Global Toy News

A Mattel Hasbro Combination; A Challenging Puzzle

Hasbro and Mattel are reportedly in discussions regarding a merger of the two companies (see: "A Hasbro Mattel Merger; Who will feel the Impact?"). The investment community seems to like it, as is reflected in the rise in both company's share prices since the news broke late last week.

We do know that a combined company would be an giant weighing in with revenues of $11 billion dollars dwarfing every other toy company with the exception of Lego which has revenues that are about 40% of that number. But how easy would it be to put the companies together? Here are some thoughts.

Lots of Brands

Its challenging enough to handle the addition of one new brand, what do you do if you are the Vice President of Sales and you suddenly find that your portfolio of brands has more than doubled? How do you prioritize when you have Barbie, Hot Wheels, Fisher Price, Playskool, Transformers, My Little Pony, Monopoly, Trivial Pursuit, Disney Princesses, Furby, American Girl, Cars, WWE, DC, Marvel, Star Wars, Rose Art, Mega Brands, Littlest Pet Shoppe, Mr. Potato Head, Nerf, Play-Doh, Nerf, Sesame Street, Spiderman, Bey Blade and many, many more?

No matter how good you are, the ball gets dropped somewhere. If the acquisition goes through, don't be surprised if we see the new combined company selling off or licensing some of its smaller brands. Smaller companies may ultimately benefit by adding some some of these brands to their portfolios.

Where to Put the Headquarters

Where will the headquarters be located? Let's face it, It is much harder to get further apart culturally and geographically than Pawtucket, Rhode Island and Los Angeles, California. Even though Hasbro is situated in old school Pawtucket, it has managed to be more of a player in the movies and digital gaming than Mattel. So, location is not necessarily destiny but it may tell us something about how the combined management sees the future of play.

Old Allegiances and New Realities

There is not a lot of cross-pollination between "Greater Hasbro" and "Greater Mattel". By greater, I mean the ecosystem of IP, service and manufacturing providers that surround each company. Those who do business with one company do not necessarily do business with the other. Some of this results from geographical proximity and some from professional history. It will be a challenge for companies doing business with only Hasbro or only Mattel to adapt and maybe even survive a new reality.

A Clash of Cultures

Let's not forget that though both companies are publicly held, the Hassenfeld family, unlike the Handlers, is still very much a presence at Hasbro. That makes Hasbro more of a family company while Mattel is more corporate. I am sure the combined management will be up to the challenge of merging two such cultures but a challenge it will be.

Nike Goes Local; Is It a Good Idea?

 

“The future of sport will be decided by the company that obsesses the needs of the evolving consumer.”

Mark Parker, Nike’s chief executive

Nike has announced plans that it intends to focus its efforts on twelve cities: New York, Los Angeles, London, Paris, Milan, Mexico City, Tokyo, Seoul, Shanghai, Barcelona, Berlin and Beijing. Here is how Nike explains it in a press release:

NIKE, Inc. today introduced the Consumer Direct Offense, a new company alignment that allows Nike to better serve the consumer personally.. by accelerating innovation and product creation, moving even closer to the consumer through Key Cities, and deepening one-to-one connections.

According to New York Times writer, Micah Maidenberg, in his article "Nike, a Global Brand, Will Try Going Local": the companies anticipates that, as a result, 80% of its growth will come from these 12 cities.The company's belief is that by focusing on these major urban areas, and by using both physical and digital retailing and engagement, it can get a better sense of what consumers will want and react more quickly in a constantly changing fashion landscape. The expectation is that, as a result, shoe and athletic styles will become localized. The shoes you find in Beijing may be different than the ones available in Berlin or New York. 

Forbes Best Brands of 2017; Lego is #1

I have to say that I was a bit surprised when I saw that the toy industry's own Lego sat atop the list of Forbes Magazine's Best Brands in 2017. Yes, Lego, sitting there above Google, Nike and even Disney.

• Lego
• Google
• Nike
• Ferrari
• Visa
• Disney
• NBC
• PWC
• Johnson & Jonson
• McKinsey & Co.

Its an interesting list. Two of the companies cited are toys and play (Lego and Disney), one is Internet based (Google), one is sport related (Nike), one is a credit card company (Visa), one is a car company (Ferrari), one is a television network (NBC), professional services (PWC aka PricewaterhouseCoopers), one is a medical device and pharmaceutical company (Johnson & Johnson) and one is in global management consulting (McKinsey & Co.).

