This is the second of a four-part story of Noel Lee, Monster Products and the lawsuit Monster Products filed against Beats Electronics (now part of Apple) for "Fraud and Deceit" among 10 other "causes of action." This second part of our story is about how Noel Lee painstakingly built Monster Products into a major player in Consumer Electronics sector. (Read Part One here.)
Noel Lee was a self-made man. A real one.
Starting Monster Cable in his San Francisco garage in 1979, puts him right up there with the Hewlett-Packard garage story. Except there was only one Lee.
But before Lee could become a major force in consumer electronics and audio, he had to convert himself and his engineering prowess at Lawrence Livermore National Laboratory into a serious audio engineer and entrepreneur.
In my band "Asian Wood," Lee told me, "that's where I learned how real music sounded, the real sound. And that would help me later when I started making headphones. So as an audiophile listener, as a 'gear head' and an engineer who knew how to get new sounds with new materials that nobody has used in a headphone before, and the fact I knew what the real deal was with music sound, gave me the unique mix of skills and knowledge."
"I really didn't like the 8 to 5 grind anymore, 'this isn't me anymore' I said to myself. But I wanted to get int the audio business so bad, I tried getting jobs in retail stores. I applied for a job at Pacific Stereo in Hayward. They interviewed me and said, 'Wait a minute. You're a laser fusion engineer with a degree from Cal Poly and worked at Lawrence Livermore Labs? We think you're overqualified.'" Lee chuckled ironically. "But I knew audio better than anybody there did. They told me 'NO.'"
"Finally, I had an opportunity to rep a speaker company, Ohm Acoustics in Brooklyn. I was an independent Ohm rep and I became the number one Ohm rep in the country. I also worked for Russound and became their number one rep. I just wanted to be in a Hi-Fi dealer so I could be around what I loved and be involved in my passion."
After Lee traveled that road and learned all he could, he said to himself, "OK, now I think I want to build something instead of repping other people's stuff. I thought, I can't make a loudspeaker. That requires too much money; that's when we had JBL, KLH, Advent and all the really deep-pocketed companies that were dominant. I can't really make an amplifier, that's when Phase Linear, Kenwood, Marantz and the others were cleaning up."
Then I looked and thought, "Here's this tiny wire that everybody's trying to push 200 watts per channel. Then I started looking at and testing all kinds of wires." Monster Cable was born.
Lee struggled and struggled to create the first Monster Cable.
When he finally did, next up was selling it.
That proved difficult, Lee told me the pain showing on his face still. What happened when he went "knocking door-to-door at stereo shops?" "I was getting slaughtered by everybody," Lee told me dejectedly. With a smile creeping back on his face, he said, "but I eventually got their attention by creating a unique A/B switch so they could hear the difference--with the simple flick of a switch--between my Monster cables and the cheap ones included with most stereo packages. They finally understood, and could hear the difference great cables made in the music," he concluded triumphantly.
"Your music doesn't sound as good as it could ... " --Noel Lee's original unique selling proposition
A serendipitous contact in the consumer electronics industry led Lee to go to his first (of many more over the years) Consumer Electronics Show (CES). While he didn't have the money for a booth, he piggybacked on a friend's booth and started making his first sales quickly. Lee had finally mastered the art of the sale of an electronics accessory that improved the quality of the resulting music.
The next year, Lee had the cash for his own booth.
Lee's master plan for the rapid growth and expansion of Monster Cable beyond just cable was very focused. I've identified several major ways in which Noel Lee built Monster cable from his garage and into Monster Products with over $350 million in annual revenue:
1) By getting things done in the beginning with little or no money and a huge chunk of guerrilla marketing, as with his first trip to CES above.
2) Lee's extreme networking ability with celebrity endorsers of Monster products. This rapport and friendship with stars of all kinds was also central to Lee's later marketing success with Beats by Dre.
3) By always innovating; by always working on new products to expand the Monster product lines. Diversifying has resulted in fast-growing Monster revenues.
4) Lee has always built real and strong relationships with key people inside his industry--Consumer Electronics--as well as without. Everybody knows him and wants to chat with him.
5) Lee's unique and differentiating Sell-Through Training program provided by Monster to retailers who carry Monster products, in addition to a plethora of Monster' competitor products. Thinks about this: not only does this separate Monster products from all others in the minds of their partners salespeople but as the only manufacturer providing this service for their products, Monster products become the go-to brand for salespeople representing many products to customers.
6) By inventing and blowing Beats by Dre through the roof, Lee created and was personally responsible for hundreds of millions of dollars of revenue and grew the premium headphone market by almost five times in just a few short years.
