The late 70's in Northern California was an innovative and transformative era in American history. The technology introduced and the companies formed then are influential to this day. Personal computing, software development, and electronic hardware became well advanced to the benefits of humans worldwide. Companies like Apple, Oracle, and an electronics company, Monster which is now making electronics, cables, wiring to electronic products like headphones and automotive accessories, were founded in this burgeoning period
What Monster founder, Noel Lee, has done is of legend and is the essence of American exceptionalism. Noel Lee designed and engineered the Beats by Dre headphones and together with Dr. Dre and Jimmy Iovine quadrupled annual sales of the headphone industry. The decision to partner with a “gangster rap” producer was risky for a company that once owned naming rights to Candlestick Park in San Francisco where the 49ers play Football on Sundays. Noel Lee had the insight and vision of the future where the influence of hip-hop can be commercialized and transform the technology industry. The partnership with Dr. Dre created $600 million in value over approximately 4 years as electronics manufacturer HTC paid $300 million this year for a 50% stake. That deal has since been restructured but other companies like HP and even Chrysler have generated billions in revenue partnering with the Beats brand after the credibility the Monster deal provided. Noel Lee has also influenced his son to create his own headphone company, Sol Republic targeted towards DJs. I was fortunate to get time with the Silicon Valley legend who is also a staple at CES, moving around on his Segway and known for the incredible concerts Monster hosts for the attendees. Our fascinating dialogue is as follows.
OI: So...introduce yourself. I mean you have such a storied history and...kind of show that off too but introduce yourself and...what we're learning here today at Monster.
NL: Well, I am Noel Lee, the head Monster, founder of Monster Cable in the old days. We're now known only as Monster 'cause we make so many products and a recent venture - the headphones has been like game changing for the whole industry. We created the fashion, lifestyle, gotta-have product along with our friends at Beats With Dre and with Jimmy Iovine. We really popularized the concept of headphones as a must-have lifestyle product. Now we're on our own and we're introducing our first Monster-only headphone with Inspiration launching here in New York City today.
OI: So now kind of let's take a journey back because looking at your history '78, coming into cable, seeing this connectivity of electronics. How did you see that, the profitability and the margin to be in the wires and connecting these electronics, especially in a time where all these electronic pieces were nascent. Everything was kind of new. You know, systems were bulky. Kind of give us that...background.
NL: Well, if told you it was all planned I'd be lying. That's one thing. You know...I'm an audiophile. I designed the first Monster Cable because I wanted to get better-sounding music. You know, I'm a recording engineer...I'm a musician so I work with bands. I know what the real thing sounds like and I wanted to improve my speakers. You know the last thing left was a cable. I had good amplifiers, a good phono cartridge in those days, good preamps, amplifiers, but the speaker cable just looked lame. How do you get all the sound through that? That's why I took my engineering knowledge and I introduced the first Monster cable. So every step of the way through Monster Power, through our speakers that we designed in the old days, now through our headphones, it's all been about better quality music, a better experience, being closer to the musician, you know, hearing what the audio engineers and producers intended.
OI: You've been very effective actually, getting there, so kind of talk about that, like the evolution of how did you start seeing these opportunities to take a cable company and actually now make that more of a brand out front because you actually pioneered using that word Monster into lifestyle. Talk about that evolution and what you saw.
NL: Well, you know in the old days when I first started nobody had the name Monster. I mean you wouldn't name a company called Monster. And you gotta remember in the old days everything was pretty straight and pretty corporate so Monster was a ridiculous name and Monster, people didn't get it. Monster? What do you mean, Monster? Now, Monster - that's cool. So every step of the way we've thought about how we evolve our journey and so even PowerCenters was to get the better quality sound in picture. If you filter out the dirty noise, then you get better quality sound especially with the wide bandwidth amplifiers in those days. So now that we're into the headphones Monster is really appropriate okay, 'cause it's Monster sound. It's big sound. It's great sound. So very seldom do you have a company that started 30 years ago, 30 plus years ago, 1978, that's still relevant today. When I think of all of the audio companies when I first started, you know, 95% of them aren't around anymore.
OI: Especially in technology.
NL: Especially in technology. You've got all these new names, new startups which is just great. You know we feel like an old company. We also feel like a new company. And so those who knew us in the old days, hey, Monster is evolving. We've got kids who buy our product who don't know we make cables so, you know, it's a great place to be. And the name Monster when we first started was a very strange name; today it's a relevant name. It's happening and people love it. The kids still love it so God bless.
OI: Now segueing now to - you took a big risk and always seeing you. You've always been a person on the cutting edge. Monster events, always, the performances always kick off CES in Vegas. You're always riding on the Segway. You always have this evangelism of this technology culture. And when I say you took a risk, doing the Beats by Dre at that time even though it's so huge now, nobody could have foresaw that partnering with a hip-hop producer to launch a line of headphones would actually quadruple the market so talk about how did that come about?