Spin Master: Putting Their Own “Spin” on Toys since 1994

Think about some of the “must-have” toys you’ve seen (or even procured) over the last few years. How about the playful robotic dog Zoomer? Or the small, colorful, hooked building balls called Bunchems? Or the great craze of 2016, Hatchimals (described by some as a cross between a Furby and a Tamagotchi)? These massively popular products are all from Canadian toy giant Spin Master, which has been developing fun, innovative toys for the past two decades. Founded in 1994, the company (which now employs more than 1,000 people globally) began with three pals, a unique idea, and lots of hard work.

While at the University of Western Ontario in the early 1990s, friends Anton Rabie and Ronnen Harary operated Seiger Marketing, a venture for selling posters on college campuses. In 1994, Rabie and Harary, joined by fellow business school alum Ben Varadi, saw the opportunity to develop a novelty concept they later renamed “Earth Buddy.” With $10,000 in start-up funding, this hand-assembled product (crafted with pantyhose, sawdust, and grass seeds) eventually earned their growing company more than $2 million in sales. The following year, inspired by their latest creation (juggling batons called Devil Sticks), the company renamed itself Spin Master.

Vintage Toy Company Logos

Fisher Price logo,  1931 - 1955

What I notice first about these five early toy company logos is that they are not playful. Rather, they are sturdy and serious with powerful fonts that imply durability. They communicated solid value to shoppers without a lot to spend.

I actually like them. They are clean and compelling. I particularly like the orange background on the Fisher Price logo and the spareness of Nintendo's.

The early Hasbro logo looks really elegant with its script HB. The Ohio Art logo looks like it comes from the early 20th century but was created in 1963.

Nintendo logo, 1966-1968

Lego logo, 1946

 

My Year with Atari

Last year, I began processing the Atari Coin-Op Division records, a massive collection The Strong acquired in June 2014. These materials were previously held by a collector who purchased them in 2003 through a sealed-bid auction as Atari Games was liquidating its assets. Housed in four different storage facilities for 11 years, the materials arrived at the museum in boxes that filled 23 wooden pallets. Unloaded from a semi, the pallets went to the climate-controlled storage facility on the museum’s lower level. At that point in time, if a researcher requested to see any of the collection, it would have required searching for a needle in a haystack—or the equivalent in dozens of boxes on the pallets. For obvious reasons, that was not going to work. Thus, to make these materials accessible to researchers and the public and to ensure their long-term preservation, the museum needed to transfer the records to archival-quality storage containers and create a finding aid to assist interested researchers in understanding what the collection contained. And for the past year, that is precisely what I did.

Working in the museum’s archives can be exciting work (especially when we find a rare document that allows a new insight or perspective into the past), but it can also be overwhelming at times. As I began processing the collection, the materials were scattered in different storage areas. There were several pallets of unorganized and oversized materials stored in old and unstable wooden map cases; two large rolling racks of loose material; 63 cartons of documents; 110 boxes of videotape (including VHS, Beta Cam, and UMatic), with only a partial clue of what content they stored; six boxes of floppy disks—including 8-inch floppy disks containing original source code to classic Atari arcade games; two computer towers; and several disintegrating boxes that contained rolled cabinet assembly drawings and artwork. As I surveyed the collection and considered how to make it accessible to the public, I knew I had my work cut out for me.

The Hottest Toy Brands; Lots of Surprises and My Comments

The Brandirectory* 2016 published by Brand Finance has been released. It contains a list of the top 25 toy brands in order of value. Below are the top 10.

1. Lego - $4,520,000000 
2. Fisher-Price - $886,000,000                 
3. Barbie - $571,000,000
4. Yo-Kai Watch $330,000,000
5. Mobile Suit Gundam -  $241,000,000
6. Nerf  - $231,000,000 
7. Mattel - $229,000,000
8. Hasbro -  $208,000,000
9. Playskool - $191,000,000
10. Power Rangers - $186,000,000

Here are my thoughts:

• I was, to say the least, astounded that Lego's brand value is greater than the rest of the top 10 combined. And don't forget, that list contains Barbie, Hasbro and Mattel.
• We tend to think of the US as the progenitor of popular culture. A look at this list demands a different perspective. 40% of the top 10 are from countries other than the United States. Lego is from Denmark; Yo-Kai Watch, Power Rangers and Mobile Suit Gundam are from Japan, 
• Yo-Kai Watch is bigger than Mattel and Hasbro? Yes it is...yes it is.  What is Yo-Kat Watch? It is group of role playing games. The creator, Level 5, launched the games in Japan in 2013. They brought it to the US and Canada in 2015. The lesson here is that you may think you are in the toy business but keep your eye on digital. 

Value Destruction, You and Me; Part 2

Please read Value Destruction, You and Me; part 1, prior to reading this posting.