7) Perhaps the most important Lee' quality: how HARD he works. Noel Lee is 67-years old and has had some serious health problems. Yet he works as diligently as any man I've ever seen. I've interviewed more than a dozen billionaires and while trying to figure out what makes them tick--how they do it--have discovered the simple truth about what makes billionaires, wealthy and triumphant people so successful. It's the one characteristic they all share: they are constantly working ... more and harder than any of us who are not amongst the wealthy.
I've personally witnessed Lee work through a day starting at 10am and running through a burgeoning nightclub' VIP lounge pitch to one of the world's most popular DJ's, getting him back to his hotel room at 5am, after which Lee took an 8am conference call with his team in the Bay Area and began a new day. He is indefatigable.
Lee believed that Monster never wanted to sell Stereos, TVs or any serious hardware devices but all the accessories in between--a brilliant strategy.
In the all-important Retail channel, Lee and Monster created something nobody else did. They became the selling consultants to their retail partners like Best Buy, Walmart, Fry's and others, essentially electrifying the salespeople and showing them; teaching them really, about how to sell the higher margin Monster products to customers and in the process--sell more products of all descriptions. This was genius, not only because the slender training these big-box electronics' retailers gives is not at all exciting to their sales staff, but also, with the dastardly, razor-thin profit margins they take in on a big-screen TV, the Monster accessories the customer bought would often turn out more profitable than the much bigger purchase.
So Lee and Monster had actual classroom training sessions with Best Buy sales-floor personnel--I'd never heard of a manufacturer doing this before for their retail distributors and it earned Monster a reputation for uniqueness.
"Monster's Sell-Through Training Program serves retailers with over 50,000 salespersons and managers trained every year worldwide," said Marty Yogya, Director of Monster Sell-Through Training. "Monster Trainers help retailers to complete the customer experience on the products they sell. When salespersons build great relationships with customers they can take a transactional sale into one that guides customers through the complete sale. With coaching on highly-effective presentation and demonstration skills, Monster helps retailer salespeople deliver an experience that their customers can't get online."
Lee has also mastered the art of recognizing the management and interestingly, the salespeople themselves with trips to Monster HQ to be immersed in the Monster culture. Dinners, parties, movie premiers, special events like concerts and coveted drives in Lee's exquisite Ferraris, Lamborghinis, Bentleys and Rolls Royces all ensue.
Those "things in between" like simple cables would eventually snowball into more and more audio cables, splitters, and then video cables, mobile phone accessories, screen cleaners and so on. Diversifying as their customers' hardware needs did was a key Lee strategy.
Soon, Monster was making power cleaners, amplifiers and rack-mounted electronics for home, office and stage. They even dabbled in hi-tech, high-end furniture with speakers and electronics built-in.
The company made Monster cables for touring musicians and recording studios too. In both of these "Prolink" locations, Monster quickly became the state-of-the-art cabling and developed a strong Musician/Rock star and recording engineer following which was loyal beyond belief.
Noel Lee practically invented the Celebrity Endorsement strategy which later saw the Beats brand grow into a behemoth. Monster stars who used Monster cables and products exclusively have included:
Now, one of Beats' (now Apple) responses to the Monster lawsuit (read the complaint here) is that Lee misses being backstage with all the celebrities that Iovine and Dre gave him access to and that is one key reason for Lee's filing of the lawsuit. Hogwash. Noel Lee is not lonely. In fact, Lee has cultivated a list of top-tier, A-list celebrity friends over the years since the 70's that Jimmy Iovine and Dre would drool over and can't access themselves.
It was Noel Lee's core strategy--not Beats', Iovine's or Dre's--to market his Monster products and Beats originally through celebrity marketing. He has consistently been successful in having his music star friends market his products through the most powerful marketing known to mankind: word-of-mouth, celebrity recommendations directly to their fans.
Noel Lee's Monster is approaching their 40th birthday in a few years and has an indelible impact on recording artists, musicians, producers and anybody requiring cables or other audio/video accesories.
Along the way, Lee brilliantly built a Monster culture. He's the "Head Monster" with various other Monster titles such as "Monster Technologist" and "Monster Photographer." He's created a vast set of "Monster Mottos and Concepts" over the years including:
"Build a Better Machine"
"Connect the Dots"
"No Hearsay, Only Facts"
"Long Preparation, Short Execution"
"Don't Build False Walls"
"Monsters Don't Acquiesce"
"Delegation is not Management"
"Push on the Balloon, Until the Balloon Pushes Back"
"Do It with Monster Style"
And, "Trust is Not Given, It Has to be Earned." It is this last one that would get Noel Lee into great trouble in Part Three of our story. Being a trusting soul, can lead to great disappointment and other people taking advantage of you.