NL: Well that came about you know, first of all, on our vision to get into headphones but we had to get into headphones in a way that other people weren't in headphones and so although we felt very confident that we could do the game-changing product, it's really about the marketing and lifestyle marketing so hooking up with...the folks at Interscope, with Jimmy and Dre, was that formula. So they were looking for something else to do in the music side of things so we just started talking and the very similar cultures and similar passion for music and you know, combining a record company with a artist of stature, Dre, you know, a marketeer like Jimmy...we put it all together and it just blew up and it became...really explosive and viral. At the time, nobody knew it. It was a vision for them. It was a vision for us and we were thinking, you know, what if we put this together and I would say there are very few companies in the world that could have done that. So we were the first and now everybody is following in our footsteps.
OI: But getting even deeper there, when I dissect the strategy, the tentacles...at that partnership spread 'cause I remember you had Lebron James having his own semi-brand so that got into the athletes, the Olympic team 2008. You had Lady Gaga. That was an international launch with the product. You had Diddy. That got into the lifestyle - into the clubs. You had Dr. Dre. It's like you had this brand, but then you had ambassadors and partners in that subset that kind of allowed the lifestyle to engage people in different demographics that a typical corporate company wouldn't seek out. Like how were those decisions...I mean I've been fascinated. I've been wondering actually like, wow, they took a risk, but you were actually ahead of the curve.
NL: Well, first of all it was a tremendous risk because we didn't know if...I'm not...I don't even want to call this an endorsement. It wasn't an endorsement. It was really a partnership and be able to bring the music to audiences that sounded like Dre and Gaga and Diddy here in the studio like nobody ever heard before; it was the first time it ever happened. We had the technology to do it and the manufacturing expertise so I have to give as much credit to Jimmy's vision as anybody because his vision was to leverage his power with tastemakers, the right people in sports, the right people in the music industry to bring them into our world, the audio world, you know, to let them hear what their music sounds like 'cause they never heard their music horrible like this. I mean they go into their studio and a tiny, tiny fraction of the people that listen to music get to ever be in a recording studio with Dre or Gaga so they never hear it that way so the quest, the vision was to bring that to everybody, bring that to the masses and that's what we focused our technology on. So it took a long time to engineer the first headphone with Beats studio, but when we did it, that was the quest and we accomplished it.
OI: So when you say a long time, about how long were you developing the product?
NL: Uh, it took over two years.
OI: Over two years.
NL: Yeah over two years and lots of trial because we had to break new ground. I mean there were a lot of headphones out there already but we couldn't copy them and you know Monster's mantra, if you will, on product development is, always lead and never follow. So we're always looking for innovations and we never copy the trend because if we copy the trend we're just a me to. It can't be me to. We want everybody, if they are gonna come in, to copy us. We always want to be the leader so we've been able to demonstrate that time and time again. That innovation, entrepreneurial spirit permeates throughout Monster. Every person you talk to at Monster is always about pushing the envelope.
OI: Now...to say the success was massive would be an understatement. You actually wound up quadrupling the whole market for headphones?
NL: I don't know where you got that number, but that's close to right.
OI: When they look at estimates, the industry was roughly around six hundred million, now it's a multi-billion dollar – at least over a billion so the multiplier effect...Obviously the recent acquisition of 51 stake by HTC kind of shows the value that was built...So I'm just curious to your insights as this has been a remarkable growth. You launched that brand. It's sort of like here is a child. They've grown up. But now you're bringing new lifestyle products so kind of talk about that. Your'e doing things with Earth, Wind & Fire. You have - you're launching new products in the lifestyle realm. So kind of talk about that segue, the maturation of Beats and then new products that you're launching and new partnerships.
NL: Well what we did with Beats was in a specific lifestyle, you know, a very urban, very hip-hop, very cutting edge in terms of music, but it wasn't conservative. Okay, so it was edgy so this is – spans both. Okay. So you've got great, great sound that we've been able to accomplish but also you can see it's rather plain. It's understated.
OI: More like a clean aesthetic.
NL: Yeah, it's understated. Okay, it's understated for something – a little more sophisticated look. I might buy Beats for my kids but this is the one I wear for myself. So we're looking at other demographics and how we can reproduce that Beats magic that we did put in for different kinds of customers. There's many different kinds of customers out there and you'll see Monster once ahead focus on every demographic, every segment that we can provide value to and that's kind of where we're going with our headphone initiative.
OI: Now you're actually getting into automotive which is something very fascinating to us. We actually do a lot of interviews with the most senior execs in the auto. So talk about your foray into automotive...Talk about that product that you just launched.