In "Value Destruction, You and Me; part 1," I wrote about companies like Dollar Shave Club that are not just reshaping but destroying our current manufacturer through retailer to consumer business model. 

Dollar Shave Club, Warby Parker and other digitally native vertical brands are providing consumers with higher quality products at much lower prices than traditional suppliers like Gillette and Schick. There is more going on, however than just a better product at a lower price. These companies are using the Internet to intimately engage their consumer.

It's working. Dollar Shave Club, started in 2011, was just purchased by Unilever for $1 Billion. Warby Parker which  sells high quality, great looking eyeglasses and sunglasses direct to consumers was founded in 2010 and is now worth in excess of $1.2 Billion.

The keys to success for digitally native vertical brands appear to be an ability to cut out costs that were one deemed essential. Television advertising; who needs it? Retailers like Walmart and Target; just an additional layer of cost. And besides, they get in the way of the brand intimately relating with the consumer.

By using social platforms; creating warm and fuzzy websites; offering outstanding products and doing so at barrier breaking prices, companies like Dollar Shave Club  have managed to change the game. Will this have a long term impact on retailing? I think it will.

Value Destruction, You and Me; Part 1

I have to admit that I had never heard of the term digitally native vertical brand. That changed when I read a startling  article by Farhad Manjoo of The New York Times. Mr. Manjoo's article,  "How Companies Like Dollar Shave Club Are Reshaping the Retail Landscape," describes how new technology has allowed startup companies like the aforesaid Dollar Shave Club, Casper (a mattress company) and Warby Parker (eye glasses) to bypass the traditional supply chain and sell directly to consumers at disruptively low prices. Is the strategy successful, well Unilever just purchased Dollar Shave Club for $1 Billion. Dollar Shave Club was five years old.

So, what is the digitally native vertical brand? Here is what I learned on a website called Medium in an article by Andy Dunn, CEO of Bonobos, Inc. they published entitled "What’s a DNVB? Only the future." Here is a direct quote from the article describing the criteria (I suggest that you read Mr. Dunn's full article by clicking here:

1. It’s primary means of interacting, transacting, and story-telling to consumers is via the web. In almost all cases the brand is born digitally. Hence the term digitally-native.
2. It’s a brand, and that brand is vertical. The name of the brand is on both the physical product and on the website. It requires the commercialization of an e-commerce channel, but that channel is an enablement layer, it’s not the core asset.
3. The DNVB is usually maniacally focused on customer experience and on customer intimacy. The experience tends to be three-part bundle of physical product, web/mobile experience, and customer service that collectively become the brand in the consumer’s imagination.
4. While born digitally, the brand rarely ends up digital only. This means the brand can extend offline, eventually. Usually its offline incarnation is through its own experiential physical retail or highly selective partnerships. In nearly all cases of partnerships, the brand controls its external distribution versus being controlled by it.

New, Disney Movies for the Next 4 Years

 

The Walt Disney Company has picked dates for its movies through 2019. It makes you wonder if they wanted to mark their territory prior to Comcast announcing its acquisition of DreamWorks. Whatever the reason, they own some powerful movie titles and opening dates. There are a lot of sequels and six movies with colons in the title. Here is what we know now:

May 6, 2016        Captain America: Civil War

May 27, 2016      Alice Through the Looking Glass

June 17, 2016     Finding Dory (sequel to finding Nemo)

July 1, 2016      The BFG (a Spielberg movie about a giant)

Aug 12, 2016     Pete's Dragon (a remake of the movie my then 4 year old son walked out of)

Oct 26, 2016     Doctor Strange (based on the Marvel comic)

Nov 23, 2016     Moana (about the South Pacific and a demi-god played by "The Rock")

Dec 16, 2016     Rogue One (a Star Wars spin-off)

Mar 17, 2017     Beauty and the Beast (a live action film)

May 5, 2017      Guardians of the Galaxy Vol. 2

June 16, 2017    Cars (third in the series)

May 26, 2017    Dead Men Tell No Tales (5th in the Pirates of the Caribbean series)

Nov 3, 2017       Thor: Ragnarok

Nov 22, 2017     Coco (based upon the Mexican Day of the Dead holiday)

 

Dec 15, 2017    Yet unnamed Star Wars movie

Mar 9, 2018      Gigantic (a sequel of sorts to Jack and the Beanstalk)

Feb 16, 2018    Black Panther (based upon a Marvel comic featuring a Black superhero)

 

Cracker Jack Will No Longer Include Toys; Noooooooooooo!

"Sailor Jack" was added in 1918

Cracker Jack have been around for 125 years and for 125 years they have been putting toys (ok, kind of crappy toys...but still toys) in bags of their popcorn / peanut mixture. I never liked Cracker Jacks...thought they tasted a little burned. But I did like those toys.

