Story time. Back in the days when I was at AbelCine I was on the team that helped bring the Arri Alexa in. We were the only company besides ARRI to sell the camera and it was a pretty big deal at the time. The profit margin on the camera was ridiculously slim but that was OK because we knew that we’d also sell lenses, tripods, batteries, etc. to complete people's kits. I had to package out the camera into standard kits that we could recommend to clients so that they could then figure out what items they needed. I discovered that Arri did not have an AC power supply for the camera; coming from the film world it just wasn’t something they bothered with. They had a monster power supply that was originally designed for the 535 film camera, constructed in a small flight case and costing almost $2000. So I went to the Mauser catalog, found a medical grade 24v 200w power supply for around $75, and bought one. I had to snip off the DIN connector and solder on a $5 XLR3 plug, and it was done.
So how much to sell it for? Less than $80 in parts and a few minutes of labor. I’m the one to recognize that there was a need for this product, something that Arri had not done. There’s some value. I knew that such an item could exist in some form already, and that has value. I took the initiative and spent the time to find the source items, and that has value (took me less than an hour, but I knew where to look). Most things a company such as AbelCine sells are commodity products. They are sealed boxes that come into the warehouse and go out again to clients. But this would be something where two source parts came in, would need to go to a technician who would interact with those parts to then create a new product, and then this product would have to be added as inventory in the warehouse. That’s a bunch of administrative work. AbelCine would be responsible for creating marketing and awareness of the product. As the end manufacturer, AbelCine would also bear the responsibility to the client for any defect. And the company had carrying costs, as we would purchase lots of parts at a time to get a decent price and so that a technician could assemble a bunch of completed units all at once. Those units might sit on the shelf in the warehouse for several months before the supply ran down enough to do another batch. That’s equity tied up in boxes sitting on a shelf. And let’s not forget there’s a business here with a bunch of employees with salaries, health insurance, pension plans, etc., plus an office with rent, air conditioning and so on.
So what to charge? In the end it was decided that a simple formula of 3x cost would apply. 1/3 is to the hard costs for parts, 1/3 is for soft costs of all that stuff I listed above, and 1/3 is for profit. So it’s a $240 power supply. Personally I think that’s incredibly fair. For the additional $160 we figured out the right kind of device, found it, did the rewiring, tested it, and will stand behind it should there be a problem. The customer doesn’t have to think about it. What’s that worth to you?
As soon as we announced the product Arri ordered a bunch. They saw the value. Eventually Arri made its own version that’s exactly the same thing and it sells for exactly the same price. I think AbelCine stopped making its own because people would just as soon buy the Arri version and for AbelCine it was less hassle for a relatively small amount of money. And of course that financial model is different because Arri has to give some of that profit to companies like AbelCine.
This little tale is a small example of how a $80 item becomes a $240 item. And who knows how much Mauser pays to the factory that makes the original item. I bet there’s a distributor in there as well. Could be those power supplies are $10 each coming off the assembly line, and the XLR3 connector 10 cents apiece. It’s a long way to go to get to $240, but it’s a fair road every step of the way.
BTW, here it is. The current iteration of what was my little idea.
https://www.abelcine.com/buy/expenda...a-power-supply
Originally Posted by Mitch Gross
