What makes a DAC so expensive?

Amazing! I jumped from here into a search for the Denafrips Ares ii and found the following statement in a review on Amazon:

"I did a direct A/B comparison between the Ares II and a PS Audio DirectStream DAC. The DirectStream as I had it configured costs $6,899. Granted the DirectStream has more features. However, when comparing sound quality, I would say the the Ares II was almost as good as the DirectStream. Maybe 90-95% of the DirectStream. Without me going back and forth I would not have been able to tell any difference - they're that close (listening on KEF LS50 speakers). The PS Audio DirectStream seemed to have a tiny bit more detail."

What does this imply about parts? Marketing? The market bearing... 

@listening99

denafrips is one of several companies that make superb sounding dacs at reasonable prices - as you mention, their ares 2 entry level model priced at a small fraction of top tier dacs in the 5 grand and up range - dena is a chinese firm, selling consumer direct, bypassing the dealer network and its 80-100% margin, so there is that value conveyed to the end user for sure

that being said, as you mention as well, the ps audio DS is programmable, can be updated via software downloads, can have a streamer/dac appended via an internal board, so there is future proofing and great flexibility that denafrips does not provide - furthermore you can only buy the denafrips units from a retailer in singapore (seriously!), if there is a problem with the unit you need to scramble for help... so there is value in other elements than pure SQ

now, also, note the denafrips makes the terminator, a 4-5 grand dac, and now they are also introducing a terminator plus, a 7-8 grand dac, all based on the same basic architecture

so within just one maker’s line you have choice... is the term and term plus 4-5-6-7-8 times better sounding than the ares 2? no way... but there IS a difference in SQ no doubt... however subtle it may be

the notion of diminishing returns in SQ from spending $ in audio reproduction has been around as long as the industry... savvy users learn the shape of the curve in each part of the chain, and each of us pick our point on the curve based on desire for performance and size of wallet

I own both the DirectStream and the Ares ll and find the PS significantly better, though the Denafrips is an amazing bargain...that last 10% often costs a lot...on the other hand, I could probably sell the PS and take less of a loss than on the Ares, so actual cost of ownership would be less...before PS started selling direct, their actual prices were way less than list...

Just get an RME ADI-2,  Topping D90,  Benchmark DAC3, and forget it. DACs are to the point of transparency, they can be made to have sound signatures using the nonsense mentioned above but in the real world a DAC converts digital to analog without adding or taking it should be neutral. If you wish to add distortion use tubes. A $99 Schiit Modius would be indistinguishable from a $60,000 MSB to pretty much anyone since amplifiers and speakers have more distortion and noise than even inexpensive well engineered DACs. 

I will add you might be able to tell the PS Audio garbage from other DACs they measure like crap.