Just simply, how is red priced like it is

[Jeff Coatney]

The Ferrari testa rosa has as many parts as the Suburu... but there are way more Suburus. Thus Suburus work better in traffic and cost a bit less. I think it has more to do with business model than tech...

Plus the Ferrari is held together with tape. Yes, I said tape. Shocking but true. You're right TJ, business model is everything.

 

[Michael Hastings]

OK, thanks Michael. That means that Jim also follows the Apple/Blackmagic theory as well - sell more at smaller margin (and develop faster). Either way, it's a more enlightened business model than the self-fulfilling "we'd better hoist up the prices because we can only sell 200 of these".

Why is that a more "enlightened" business model?

I like RED's business model because it worked for me and a lot of my friends and business associates. It allowed me to PURCHASE a camera that gives picture quality as good as or superior to cameras like the F900 and approaching the quality of 35mm film while using relatively low cost SLR lenses - at a price I am more comfortable with in these days of declining professional video work/budgets and the obvious moore's law implications of DSLR/vDSLR technology. (even though I have purchased several cameras at that price level in the past). And I embraced the uncertainties and beta test experiences that went with a new product from a new company because I believe that is what allowed the $17,500 price point I was comfortable with rather than the $30K+ it would have been if the R1 had been a more finished/tested product.

But it doesn't make me oblivious to the fact that a company like Arri is dealing primarily with the high end feature film and commercial production market where the acquisition cost/rental cost of the camera is minimal compared to the cost of talent, production personnel, location costs, etc. so reliability, familiarity, and service are far more important - and that overhead and development costs money that traditionally was built into the price.

RED's 2nd gen camera should approach that ideal more closely and they will certainly put more pressure on the Arri-type business model (and may even drive them out of business) - and the vDSLR manufacturers may put the same kind of pressure on RED! It will certainly be interesting for the next few years.

But many of us 50 year old fogies can recall when you could call up a company and actually speak to an engineer and discuss a problem or get a circuit diagram or mechanical drawing, or a salesman and get a realistic answer on when an accessory might be available, etc. - and that wasn't all bad either.

I like being able to buy bargain products manufactured in China, Singapore, etc. And RED's bizmod may be the way of the present and future - but I'd wait 5 or 10 years before giving these trends the "enlightened" label.

Plus the Ferrari is held together with tape. Yes, I said tape. Shocking but true. You're right TJ, business model is everything.

Tape is so yesterday - flash memory, baby!

 

[Casey Schendel]

Those companies have stockholders and years of slowly moving the market forward with tiny improvements to keep end users buying new gear every few years.

Red is a private company that answers to no one which gives them the flexibility to offer the specs they want and charge the price they want.

 

[Alex Kornreich]

RED's 2nd gen camera should approach that ideal more closely and they will certainly put more pressure on the Arri-type business model (and may even drive them out of business)

Are you saying there is a chance Red will drive Arri out of business, or that they will make the "Arri-type" business model obsolete? Either way, I think both of those are nearly impossible.

Since image quality is somewhat subjective, for arguments sake, let's give Red the benefit of the doubt and say the Red has equal picture quality to the D21/Genesis/F35. If we strictly look at the brand Red has created for itself, it is NOT on the same level as Arri/Panavision/Sony. Red is marketed to low/ultra low budget filmmakers, while the other companies market to the high/medium budget market. While there is some overlap, and a few filmmakers who are exceptions, this is still the overwhelming majority of Red's business.

It's like comparing a Hyundai Genesis to a Mercedes S class/BMW 7 series. There's actually quite small difference in ride quality, yet the Benz and BMW sell for 3-4 times more. Furthermore, Hyundai will never be able to compete in that segment, because once you brand your company a certain way, it's almost impossible to change that. Back to Red, Red has branded itself in their particular segment extremely well, hence over 7k cameras sold (or at least 7k+ serials, i doubt nearly that many sold). Problem is Red's marketing, while very effective, is juvenile at best (bomb squad?). Their site design, HQ store, reduser, etc would lead me to believe they're selling skateboards to 15 yr old boys, not $40k professional camera packages. Finally, the very gimmicky way they make announcements is offputting.

