Monster Cable lowers prices during recession

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."

Monster works hard to keep retailers happy, throwing a big concert every year at the Consumer Electronics Show (artists have included Diana Ross, Rod Stewart, and Crosby, Stills and Nash) for 4,000 retailers, and awarding them prizes for salesmanship.

Lee says the loss of Circuit City "affected us dramatically," though he declined to discuss specifics. The Oakland Tribune recently cited Monster's yearly sales at $100 million, but Monster spokesman Daniel Graham says that's "way too low."

The company, which laid off 120 workers at the end of 2006 and outsourced their jobs to China, let go 43 workers in March due to the recession.

Doherty says Monster's biggest challenge now is keeping up with competition from Asian knockoff companies that are producing HDMI cables so cheaply.

"Monster used higher-quality products in the analog era to give you better sound, but as things went digital, it either works or it doesn't," he says. "Now there's an awful lot of $15 cables out there which would give you the exact same performance as Monster Cable."