always appreciate reading your posts because they always make such good sense. The question I have is whether it is common practice for a manufacturer to take a write off for the accommodation pricing. If so and the ad only cost $18K but the accommodation price is multiples of that, what do you do with any residual? I guess that I just haven't read a review that one can say might be worth $50K-$75K based on 50% of MSRP of many of the high priced items.

As for gifting, I was under the impression that if a gift is above a certain amount, tax needs to be paid

Also I wonder if in the eyes of the IRS this could be considered a form of barter between manufacturer and reviewer and if so, isn't this taxable

Finally, if i can ask the question whether sales tax is paid on the accommodation pricing because many times this involves an out-of -state purchase for the reviewer and I have heard from some of my reviewer friends that tax isn't charged or is this erroneous

 

[mep]

Steve-how can a manufacturer whose business model allows no sales directly to consumers claim a loss when selling a piece of gear to a reviewer for the same price they would have received from a dealer? It's all a wash unless the manufacturer sweetens the pot by selling it at his true cost with no profit added.

 

[Steve Williams]

I know of a reviewer who recently bought a pair of speaker that were well over $150K for $40K from the manufacturer

 

[Steve Williams]

Steve-how can a manufacturer whose business model allows no sales directly to consumers claim a loss when selling a piece of gear to a reviewer for the same price they would have received from a dealer? It's all a wash unless the manufacturer sweetens the pot by selling it at his true cost with no profit added.

good point Mark but remember that the dealer has a resale licence whereas I would bet that reviewers don't. So potentially no tax ever paid if tax isn't paid on the accommodation pricing and again when the gear is sold on Audiogon

 

[mep]

Well, you’re right about the no-tax thing. Nobody is paying taxes on Audiogon unless they buy from an in-state dealer just as most people don't pay any taxes on anything they buy on the net unless they are buying in-state. I would assume that all product that gets shipped out of a manufacturer's door is taxed at the state and federal level unless they keep the sale/shipment off the books.
Now, I do get your point that if you as the consumer buy your expensive products from an in-state dealer; not only are you paying way more for the price of your product, you are also paying state tax on top of it. If you are buying really expensive speakers like $140K Wilsons and getting slapped with let's say 8% sales tax, that's $11,200 more you just shelled out which would have bought you a brand new REF 5 for instance. I guess we are chumps.

 

[Randall Smith]

actually not always. I bet there are many of us, myself included, who have purchased a piece of gear that was an absolute loser and dumped it. But then I suppose Randall, you can call that bias as well

Let me make this clear, if someone has a preference in this hobby, then they are biased. Steve, you love your speakers and amps and you will go to battle with anyone who does anything but praise them. Perhaps this is the reason you have singled out Jeff and I in the last few days? Do you respect Jeff's opinions on loudspeakers less now because they differ from yours?

I am not sure you will see many members of this forum take the time to write a luke warm review of a product they own. Maybe I am wrong, but I just don't see people spending the time to properly write up a complete and thorough review of something that they are not happy with. On the other hand, they would love to rave about the product they just bought.

I also see a lot of people reading reviews to help affirm a recent purchase. They may not have used the review to make the purchase, but they sure use the review to validate the purchase. I have been guilty of that.

 

[mep]

Randall-I don't know where you have been, but plenty of people on this forum have taken pot shots at Steve's stereo. People who think SE amps are nothing but distortion generators are usually the first to pile on Steve. I recently bought an ARC LS-17 and I would be happy to write you a negative review.

 

[MylesBAstor]

Randall-I don't know where you have been, but plenty of people on this forum have taken pot shots at Steve's stereo. People who think SE amps are nothing but distortion generators are usually the first to pile on Steve. I recently bought an ARC LS-17 and I would be happy to write you a negative review.

Well look at the measurements silly Can't you hear that distortion?

 

[Steve Williams]

Let me make this clear, if someone has a preference in this hobby, then they are biased. Steve, you love your speakers and amps and you will go to battle with anyone who does anything but praise them. Perhaps this is the reason you have singled out Jeff and I in the last few days? Do you respect Jeff's opinions on loudspeakers less now because they differ from yours?

I am not sure you will see many members of this forum take the time to write a luke warm review of a product they own. Maybe I am wrong, but I just don't see people spending the time to properly write up a complete and thorough review of something that they are not happy with. On the other hand, they would love to rave about the product they just bought.

I also see a lot of people reading reviews to help affirm a recent purchase. They may not have used the review to make the purchase, but they sure use the review to validate the purchase. I have been guilty of that.

Randall, take a deep breath and relax because this is not a personal vendetta.Personally I could give a rat's ass what you, Jeff or anyone thinks of my system. Quite honestly all I care about is my ass in that sweet spot. As to Jeff taking a different position on speakers I could also not give a rat's ass.