So that my point doesn't get too lost, brand is nearly as important as quality, and there is a remarkable difference in the upscale, elegant branding of Arri (just take a look at their website/logo), and Red. No one will put the other out of business, and no one business model will win out.

Now on to their business model and pricing, here's my theory: Jim is a passionate, crazy filmmaker/billionaire who is able to take bigger financial risks than companies with boards and shareholders. I believe the Red camera body ($17.5k) was used as a loss leader to attract as many customers as possible, and Red's profit comes from repairs and their huge mark-up on their sub-par accessories (do you know anyone who hasn't replaced everything with ET/Arri/IDX batts, etc.?). I would estimate the average sale from Red is between $30-$40k. This means they're raking in between $12.5k-$22.5k in accessories, and possibly way more now that they've got better lenses, etc.

Simple, when a company is more interested in improving the world than making a quick buck, you get a product like the Red One!

Someone like Jim, who has the desire, means, and most importantly time, to devote to a project this large and ambitious, is a rare being indeed!

Finally, when a product is so revolutionary, in both function and price, you don't have to spend $500 million to market it... Just put the word out and everyone who needs to know will know.

One of those few times in history that we're lucky enough to be in the right place at the right time!

I can't tell if you're being serious or not.

 

[Michael Hastings]

Alex:

Your points are well taken, and maybe closer to what I was driving at than you realize.

I hesitate to criticize RED directly because from personal experience I know how difficult it is for small or startup companies to quickly get to where they want to be in all phases of the business - product, support, and development - because it takes a certain amount of time and experience that you can't simply write a check for.

But I also disagree with that poster that the way the RED program has gone is more "enlightened". I think it will be better for all of us if RED becomes more like ARRI, than if ARRI becomes more like RED. There isn't much point in going into specifics because, at least in the early stages, usually no one knows what needs to be done better than the founder and we probably need to just wait for the next gen to arrive and settle in.

One thing I do disagree with you on is your pricing analysis (and this isn't very important). I suspect that initially Jim based his assumptions on selling 500 cameras or so. Fairly knowledgeable people have told me that they think the Mysterium development would cost $800K to $2 million with a commitment to purchase 500 to 1000 at a unit cost of $500 to $1500. The FPGA cost is pretty easily found and the body machining can be figured pretty easily as well. Beyond that the other circuits, connectors, LCDs just don't add up to that much. So I would be extremely surprised if the R1 body landed cost was more than $9K - and wouldn't be surprised if it was half of that given the increased sales volume. And that's a good thing because those are fairly normal manufacturing margins - and even though Jim may not need the money, he has expressed his interest in making RED a "real" business (presumably meaning without extraordinary financing). So a healthy profit means a better chance of viability and the likelihood that they will be able to push the envelope on the next generation as well.

 

[Chris Kenny]

Are you saying there is a chance Red will drive Arri out of business, or that they will make the "Arri-type" business model obsolete? Either way, I think both of those are nearly impossible.

Since image quality is somewhat subjective, for arguments sake, let's give Red the benefit of the doubt and say the Red has equal picture quality to the D21/Genesis/F35. If we strictly look at the brand Red has created for itself, it is NOT on the same level as Arri/Panavision/Sony. Red is marketed to low/ultra low budget filmmakers, while the other companies market to the high/medium budget market. While there is some overlap, and a few filmmakers who are exceptions, this is still the overwhelming majority of Red's business.

It's like comparing a Hyundai Genesis to a Mercedes S class/BMW 7 series. There's actually quite small difference in ride quality, yet the Benz and BMW sell for 3-4 times more. Furthermore, Hyundai will never be able to compete in that segment, because once you brand your company a certain way, it's almost impossible to change that.

Is the car analogy really the right model, though? Cars are a basically mature technology, with differentiation based on aesthetics and brand associations. Digital cinema cameras are in extremely active development and there are real technical differences. Maybe instead of Hyundai vs. Mercedes, we're looking at Mac and Windows NT desktops vs. SGI workstations. Yeah, remember Silicon Graphics? There are a lot of parallels there. They made expensive specialized hardware for a small customer base. They were good at it. I'm sure they told themselves the same things. "Our customers have a lot of money, and they want the best, and there will always be a market for that."

And they got completely trashed by the rise of commodity hardware. Completely. Trashed.

