In audio electronics, there are several methods of measuring power output (for such things as amplifiers) and power handling capacity (for such things as loudspeakers). The question has engineering, regulatory (consumer protection and advertising), and psychoacoustical aspects and is, in a serious sense, much more complex than may be imagined.
Amplifiers are valued in part by their power output capacity. And in the interest of being able to advertise a higher power output number, manufacturers in the US (and elsewhere) began to take advantage of the highly variable nature of most audio signals (especially musical sources) and to cite the peak output (quite brief and rarely sustainable for long) as the amplifier power. There being no standards, imaginative approaches came to be so common that the US Federal Trade Commission intervened in the market and required all amplifier manufacturers to use an engineering based measure (root-mean square) in addition to any other value they might cite.
Amplifiers, being electronic devices, have power limitations deriving from both their electrical and mechanical properties. All amplifiers produce heat as a byproduct of their operation, and if that heat is generated too fast, temperatures will rise high enough to damage components. In addition, for any given electrical load, higher power means higher voltage and current delivered, and either may exceed the capacity of one or more amplifier components.
There are no similar loudspeaker power handling measurement methods in the US; the problem is much harder as many loudspeaker systems have very different power handling capacities at different frequencies (e.g., tweeters which handle high frequency signals are physically small and easily damaged, while woofers which handle low frequency signals are larger and more robust) in addition to the previously cited great variation in the power levels inherent in musical signals presented to a loudspeaker.
For loudspeakers, there is also a thermal and a mechanical aspect to maximum power handling. Not all energy delivered to a loudspeaker is emitted as sound. In fact, most is converted to heat, and that heat must not rise too high or damage will follow. High level signals over a prolonged period can cause thermal damage, some of which will be immediately obvious, but much will have the effect of reducing longevity or performance margin. In addition, loudspeaker components have mechanical limits which can be exceeded by even a very brief power peak; an example is the most common sort of loudspeaker driver, which cannot move in or out more than some limit without mechanical damage.
Read more about this topic: Audio Power
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