NL: Well, first of all, nobody knows that we have expertise in [the] automotive field, but I've designed some of the most incredible audio systems for myself, you know, for my cars and we had an opportunity to introduce them to some very big car manufacturer and they said, wow, we got a hundred engineers that can't do this. How did you do it? Well, I'd like to give you the benefit of our expertise and maybe we can do something with Monster and automotive manufacturers so nothing is official right now but we're exploring it, you know, higher quality audio that's affordable so it's not five thousand, ten thousand dollars for an audio system but maybe a thousand or two thousand for an upgrade. So that's kind of where we're going with the automotive because me personally, ever since the beginning I always wanted high-speed cars, high-performance driving but also high-performance audio to go with it. When you can blend the two together, you know, it's magic.
OI: And you actually have like this hand gesture adapter that was like real cool we saw where you could use your hands to motion and change channels. Talk about that like not only – so that's like getting into the OEM side of things where you have like this universal product and then also the speakers too that you're getting into.
NL: Well, you know, things that drive automotive is voice recognition and motion so we've got something very affordable called iMotion and if you wanted – people are concerned about safety, taking their eyes off the wheel. You can't text. You don't want to make a phone call but you don't want to pick up your iPod and have to deal with track up, track down, volume up, volume down so you can do it just by waving your hand in front of it, you know, sideways for tracking, up and down for volume and it's great. It's affordable.
OI: Yeah I mean very, very – sub-one hundred dollar...price point...
NL: Yeah. It's very cool.
OI: ...Then also with what you're doing, it's also generational so talk about like working with your son. He's doing his thing too in the headphone business.
NL: Well, you know everybody in the older generation. I'm a baby boomer now and you know, I remember when baby boomers were young, the generation before baby boomers, ah, how do you listen to the Beatles? Elvis, ugh. So I'm finding the same thing today. I don't really understand all that's going on with the young kids with the electronic dance and with DJs and stuff but my son does. He started Sol Republic, you know, very focused on that generation of music listeners. It's very, very different. Their priorities are very different. What motivates them are very different than - from the old guy who just does very traditional things. He's done extremely well. He's got great brand recognition in a very, very short period of time. He's got this unbelievable army out there of evangelists. It's, you know, it's been his claim to fame.
OI: So as a parent how does it feel to have your son pick up the craft and excel at it and add his own dimension. I mean when you talk about the colors, the interchangeable with the tracks and - how does that feel as a parent having your son get in the industry and kind of forge his own path and carry the legacy forward?
NL: Well, first of all, you got to be very proud and contrary to what some people think, oh yeah, Kevin started his own company. You helped him out and I said no, I didn't help him out. I said, you have to fly without a net. You know, you gotta get your own venture capital. You gotta come up with your own ideas because you've been under a protective wing for most of your life so if you're gonna really do something, I'm not gonna help you out. You're gonna do it all yourself which is what he did and so I gotta be very proud of that. He's very proud of that also because if I did everything for him, there's no accomplishment for himself. You know, what do they say, the apple doesn't fall far from the tree? So he got a lot of experience working at Monster. He had a lot of experience with audio, you know, working with me and tuning my audio system all the time so he had the chops to do it and he had the marketing mind to do it and he understands this new generation.
OI: So now looking into the future, what could we expect with Monster? What kind of new places are you looking to – strategic alliances with celebrities?
NL: Well, I must say that the celebrity model is very, very fragile in how you handle it because I think the consumers see that as a sham if it's not authentic. So any endorsements or celebrities that we deal with in the future and I'm not saying that we're even looking for that, has to be authentic to the consumer. Rather, we'd like to do things with companies so like what we did with Diesel, you know, an equivalent company to Monster except in fashion. You know, they've got their own brand. They've got their own lifestyle and just adding Diesel and Monster together strengthens both companies. So they're not an audio company, but they're a lifestyle and a fashion company which music is a great part of that so combining the two, you've got an explosion there. So what you see or what you'll see in the future is collaborative – I would say collaborative marketing. I would say collaborative explanations in developing a genuine authentic message between the two partners and if it's not authentic, it's not genuine then we're not gonna do it. We don't write checks like what people think...That's not us. What we did with Earth, Wind & Fire was a true partnership where they're passionate about the product. I love that band as many people do, but it's authentic music. You know, it's about real music with real horns, real pianos, real guitar, real kalimbas and the...what we're trying to achieve with the Gratitude product with Earth, Wind & Fire was to bring that nightly performance on the stage to the consumer in an interval.
OI: So companies that might want to partner with Monster, how can they reach out because that's a very intriguing model to say we, more or less, look for this strategic alliance, people that have a brand, have a core base and more or less we're looking for people that want our line where they can bring their market. We bring our expertise. And then together we attack and create new business like great business development model basically.
NL: Well, I would say, first of all, we're very fortunate to be a leader in that and we get a lot of people coming to us [that] want to design a such and such headphone and why don't we collaborate. Like I said we're very selective about how that goes because the consumer is kind of traumatized these days with all the artists headphones. They're confused and just because you put an artist's name on a headphone, doesn't mean you're gonna sell it. So how to do it? Easy: email@example.com. I answer all my emails so if you've got an idea, we want to see 'em.
OI: Thank you so much.