Sometimes a Cigar is Just a Cigar

A post on the Olive One by my colleague Al Griffin got me to thinking. For a modest dollar sum, you can own a cool audio component with audiophile-quality specifications. But here’s the paradox: if it doesn’t cost an arm and a leg, can audio gear really have audiophile cache?

First, you need to know about crowdfunding. Crowdfunding is the financial equivalent of a flash mob. In particular, crowdfunding is when individuals collectively pool their money to finance a particular outcome. That outcome might fund disaster relief, a startup company, scientific research, a new invention, or even rock band’s tour. For their money, individuals might receive equity in a company, tickets to a new movie, or a new product.

For example, suppose a company has an idea for an innovative audio component, and it wants to raise money to manufacture and distribute it. Instead of the usual routes, it appeals directly to individuals to buy the component upfront, in return for a promise to deliver the product at a later date. By pre-selling the product, the company has almost no development downside.

That’s exactly what Olive Media is doing with its Olive One music player, a disc-shaped device that lets you stream music from your phone, computer, or NAS box. Want one? Pony up $399 and if the minimum crowdfunding goal of $200,000 is reached, Olive Media will send you one in July 2013. Olive sees this as the start of an entire series of affordable audiophile products, including speakers that dock and stack underneath the Olive One.

Although they are based in San Francisco, Olive Media isn’t a bunch of hippies in a garage. Their current products such as the Olive 5HD and 6HD are truly audiophile music systems. I think it is perceptive of them to realize that while elite products will always have a small but profitable market, it’s infinitely more interesting to develop innovative products, like the Olive One, that provide the same audiophile quality at a mass-market price.

But here’s the paradox: everyone knows that the prices of audiophile products are highly inflated. That’s partly because of economy of scale; making a few hundred of something is more expensive than making a few million. The middlepersons in the retail distribution channel also take a toll. But audiophile products are also expensive simply because we agree to pay the premium for audiophile status. Moreover, one could argue that a product can’t really have audiophile status unless it costs a lot.

The Olive One has audiophile parts inside and should sound terrific. If it sold for $4,000, then it would surely qualify as audiophile gear. But if it’s being sold at its fair value of $400, that is, without an audiophile premium, then by definition it’s not an audiophile product. Right?

But ultimately the philosophical questions are beside the point. Here’s the deal: this is an intriguing product; it is fairly priced; it is from a vetted company. And thanks to the economics of crowdfunding, it may redefine what qualifies a product as having audiophile status. Sometimes a good product is just a good product.

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