Complete with quotes and previously confidential images provided by Monster, a new article at Gizmodo paints a surprisingly negative picture of Monster’s relationship with Beats Electronics, discussing how Monster lost virtually everything it had built when Beats left for HTC. Interviews with Monster CEO Noel Lee and his son Kevin Lee detail how Monster and Beats formed a shaky business arrangement, wherein the Beats side retained ownership of everything Monster developed. According to the report, Monster also footed the bills for manufacturing and distributing the products.
While Beats contradicted Monster’s claims of handling industrial and audio designs for the headphones, Monster offered audio engineering and industrial mockups, and Noel Lee claimed Beats had nothing to do with engineering: “Absolutely not, they don’t have any engineers.”
The article also acknowledges that Beats’ success came from astute marketing — not from the sound — and that the products were both overpriced and hugely profitable. Kevin Lee suggested that Beats were marketed as “the hottest product to have, and sound will be a Trojan horse. And that’s what we did.
Beats was in every single music video.” Notably, iLounge’s reviews never gave Beats products higher than a flat B rating, with most falling below that, often citing unimpressive performance to price ratios as a key issue.
When Beats Electronics left Monster for a partnership with HTC, Monster was paid only a small amount—“more severance payment than cash-out”—while Beats retained the audio, patents, designs, and the name. The article notes that Beats made $519 million in sales during its first year with HTC — up from $219 million in the previous year — taking control of 64 percent of the $100 and higher “premium” headphone market.