Diversifying beyond simple stereo cable was not an easy thing to do. "I wake up every morning thinking about my Marketing, Operations and how to make it all snowball," Lee told me after one of his daily, intense and never-ending slew of meetings. And snowball it has over the years.
A Monster marketing meeting is a global activity. Sitting in on one recently in the company's Brisbane, California offices, the conference room was absolutely electric. People from all over the company and world participated energetically, with Lee occasionally stimulating excited responses to his questions such as "Yes, but how do we get social media responses to lead to sales?" Indeed, how?
Distributed eventually by Amazon, eBay, Sam Ash Music, Guitar Center and more, Monster Cables for the stage and performing musicians became the gold standard for studio and tour musicians alike.
New product development has been essential to the diversification and growth of Monster Cable into Monster Products.
Take their new "sniffer" product. Originally developed as an in-store demo device only under another brand name entirely, the Sniffer is plugged into any power outlet anywhere, and proceeds to show audibly any issues with 'dirty power.' It does this like a Geiger counter foretells radioactivity by making a static noise. Instead of just crackling static, the Sniffer sounds out radio shows, cellphone calls and other interference for the consumers of high-end electronics to clean their power, protect their devices and improve their listening experience. However, there is an unintended consequence of opportunity here as a Home Depot or a Loews might find an excited market in the Construction, Building, Developer and Electrician vertical markets to prevent costly electrical work after the walls go up, for instance.
With exclusive strategic alliances with elite brands such as Lamborghini, Chanel, Hublot Watches, Disney, THX and many others helped Lee and Monster firmly establish the brand within different categories.
A recently announced partnership with global soccer icon Cristiano Ronaldo, his merchandising arm, ROC and Monster Headphones, yielded over 40 million page views, 1.6 million likes and over one million shares on Facebook for the beautifully scripted, disguised, flash-mob type video in a Madrid square.
This video has almost 12 million views on YouTube, making it the second most watched ad on Earth for August, 2015 according to Adweek
Noel Lee and Ronaldo discuss this major strategic alliance and big 'get' for Monster
So Noel Lee built Monster Products to a great degree on this central strategy: Get famous musicians, athletes and celebrities familiar with your products and underlying quality supremacy, then get them using and listening to them as gifts. Finally, bring in the top celebrity users and secure them as ambassadors for the Monster brand. This "pure Monster" idea of course, sounds suspiciously like the Beats by Dre strategy of using the Dre name to sell products.
With Lee's early-days' suggestion that Jimmy Iovine and Dre make headphones instead of speakers because "few people are buying home audio systems anymore and the smartphone is the new player," Lee not only invented the subsequent Beats by Dre headphones and speaker line, he designed, engineered, manufactured and distributed the entire product line through Best Buy and other Monster-aligned, big-box retailers. Without Noel Lee, Beats by Dre would certainly not exist.
In spite of the successful, highly-diversified and quality organization Noel Lee has built, there has been no dearth of Monster detractors. There's been a lot said online and in-person about the higher cost of Monster products and some have labeled them a 'rip-off.' I cannot change your mind here today.
What I can do however, is put forward some strong arguments that the people who buy Monster products, from cables for their home, office or studios to all the other related sound, audio, power and video accessories Monster makes, seem to love them. How can something higher-quality, that people happily buy, be a rip-off? Seems a contradiction, no?
But we don't know who these anti-Monster trolls might be. Or what their agenda is--that's the creepy thing about the Internet. We don't know if they've ever bought a Monster product, much less ever used one to get an idea of their value, their worth.
And more suspiciously, these Monster-haters never impugn the sound quality or efficacy of Monster creations.
Hateful detractors and Internet trolls aside, it's been quite a wild ride for Noel Lee.
After having started out by crashing CES in 1979, Lee is now being honored with the Consumer Electronic's industry's highest award by being inducted into the CE Hall of Fame on November 2nd in New York City. Lee has also won Ernst & Young's "Entrepreneur of the Year" award and the Plus X award.
While Noel Lee's work is never done, hopefully he might take a little time after these honors and reflect back on his amazing journey before getting right back to the grindstone, meetings at all hours and the constant work an entrepreneur of his status invariably puts into his business.
Next Up: Noel Lee and Monster meet Jimmy Iovine and Dr. Dre. Beats is born as a Monster product invented by Noel Lee