That was why I was so surprised to read today that the company is ending that tradition. Instead, they are going to include (you need to be sitting down for this) a digital code that will allow the muncher to play mobile games.

New Cracker Jack Logo

Think about it for a moment: 125 years ago means that kids were playing with Cracker Jack toys during the Spanish American War, the Roaring 20's, the Great Depression, World War II, the Kennedy Assassination, the Viet Nam War and the digital revolution. That represents a nostalgic link between 5 generations of children.

The New Age of Mattel; Richard Dickson speaks

A company that honors its past, owns its present and dreams about its future is a company to believe in. - Richard Gottlieb

Things are looking up for Mattel. 2015 was a very good year with a rebounding Barbie and a surge in new technology based products. How strong is the rebound? One good sign is that  Richard Dickson, COO and President of Mattel, was recently in Cannes for MIPTV (Marché International des Programmes de Télévision) to accept that orgnanization's Brand of the Year Award.

What I found of particular interest was an interview Mr. Dickson gave to Worldscreen's TVKids reporter Mansha Daswani. He was positive about the past; candid about the present and optimistic about the future. 

In the interview, Dickson framed Mattel as a cutting edge company at its birth that provided great, open ended content closely tied to a pioneering use of television advertising. Dickson then went on to provide perspective on what happened next:

We essentially devolved into a packaged-goods company that made toys, losing that entrepreneurial, creative invention that started the company. The 30-second commercial for kids that was so innovative at the time became so much a part of our culture that we could not look beyond it. Our media became focused on tonnage, rather than innovation.

The next step for Mattel was therefore to make sure that its brands did what Mattel did first and has done best, blend its toys with media.  The number of play and media platforms that children migrate through are, however, far broader and deeper than that handful of television channels that comprised television in the 60's and 70's. Mattel is therefore now working across platforms which we can see in its  empathic robot, "Hello Barbie," and its alliance with Google in creating the View Master for Google Cardboard.

What really impressed me, however, was Mr. Dickson's candor in saying that despite adapting to the new play and media platforms, Mattel has to make sure that its brands are seen as "healthy and relevant." In this case, he means body types and a racial diversity that fits with how Millennial parents experience what is normative in the 21st Century.

Thomas The Tank Engine Goes Global

Ashima of India

One of the more interesting and perhaps ironic aspects in this age of cultural export is the boomerang effect that occurs when the world claims a piece of a national icon. That is what happened to Sesame Street and that is what is now happening to very proper and British "Thomas The Tank Engine".

Thomas, who looks great at 65, was the creation of Rev. Wilbert Awdry who, in 1942, created Thomas and some friends in stories he made up for his ailing son.  A book followed in 1945 (The Three Railway Engines) and eventually a television show.  The British public loved Thomas and eventually the world came to as well.

This week, we learned that Thomas is being joined by some international friends in a new DVD movie: "The Great Race.” There are going to be a number of new engines joining the fold and as of now we know about four: 

Raul from Brazil

Yong Bao from China

Raul from Mexico 

Each of these characters has a distinctive look and personality that reflect their national origins and aspirations.  For example, Yong Bao of China is described as “driven to achieve and make progress” while Raul of Brazil is “feisty,” “strong and agile.” 

Good for Hit Entertainment and good for parent company Mattel for recognizing that a global constituency demands an expanded brand concept.  Three of the new characters come from BRIC countries, Brazil, India and China) so it certainly makes sense from a business and financial standpoint.  After all, China is a  huge market for Thomas.

It also, however, makes a lot of sense from a cultural and social standpoint.  Strong children want some characters that look like them.  

Will Winnie the Pooh someday have a new visitor to the Three Acre Wood?

Star Wars Movie Tie-Ins; How Important Are Toy Companies to the Walt Disney Company?

Star Wars and The Walt Disney Company are, as we know, very important to the toy and consumer product industries.  Based upon this analysis, I think we can fairly say that the reverse is true as well.

 

Did you ever wonder just how important toy and consumer products sales were to The Walt Disney Company?  In fact, have you ever pondered just how much Disney spends on marketing or production?  Apparently if you have you are not alone.  According to a great article by Brooks Barnes in The New York Times, "An Educated Guess on How Much ‘Star Wars: The Force Awakens’ Will Make for Disney," movie studios are extremely stingy in giving any information other than box office figures.