Just out of curiosity Randall, can you enlighten us as to your credentials and how long you have been a reviewer? IMO it is you who has a bee up your back side. Not me

 

[Jay_S]

Hi Gary

I always appreciate reading your posts because they always make such good sense. The question I have is whether it is common practice for a manufacturer to take a write off for the accommodation pricing. If so and the ad only cost $18K but the accommodation price is multiples of that, what do you do with any residual? I guess that I just haven't read a review that one can say might be worth $50K-$75K based on 50% of MSRP of many of the high priced items.

As for gifting, I was under the impression that if a gift is above a certain amount, tax needs to be paid

Also I wonder if in the eyes of the IRS this could be considered a form of barter between manufacturer and reviewer and if so, isn't this taxable

Finally, if i can ask the question whether sales tax is paid on the accommodation pricing because many times this involves an out-of -state purchase for the reviewer and I have heard from some of my reviewer friends that tax isn't charged or is this erroneous

There's no gift. For U.S. gift tax purposes, a gift requires disinterested and detached generosity. That's not happening here - this is a business transaction.

 

[garylkoh]

Hi Gary

I always appreciate reading your posts because they always make such good sense. The question I have is whether it is common practice for a manufacturer to take a write off for the accommodation pricing. If so and the ad only cost $18K but the accommodation price is multiples of that, what do you do with any residual? I guess that I just haven't read a review that one can say might be worth $50K-$75K based on 50% of MSRP of many of the high priced items.

As for gifting, I was under the impression that if a gift is above a certain amount, tax needs to be paid

Also I wonder if in the eyes of the IRS this could be considered a form of barter between manufacturer and reviewer and if so, isn't this taxable

Finally, if i can ask the question whether sales tax is paid on the accommodation pricing because many times this involves an out-of -state purchase for the reviewer and I have heard from some of my reviewer friends that tax isn't charged or is this erroneous

I don't know enough about taxation in the US or other manufacturers to comment intelligently. What has happened (before I fired the whole management team and I started to run the company myself) is that the review item was not requested to be returned. Then, my accountants depreciated the items in the books. Once the value reached zero, the items were written off.

Now, my policy is that if a reviewer likes the items enough to want to keep them (and this request CANNOT come before the review is published), I charge them above dealer cost - but for an ex-demo or show item. If there is a dealer near the reviewer and knows the reviewer, that dealer gets a "cut" so that he can service the reviewer if necessary. Otherwise, that additional profit goes towards long-term service and warranty. The objective, of course, is that our service to any customer, reviewer or not, should be second to none - dealer or no dealer.

If it is a long term loan (like I made to the Pacific Northwest Audio Society and other industry players), it remains on our books. This is a loan, because we can recover it and they are not allowed to sell it or give it away. Our treatment of other manufacturers is very different. For example, I get products from other manufacturers below dealer cost because they know that since I like it, my customers will also buy their products. More than once, I have made suggestions that have improved their product. Another manufacturer who will demo with my products, and then want to buy it, I provide an equal and similar courtesy.

And no.... if you make your own amplifiers on your kitchen table, you are not a manufacturer.... unless you're Nelson Pass

 

[vinylphilemag]

Fascinating thread! Admittedly I am biased, but I think that accommodation pricing for reviews is OK, provided that there are certain restrictions in place. I think promising gear in return for a favourable review is an absolute no-no, as is buying gear and then reselling it for a profit. I have yet to be in the position to buy something at accommodation pricing, but I would expect such stipulations to be part of the deal.

Call it a perk of the job, I guess, a bit like long term loans. *Shrug*

 

[Steve Williams]

Gary your model is one that all manufacturers should follow.

 

[Randall Smith]

I am not upset, I apologize if it seems that I am.

I have been a reviewer for around 5 years. I reviewed HT equipment for the first 3 years and have been on Soundstage for the last two. I have known Jeff for 7 or 8 years. In the 3 years before Jeff would allow me to start writing, I was able to listen to many of the great speakers and electronics. I even helped him build and treat his audio room. We have traveled to shows together as well as traveled to many stores across our state and up through the northeast. I have been to Toronto and conducted several factory tours. Over the 5 years I have reviewed, not only do I have experience with the gear I have owned and reviewed, but I have heard every piece of gear that has come through Jeff's room. While the amount of time I have been doing this may be short in comparison to the amount of time some of you have been an audiophile, I would say that my learning curve has been steep.

 

[Gregadd]

Let's see, I wrote a positive review for Alon Wolf Magico Q5. You think Alon will give me a Q5 for $30k$ Believe me, his attitude changed when I told him I was writing a review.
Most of the time the purchase is for a review sample that has been passed around a lot. Substantial depreciation has occurred.

 

[MylesBAstor]

Let's see, I wrote a positive review for Alon Wolf Magico Q5. You think Alon will give me a Q5 for $30k$ Believe me, his attitude changed when I told him I was writing a review.
Most of the time the purchase is for a review sample that has been passed around a lot. Substantial depreciation has occurred.

Nor can a manufacturer legally sell the unit as new.

 

[microstrip]

And no.... if you make your own amplifiers on your kitchen table, you are not a manufacturer.... unless you're Nelson Pass

And if we manufacture our cables with grandmother's silver candlesticks using draw plates at the kitchen bench?