I'm not sure how speculating is "self-defeating", as that would imply that there is something to be "won" here . . . I was merely positing the question to get some ideas as to why SB would've priced the RioCentral at such a high price point, as I know that I don't know enough to really "know" why they did what they did. The reason I was trying to get an idea of why they may have priced the RioCentral so high was that I was hoping to be able to discern if their pricing strategy "left room" for lowering the price on the existing product, or whether or not a significant product re-design would be necessary in order to offer it at a much lower price point. To date, the feedback or ideas I've gotten suggest that indeed, SB could probably lower their pricing to somewhere in the sub-$1,000 range on the existing product (at least that's my inference from the information shared so far, YMMV).

The "volumes of production" assumption is an interesting one. I work in a mfg environment, and such assumptions can become self-fulfilling if there are substantial R&D costs to be amortized over the production run, or if there are significant savings to be had by buying certain products in bulk. It would appear that due to the at least somewhat proprietary design of the RioCentral -- both from the hardware and software perspectives, that there are probably significant R&D costs that require amortization as well as (most likely) less of an opportunity to get "price breaks" on hardware from suppliers on proprietary or low volume hardware (such as a processor -- what chip does SB use in the RC anyway?). The catch is, if you make HIGH production run assumptions, the amortization of R&D on each unit becomes smaller, making the "profitable" selling price lower. If you make LOW production run assumption, the amortization of R&D on each unit becomes large, making the "profitable" selling price higher -- resulting in a somewhat self-fulfilling "prophecy" on production run assemptions (and price point).

Not to get too obtuse here, but Economic Theory tells us that producers should produce up to the point where variable costs equal variable revenues. So assuming that R&D costs are "sunk" and therefore no longer variable, SB should be selling the unit at hardware cost + profit. Then again, if one takes Marketing Theory seriously, SB should determine the "value" the RC provides and charge accordingly for it, working backwards to decide what an adequate profit is, and therefore what acceptable profit levels are . . .

God, did I just say all that crap out loud? Ooops, sorry. This is my second "Grad School Regurgitation" slip up . . .