Okay, call me crazy ... but I'm going to defend Lexicon here. Sort of.
First of all I want to state outright that, before a career change 20 years ago, I was a retailer of HiFi, including a number of brands that, for better or worse, would be labeled "High End". We were in a small market (to the point where some brands would not let us become dealers) and also had to pay the rent, so we sold some mass-market gear, although we started at a fairly high entry point.
We did very well, and led the nation in sales of a very few high end products, but that's just to show that we took it seriously and made our market, instead of expecting it to come to us.
I would like readers of my post to take that into consideration, keeping in mind that a lot has changed, (from a dealer perspective) and a lot has not.
Lexicon adds a more robust chassis. Regardless of the intrinsic value of those parts, it may help with certain aspects of audio performance (or it may not, but my experience is it often does).
Secondly, Lexicon provides and pays for warranty service for their players ... they don't ship them to oppo to get fixed. Again, the value is hard to quantify, but it none the less amounts to something, and broadly speaking backing your product is somewhat expensive.
Lexicon has a different distribution structure than oppo. There is a certain amount of value added in being able to go to a dealer rather than dealing online. Leaving aside, for the moment, that oppo does a very good job with their model, none the less it's more expensive the Lexicon way.
I'm just using seat-of-the-pants figures here, but they don't just come out of a hat; in my experience the above would probably result in perhaps doubling Lexicon's costs over oppo's. This would be true pretty much regardless of what product we're talking about.
Now, what about the rest?
Here's what I think happened. Lexicon will try to cultivate dealers that are system installers. In HiFi reselling, there isn't much in the way of difference between what it costs to buy a product wholesale, and what you have to sell it for to stay in business. Margins are fairly consistent from brand to brand; there's some room for discounting if you run lean and mean, but selling brand A and selling brand B, well, you know pretty much how much you have to mark them up from wholesale to keep the lights on and the heating/air conditioning running, and pay the staff and the bank their cut, regardless of your business model.
You also can be safe thinking if Brand A costs X and sells for Y, then you can be pretty sure that Brand B's MSRP of Y means the cost is probably around X too. (Don't read that to mean the value of Brand A is equal to Brand B, although if they directly compete it will be similar; it's just margins based on wholesale cost and MSRP I'm talking about).
However, those margins are consistent from like product to like product; they are not consistent in the sense that the difference between MSRP and the selling price is going to be always a 10% discount (for example) for every product in the storefront.
Some stuff has higher margins than others. Broadly speaking, this is to allow a "system" discount that is better than a "single box" discount. If you buy a single component, the discount is going to be fairly consistent. If you buy a system, they are going to want to add a financial incentive to go with one brand, or perhaps a certain combination of brands that the store prefers to sell.
(Some resellers use extended warranties, which, going by a tax court case I read about recently have 50% margins; ie 100% markup, as the fat part of the system price. Whatever).
Traditionally, loudspeakers have somewhat higher margins than the bread-and-butter devices; amps, preamps, receivers, integrated amps. Also, source components tend to fall somewhere in between, margin-wise.
Within those categories, stores sometimes sell house brand items, or if they're nationally advertised, some brand that has a marketing strategy based on attracting dealers with higher margins (difference between cost and MSRP).
You don't (or shouldn't) really pay more (or much more) for these higher margin products, but it's where a disproportionate amount of a system discount lies. In other words, if the store can only afford to cut 10% off the MSRP price of the amp, it may be able to afford to cut 30% off the MSRP of the speakers or the CD player. You get a quote that averages 20% discount. Looks good.
Now, I don't want everyone to read too much into the particular items I chose in this example. Some speakers are just as tight as everything else; these tend to be better quality units by manufacturers who are in it because they give a damn about the sound, and they want to offer the most value at a workable margin to the consumer, without charging any more than they have to.
But, it does happen that sometimes there is a product that is there to take up the "room" in the price.
It's my personal opinion that Lexicon never expected anyone to buy the disk player by itself, and if they did, it's a bonus to the dealer, not Lexicon, because the wholesale price on the unit was low but the MSRP was higher than normal.
I think the player was supposed to sit in a system, put together by an installer, and to be the source of a big part of any discount. A reputable and ethical dealer would know what he needs for a margin, take the wholesale price of everything, multiply that by his margin, and say ... there you go; that's the quote.
If the disk player is responsible for $2000 of perhaps a $3000 system discount, nobody's the wiser, the price looks good, the dealer makes his margin so he can meet payroll this month, and everybody's (supposed to be) happy.
I do think that, with the added costs Lexicon takes on supporting it's products through a dealer network versus oppo's model, with Lexicon's national advertising budget, and other intangibles that add to the cost of doing business in a certain way, believe it or not, the player probably should sell for about $1500. That still might sound like a lot to some, but if it's accurate, there's about $400 more at wholesale for Lexicon than oppo. The rest goes to others (not necessarily the dealer alone, either).
I think that's illustrative of the number the installer might use when making up his quote for a system & installation. It could be fairly different (I've somewhat deliberately not used margins and costs I had to deal with, because I'm not trying to let out secrets here ... but the numbers I've used are not out in left field either; I just want to illustrate how the process works) but I think the concept I've described would remain true.
The figure I used may sound like a lot in comparison to oppo's price, but you do get something in return that oppo doesn't offer, and like I said, I'm not using numbers that are meant to be completely accurate. Whether that something is of value to you, is up to you to decide. Some people, obviously, think it is and others don't. That's business.
The THX thing I don't have any explanation for; but one possibility is that THX allows manufacturers to self-certify. In other words, THX doesn't actually test anything, they set out specifications and the manufacturer certifies it's compliant by submitting test results to THX. It's quite possible Lexicon was told the machine met specs by the OEM, and that they were under the impression oppo did not certify to minimize cost and follow it's lean marketing model. Thus Lexicon's perceived advantage to differentiate the products, and if I were Lexicon, I might buy that explanation myself.
Finally, although some are "outraged", I'm somewhat more sanguine. I've seen enough of the business to know that it's not so far out of standard industry practice to make a big deal about. Some companies do have high R&D costs they need to recover from relatively few units; some just pretend they do.
There is a rule of thumb that says the actual parts costs of a mass-market electronics device is about 20% of the retail cost. Like all rules-of-thumb, it's broad and doesn't apply on a strict basis, but it's close enough that you can do back-of-the-napkin calculations with.
As a consumer, you need to do your own due diligence and not take any manufacturer's word (including someone who you admire) at face value.
Finally, I just want to point out that if you look at two products and the rear panel is laid out exactly the same, and the front panel is laid out exactly the same, you would be right to suspect they are the same, or wonder what, exactly, might be different.
Okay, that's it. I hope I don't get flamed too much, but I'm just trying to help. Give me some liberty with the numbers I used; I'm just trying to illustrate a process, and give some insight as to how the business works, how something like this "could have happened", with no particular axe to grind, rather than suggest anything I've used are the "real numbers".
I would never have bought the Lexicon even if I didn't know what we've all learned, because when I do audio and video, I do for myself what Lexicon dealers and installers do, and I choose my products carefully and on a strict budget. My "new career" is remarkably fulfilling (although I loved being in the audio business as well), but it doesn't pay enough for five figure home theaters, and I'm totally OK with that.