They eventually tried to build custom turn-key systems around that commodity hardware, but it was too late; other vendors were already too well established in the market, and they had nothing to distinguish themselves but their brand name, which people who had already seen what could be done with non-SGI gear had no reason to particularly care about.

The thing about most technology products is that there are very large economies of scale, both for R&D and actual physical production. If the other guy is selling his products for 10% of what you are, but as a consequence is selling 50x as many units as you are, it's not impossible that with the economies of scale that provides, not only are his products much cheaper, but he can actually afford to make them better as well. I mean, we won't really know until someone shoots them side by site, but by the numbers Red's new $7K camera body looks like it might actually produce a better image than Arri's new ~$70K camera body.

Now, there are a lot of snobs in this industry, and enough subjectivity that they'll be able to go on justifying the use more expensive gear even if it doesn't really work any better. That will let some vendors coast for a while. But I think eventually, if for no other reason than that workforce turnover will fill the industry with people who came up using the cheap/powerful stuff, it will be "change or die" time. Companies like Arri need to decide whether they want to get out ahead of the market on this, or try to hold onto the existing high price/low volume model for as long as possible. The latter approach (which is, unfortunately, the direction companies most often decide to take) will mean that when these vendors do eventually try to make the transition, Red will already be firmly entrenched in the market they're trying to move into.

 

[Jeff Coatney]

Tape is so yesterday - flash memory, baby!

No, I mean "tape" as in: Scotch, Masking, Duct and / or Gaffer's.

 

[Jamie Havill]

Is the car analogy really the right model, though? Cars are a basically mature technology, with differentiation based on aesthetics and brand associations. Digital cinema cameras are in extremely active development and there are real technical differences. Maybe instead of Hyundai vs. Mercedes, we're looking at Mac and Windows NT desktops vs. SGI workstations. Yeah, remember Silicon Graphics? There are a lot of parallels there. They made expensive specialized hardware for a small customer base. They were good at it. I'm sure they told themselves the same things. "Our customers have a lot of money, and they want the best, and there will always be a market for that."

And they got completely trashed by the rise of commodity hardware. Completely. Trashed.

They eventually tried to build custom turn-key systems around that commodity hardware, but it was too late; other vendors were already too well established in the market, and they had nothing to distinguish themselves but their brand name, which people who had already seen what could be done with non-SGI gear had no reason to particularly care about.

The thing about most technology products is that there are very large economies of scale, both for R&D and actual physical production. If the other guy is selling his products for 10% of what you are, but as a consequence is selling 50x as many units as you are, it's not impossible that with the economies of scale that provides, not only are his products much cheaper, but he can actually afford to make them better as well. I mean, we won't really know until someone shoots them side by site, but by the numbers Red's new $7K camera body looks like it might actually produce a better image than Arri's new ~$70K camera body.

Now, there are a lot of snobs in this industry, and enough subjectivity that they'll be able to go on justifying the use more expensive gear even if it doesn't really work any better. That will let some vendors coast for a while. But I think eventually, if for no other reason than that workforce turnover will fill the industry with people who came up using the cheap/powerful stuff, it will be "change or die" time. Companies like Arri need to decide whether they want to get out ahead of the market on this, or try to hold onto the existing high price/low volume model for as long as possible. The latter approach (which is, unfortunately, the direction companies most often decide to take) will mean that when these vendors do eventually try to make the transition, Red will already be firmly entrenched in the market they're trying to move into.

Couldn't agree more. Alex makes an interesting point, but what he is forgetting is that the market changes as well. I don't know a single young filmmaker that hasn't at least flirted with the idea of shooting on Red.

 

[Brennan Klensch]

...and besides all those things, you are now also being naive. Jim has never revealed anything related to the origins, manufacture and cost of his sensor, however hard he has been pushed to do so here for years. And rightly so, many of these things need to remain closely guarded, regardless of the good intentions of the many of us who are just curious to know. Besides, knowing Jim, he would consider it tacky and inappropriate to talk about how much things cost him, lest anyone then try and establish a relation between costs and profits. Be content in the fact that RED offers amazing products at remarkable prices and believe that RED is not loosing money on this venture, good for them and great for us.

okay so I'm gonna go ahead and write you off as a MAJOR suck up to Jim and then, from there, I'll just logically go ahead and ignore what you say while I read what everyone else, knowledgeable of Jim's personal preferences or not, has to say on this OPEN and PUBLIC forum