Barnes was able to get Michael Nathanson, a partner at MoffettNathanson and a media analyst, to provide an estimate of how Disney's costs and revenues broke out for "Star Wars: The Force Awakens."  I suggest that you go to the article to see the full breakout but what struck me was the ratio of product sales to box office.  Ticket sales for the movie was $1.1 Billion while revenue from product sales was $500 million.  That means that sales from products like Star Wars Monopoly or Star Wars sheets and pillow cases amounted to almost half of global ticket sales.  

In fact, that $500 million delivered almost twice as much revenue as derived from disc and digital sales ($276 million) and more than three times what was derived from pay television and broadcasting ($165 million).

Barbie's New Looks

Barbie is by birth an American doll and America is a place where a person gets to reinvent herself...even when she's a doll.

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Barbie is so much more than a doll.  Yes, she is made of plastic and sits on a shelf but the essence of Barbie resides in the hearts and minds of girls and women all over the world.  That's why news that Mattel was changing this iconic doll's shape and look caused such a stir in the media.   One example is a great piece on the PBS Newshour in which I was honored to participate (see below).

 

I see Barbie's new looks as highly significant as they bring Barbie into alignment with a world that has changed almost beyond recognition from the world she was born into in 1959.  At that time it seemed possible to define beauty as having a particular look.  In today's world, however, we define beauty in a multitude of ways and by providing "Petite", "Tall" and "Curvy" as well as racially diverse versions Mattel is responding.  

Barbie has always been about aspiration; not just in terms of beauty but achievement.  After all, Barbie was in space a long time before Sally Ride.  Her desire to achieve, however, was sometimes buried under the debate over her body.  Hopefully, we can not move on from that debate.

Bottom line:  Barbie is by birth an American doll and America is a place where a person gets to reinvent herself...even when she's a doll.

 

Star Wars to Reign Supreme in Traditional Toys and Games in 2016

The release of Star Wars Episode 7 was the central story in traditional toys and games for much of 2015. The highly-anticipated feature has precipitated an unparalleled array of licensed products spanning toys, apparel, housewares, even jewellery. Licensing has been a growing force within toys and games over the last few years, and the success of Frozen in 2014 made licensing the focal point for toy manufacturers worldwide. Sales of Star Wars-licensed toys are expected to remain strong throughout 2016, with sales in the second half of the year supported by the release of Rogue One: A Star Wars Story.

 

Vertical integration

In today’s hyper-connected world, people have unprecedented access to entertainment media and interact with it on a wide range of devices and mediums. This has given rise to the dominance of entertainment ecosystems, of which toys are a growing part. Successful entertainment franchises like Star Wars and Transformers span films, TV shows, merchandise, and video games, as well as traditional toys and games. Building these ecosystems has become increasingly lucrative and companies are working to internalise as much of the value chain as possible. Toy manufacturers like Spin Master have even opened content production studios.

Most notably, Disney, which owns many of the world’s largest licensed properties, has been expanding its own toy manufacturing capabilities. 2016 will see a continuation of vertical integration, especially on the part of Disney, which will be looking to lessen its reliance on license revenue by producing more toys in house.

 

Mattel Puts a Boy in a Barbie Ad; Big Shift in Strategy

You really have to hand it to Mattel.  They are willing to do the new and different. That was what I thought when I saw a boy in the new ad for Moschino Barbie.  The boy, who is blonde, has a mohawk and has lines (“Moschino Barbie is so fierce!”) is a prominent actor in the ad. The gender lines in the toy department are, if not completely coming down, certainly blurring.  Here is a link to the video (and remember to look for the wink at the end):  

 

Knock-Offs; Are They Getting Worse

The "Kung Fu Panda" knock-off, "The Little Panda Fighter" would actually be pretty funny if knock-offs weren't such a continuing problem.  I received an email this week from a toy company telling me that they had had a large number of their products recently counterfeited.  The person told me that they were suing and wanted to know if I was hearing about any rise in the problem.  There were Shopkins counterfeits earlier in the year and I am sure that others have had the problem.  If you have recently experienced knock offs, write in and let us know. 

What I find ironic is that China has been making efforts to curtail piracy.  In fact, November 6, 2015 New York Times article by Neil Gough entitled "China Moves to Crack Down on Counterfeit Disney Products" informs us about

"[a] survey this year by the American Chamber of Commerce in China, published with Bain & Company, a consulting firm based in Boston, found that 85 percent of respondents said they believed China’s enforcement of intellectual property rights had improved in the last five years.  However, 80 percent said ineffective enforcement still remained a concern. Two-thirds said that the risks of intellectual property or data being leaked were greater in China than in other countries.

 What is interesting about the article is its discussion of the Chinese government's focus on The Walt Disney Company.  The government is calling it a “special action aimed at stamping out imitation goods that infringe onDisney’s trademarks."