For years, electronics shops loved Monster Cable's high-priced, premium cables. Consumers snapped them up for $100 and more when purchasing expensive new flat-panel TV sets and home audio equipment.
Then the recession hit. TV sales stalled. Monster lost one of its top retailers — Circuit City, which closed 567 stores.
Now, founder and "Head Monster" Noel Lee is cutting prices on top-of-the-line cables for high-definition TVs, effective in June. An 8-foot HDMI cable that currently sells for $129.95 at Best Buy will be priced at $99.
"We're lowering prices, due to the recession, but we're also increasing performance," says Lee.
On Monday, the company also lopped $10 off the price of its most basic — but rarely stocked — HDMI TV cable, to $29 for a 1-meter length. And it introduced two new lower-cost HDMI cables in 2-meter and 4-meter lengths for $39.95 and $59.95. Competitors' cables of similar length can be found online for as low as $5.
Privately held Monster does not release sales figures, but tech analysts believe it's hugely profitable — even though some argue that pricey cables don't make most home entertainment centers sound or look better in the digital era.
"If you're a broadcast TV station, and need four times the bandwidth of most people, then yes, you need a higher-performance cable," says Wilson Rothman, an editor with gadget blog Gizmodo. "But to get the signal from your Blu-ray player to a TV 2 feet away — that's not a challenge. The cheaper cables do the job just fine."
Lee's main selling point is that a high-performance cable will prepare you for new technologies, while a $5 to $10 cable from the company's Asian competitors will not.
"Do you need the higher-performance cable today? Probably not. But with bigger displays and 3-D TVs coming down the pike, you will, eventually," Lee says.
Such talk riles bloggers like Joshua Topolsky, editor-in-chief of tech blog Engadget. "You buy a new cable with the new TV — not three years ahead of time," he says.
Origins in analog
Lee started the company in the analog era in 1979, on the premise that higher-grade cables would enhance the audio experience, and critics and retailers agreed. Lee moved effortlessly into the digital world with cables for high-def TVs, and prices increased dramatically with the new technology.
A recent visit to a Los Angeles Best Buy showed Monster HDMI cables (used to connect a TV set to a cable or satellite set-top box) on display for $89.95 to $169.95.
Lee says that while he offers lower-cost cables, retailers don't want to stock them, and that his customers prefer high-end "performance" cables.
"It's ironic," Lee says. "When people buy Monster, they don't expect to pay (a) low price, so our lower-end cables don't sell very well."
Rich profits for retailers
For retailers, cables and other accessories have higher profit margins than big-ticket TVs.
"Cables are enjoying percentages consumers would scream about if they knew the markup on them," says Richard Doherty, an independent analyst at Envisioneering Group.
Ed Kasza, a salesman for Chicago area retailer The Little Guys, says his store uses only Monster cable because it is the most reliable cable. "Would you really want to put a $25 cable with a $3,000 TV?" he says.
"You'd be wasting your money on the TV if you were to do that."