 

[Brennan Klensch]

Back to my original point now, thank you to the rest of you who are seriously giving me food for thought with all of your points. I will say this. As much as it is just a difference of business models, RED is escalating to an insane degree at an insane speed (product and sales wise) Eventually those upper market snobs are going to come to a realization that Red is already as good or better than some of their digital cinema cameras and that very quickly, it seems to be surpassing all others. SO, at the end of the day, they will begin to listen to that little snobish voice again, and it will tell them to get a better product for less money, and they will buy the RED. It is definitely being taken more and more serious as a digital cinema competitor. THe others have much less hype around them and will begin to lose the next gen. of filmmaking students due to their attempt to market at only deep pockets. that may keep them going but it certainly won't classify them as a worthy competitor in teh very near future. In order for someone to compete, they would need to go the same route Jim did but with a whole new product line that had comparable but contrasting product value, while at the same time being offered at the same, or cheaper, prices

 

[Steve Sherrick]

Brennan, if you've been watching REDuser for a long time you know how much I respect what Jim and the rest of the folks at RED have done in getting this company off the ground and putting out a very respectable product in a short amount of time. But I just don't see this as an US vs THEM kind of thing. If Arri, Sony, and any of the other players put out products that make sense for people both technically and financially, then they will survive and it will keep everyone pushing to make better products. I'm just not sure that RED needs to WIN. In other words, as long as they are achieving their goals, continuing to make products that sell I'm not sure it matters if the others stay in the game. I happen to think that Arri makes great products. Some of their accessories are built incredibly well and have lasted the test of time. I respect that. They are a good example to learn from. Other companies have come along (Element Technica) and made some great accessories at decent prices. There are options. Options are good for the end user. Competition is good for the end user.

Of course I'm a bit partial to RED eating into the market share as I own their products, enjoy using their products, and really like the guys at RED. But I don't wish failure upon any of the other companies. Regardless, what will be will be. The market will determine the fate of all those in the game. Based on what I have seen so far from RED, I have no doubt they will be around for quite a while.

 

[Luis Otero]

Basic law...

Basic law...

Let's don't forget that, within a relatively short period of time, we have not seen, neither can see, the long term effect of the survival basic law: the one that adapts will endure and will "defeat" others (as in taking over more and more of the market share).

In a 5 to 10 years period, we will see the real effect of the Red phenomenon in this market niche. The other companies will either adapt (cost-wise), or will need to move out of this particular market.

After seeing the teasers (stills and moving images) posted by Jim and Jarred, I think my point will be more relevant. Red One, as great as it is, was really just the first step. Epic will be a totally ball-game-changer. :auto:

 

[Brennan Klensch]

Steve,
I most definitely and completely agree with everything you say. my point is actually opposite to what it may have come across as. I would love to see them succeed, I'm just saying that although you and I may not see it as a business "competition" perse, those other companies do. I love the D-21. In fact, as of now, (pre-Scarlet, Epic, M-X, FLUT, etc..) that camera produces the best digital cinema image, IMO. So, i'm all for them succeeding and would prob. use their stuff if they could price at a competetive rate with Red, and, with that being said, I wouuldn't abandon Red either for the sake of Arri. All I'm saying is that for product to price ratios, Red is winning in the business world because they are growing so rapidly without compromise. To you and I, that's not translated as a Red:1, Arr-Sony-Panasonic-JVC: 0 scenario, but rather a, wow, we actually can afford to own stuff of this quality now, how very nice. And i just want to tell the other guys to kind of start waking up a little more and take a chance on the indie film crowd

 

[Luis Otero]

Local Auto manufacturers...

Local Auto manufacturers...

Automotive industry: a prime example of my point. The market was turned upside down by the others... and they had no other option but to adapt.

Just look at their current marketing strategy: comparing their cars to the ones that took over the market (due to their ingenuity), using both, perceived and possible real advantages, such as miles per gallon, cost, aesthetic, etc.

They are just adapting before going extinct (and thanks to all of us for saving them by borrowing and using our money to have a new begining).

Can any one think that they are going through all these to adapt just because they changed their minds and wanted to make better cars? At least I don't... :frown2: