Three high-level experts from the toy industry, specifically from companies partnered with The Walt Disney Company, explain what is going on with toy sales and decisions.
A couple of months ago, readers of this site know that an insider within the toy industry… someone with decades of experience… reached out with exclusive information regarding Disney, Marvel, Star Wars and the merchandising machine that helps sustain all of it. Readers have loved the material and a wide variety of popular YouTube channels have picked up the content, commenting on what has been revealed. Now, we’re happy to let you know that two additional anonymous sources within the toy industry have come forward with more information.
To start a series of articles that will reveal much about what is happening behind the scenes with decisions for you and your kids’ favorite action figures, we’re diving into a discussion about G.I. Joe. Where has it gone? What happened to one of America’s favorite toy lines? And what forces are driving the choices for production lines, content quantity, etc.
The following chat comes mostly unredacted and is an amalgamation of three commentaries provided to That Park Place from three independent sources. Their identities are being protected. This is “Part 1” and we plan to release the next segment 24 hours later. Due to the way Google works, we’re cutting this into multiple stories so it’s not overwhelming to readers’ eyes and to the algorithms that rule the internet.
Enjoy…
As you know, Joe has one of the richest histories in toys where it started as a celebration of the branches of the US armed forces (more on that later). The brand has been around for a long time and gone through so many incarnations – one of the longest running toy brands: From the mid-sixties 12-inch realistic action figure to the even more successful early 80’s to mid 90’s 3 ¾” inch line, with the IP eventually downshifting and stabilizing into the “collections”-based remakes & re/releases mostly aimed at collectors of more recent years (more on that below), including todays strong DTC (direct to consumer). Of course there’s more to it, but that’s a decent kick-off recap for the purposes of our discussion.
Goldner & team had a few core tactics for making the company transition from “Toy” to “Entertainment” successful, with one of the obvious being capitalizing on owned, royalty free IP. While producing revenue generating “Entertainment” based on current [company redacted] is a no brainer, the more powerful tactic, again unsurprisingly, is to generate revenue by truly cross-platforming: generating revenue from Entertainment Productions of a given IP conceived as its own revenue generator but which is also specifically conceived at its inception (story, etc.) to simultaneously promote and drive a full Toy line-up while also energizing Hasbro as a license holder who can credibly license the IP to other categories and generate significant additional revenue. Make money three ways, the Entertainment, Toy and Licensing. Guess which toy brand created media cross-platforming four decades ago? Please don’t say He-Man …
Ok, another piece of the Joe puzzle; the two key different toy markets. I’m going to simplify and group today’s IP toy sales into two main segments (obviously not as simple as that, but it will suffice for now): You’ve got the “collectors” who buy through specific channels (brick & online) and the “kids” which here should be interpreted as mass (both brick and online, i.e. Amazon),. Today’s collectors of an IP are usually yesterday’s kids, who actually played/interacted with the IP’s toys & other merch way back when. Eventually the “kid” fades out of active interaction with the IP (with the exception maybe of branded apparel) but he has a chance of coming back to it later in life as a “collector” – usually as disposable income increases (an adult spending money they don’t have is good too!). Then there is the pure adult collector who never interacted with the IP as a kid but got on board as an adult. Less of those, but they are there.
Top line: Kids Play While Collectors Display (we sure love our sloganeering..)
For this discussion it is important to know that the vast majority of collectors also collect/buy or can be enticed into collecting/buying the “kid” targeted product if it nails the IP – for some IP they actually prefer it, and can even make up the majority of sales at mass retail or mass online (amazon).
A quick underlying point, again obvious if you’re in the market as a consumer: the two different segments not only have different distribution channels, cost/price structures etc, etc, but more importantly are targeted with very different product offerings with respect to design & functionality, build specs, packaging, production factors including MOQs, lead times, etc, .. So you have product designed for collectors, sold to collectors, and products designed for “kids” that are also bought by collectors who are active on both of the lines (again, some “kid” lines are actually mostly sold to collectors).
There is much more to it with respect to refining toy market segmentation and financial impact, but while not always true – it can vary by IP – in general Kid/Mass segment is where the far far larger gross dollars reside (think of the units rolling through thousands of planograms at US retail alone, all goosed by massive seasonal and retailer specific ad multipliers). Big dollars, fortune & glory.
Ok, I’m way over the line into over-explaining this part, but I’m sure you can surmise that while the gross from Kid/Mass is sweet and in some ways is the promised land, it comes unfortunately at far lower margins and much higher risk than that generated by the purely collector side, especially once netted from all the other segment specific factors and expenses such as – to name a few – listing fees, retailer sales packages, damaged product allowances, larger marketing spends, contributions to retailer promotions & ads … the inevitable clean-up markdowns (actually unavoidable – the question is will they be large or minimal), etc … to say nothing about the need to hit target retail price points which influence designs, creates its own margin squeeze that can compromise product, etc. Ugh. Many deductions and painful accounting posts later – the daily lingo for evaluating a line’s return includes not only the expected gross and net sales totals, but then you see your income further melt away with the net, net then even the net, net, net, and that’s even before getting into the various other accounting acronyms when the results are rolled into corporate. Black can switch to red, and real fast if keys aren’t properly estimated at kick-off and then subsequently managed.
I don’t want to get too deep into the collector side in order to get to some Joe-specific, but as you know the emergence of the product-specific collector stuff over the last 30 years accounts for many of the healthier parts of the Hasbro balance sheet, along with Parker and Bradley, actually kept the company out of serious financial trouble a couple of times, and the emergence of a new generation of true toy mavericks in the industry. They were often some of the most unique, interesting and fun Joe toys: Toys’R Us exclusives aside, some of my favorite for collector products were the FAO Schwartz Joe exclusives from back in the day. True treasure hunt fun for collectors to track those down today. The segment’s sales have multiplied with online to eventually arrive to the lowest risk model to date, the Direct-To-Consumer model (ex: Haslab) which even allows for real data collection and true consumer relationship building. The money overall might usually be less than mass (again depends on the IP), but the higher margins and the comparatively lower risks associated make the collectors market a more than viable stand alone for any IP, especially one where you bank what you would have otherwise paid out as a royalty to 3rd party IP holder. Key point: You don’t have to go to mass to bank.
Ok, very long winded, but you can’t bring up current state of Joe and the various internal discussions taking place without understanding at least bit of some high altitude context because Joe is one of those IP for which different leadership figures, departments and clusters of individuals internally are advocating very different medium to long term paths forward.
Again, we’ll continue this conversation in 24 hours. This is an exclusive leak to That Park Place and we send our deepest gratitude to the insiders providing it. No NDA or legal contract has ben broken in acquiring this information. TPP makes no claim as to ownership, receipt or veracity of the claims herein.
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