CES Watch: Monster's Noel Lee to Launch New Lines

Marketer of Beats by Dr. Dre Seeks Shop to 'Market This Stuff Properly'

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It's not easy to sell people things they usually get for free. But dating back to the 1970s, Noel Lee has found a way.

The stereo systems popular back then -- amplifiers, turntables, FM tuners -- were connected by hookup wires that cost maybe 10 cents a foot and sometimes came in the box with the speakers.

Noel Lee
Noel Lee Credit: monstercable.com

In 1979, Mr. Lee founded a company, Monster Cable, and created a proprietary audio accessory: 10 feet of Monster Cable speaker wire that cost 20 times as much. "You're kidding," the retailers said. "Sounds better," he claimed.

It did.

Exotic cables are still part of the package, but today, Monster (the "Cable" was recently dropped) is best known for an accessory far more hip than wire: Beats by Dr. Dre. And retailers, which will be flocking to Mr. Lee's suite at the upcoming Las Vegas Consumer Electronics Show, are believers.

His legendary parties have become a fixture at CES. This past January, Lady Gaga stopped by the Monster suite to chat up Mr. Lee. In the past, Mr. Lee has hosted Rod Stewart, Stevie Wonder and Ray Charles to serenade his dealers. Next month at CES, it will be '60s popsters band Chicago (or what remains of them).

Mr. Lee, who in a prior life was a design engineer at the Lawrence-Livermore National Laboratory, is an unabashed self-promoter. In 2004, he bought the naming rights to Candlestick Park, home of the San Francisco 49ers. For four years it was Monster Park. He spent about $50,000 for his first CES event in 1979. "The cost was extravagant then," he said, adding that it consumed most of his marketing budget, and still does.

Monster Cables didn't fly off the shelves. "We did it the hard way, a demo at a time," said Mr. Lee, 63. "I went out to retailers and did thousands of demos. I used a switch box, Monster Cable on one side, regular cable on the other. People didn't believe what they heard."

While electronic accessories aren't particularly hot topics among consumers, they generally offer higher profit margins -- up to 40% or more -- than big-box items like TVs or computers. Apple retail stores do especially well with his merchandise, Mr. Lee said.

Audiophiles question the sonic integrity of the Beats line (the most expensive pair sells for $500), but annual sales are estimated at $500 million, and Beats have expanded the headphone market. Rappers 50 Cent and Ludricris have endorsed their own brands, and more are grabbing onto the branding trend.

A study earlier this year by the NPD Group, a marketing research firm in Port Washington, N.Y., found that artist endorsements ranked high in headphone purchases. Those priced at $100 or more grew to 3.5% of the market in 2010 from 2% the year before.

Beats by Dr. Dre Headphones, by Monster Cable
Beats by Dr. Dre Headphones, by Monster Cable

"Headphones have become as much of a fashion statement as an audio accessory," said Ross Rubin, executive director of industry analysis at NPD.

"The deal with Dr. Dre was collaborative," said Mr. Lee, who leveraged his relationships with high-profile musicians to get access in 2000. The rapper (real name Andre Young) and longtime rock producer Jimmy Iovine "were looking to do their brand on some product," he said. "They were looking at loudspeakers, but people don't buy loudspeakers any more. And we were already developing headphones at that time."

In a life-imitates-art twist, Monster has just released a slick, $750 speaker system-cum-iPod dock that 's designed for music lovers who grew up listening with headphones. The company also plans to release a slew of new headphones and accessories at CES.

"Now we got to market this stuff properly," said Mr. Lee, who says he's never employed an ad agency and is actively shopping for one now to handle his account. Any takers?

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