Surge in Licensed Toys

In New York, a significant surge in toys linked to licensed franchises has been reported, indicating a robust profit source for the entertainment sector.

According to a recent trade group report, the share of the overall toy market attributed to these licensed products soared to 46% in 1999, up from 35% in 1996. This information was unveiled during a preliminary event for the 97th American International Toy Fair, which is scheduled to take place from Sunday to Thursday.

Notably, merchandise related to "Phantom Menace" and "Pokemon" emerged as frontrunners, contributing significantly to the overall toy market's healthy 7% growth, bringing retail sales to an impressive $22.5 billion in 1999.

The Toy Manufacturers of America highlighted that action figures, especially those from "Star Wars," "World Wrestling Federation," and "Toy Story 2," experienced the most substantial annual sales increase, recording a remarkable 23.8% rise.

During the fair, industry experts expressed optimism for the current year, marking a contrast to the previous year's challenges, which included major setbacks with products associated with "Godzilla" and "Lost in Space." However, they noted a shift in consumer behavior, with shoppers becoming more selective regarding licensed toys.

Panelist Pat Lewis, president of Family Co., emphasized that brands can no longer merely place logos on products; consumers now expect enhanced interactivity and a closer connection to the original entertainment content.

Recent trends indicate a pivot away from high-risk blockbuster investments toward more stable options, particularly those backed by popular television series and books.

This year's Toy Fair will take place at the Jacob Javits Convention Center in Manhattan, showcasing around 2,000 exhibitors. Both Warner Bros. and Universal announced new licensing agreements related to major studio properties, such as Harry Potter and Curious George, which are still in development.Warner Bros. has entered into a significant partnership with Mattel, securing a multiyear licensing agreement for toy merchandise related to the Harry Potter film adaptations. This deal also covers characters from the initial two books, "Harry Potter and the Sorcerer's Stone" and "Harry Potter and the Chamber of Secrets," both of which are cherished works by J.K. Rowling that Warner Bros. plans to bring to the big screen.

The collaboration will see Mattel produce a diverse range of toys, including dolls, games, and innovative tech products. These items are set to debut in 2001, aligning with the premiere of the first Harry Potter film, although the production schedule remains uncertain, particularly with director Steven Spielberg yet to confirm his involvement. However, select toys are expected to be available at Warner Bros. studio stores as early as this fall.

Dan Romanelli, president of Warner Bros. Consumer Products, expressed enthusiasm about the partnership, stating, “Our choice in selecting Mattel as our master toy licensing partner has been very strategic. Their creative vision and dedication will elevate the product line beyond traditional expectations.”

In a separate development, Universal has teamed up with VTech to create a series of electronic learning toys for preschoolers featuring the Curious George character. This new line aims to highlight George's adventurous spirit and curiosity, with products expected to launch next year.

Universal, in collaboration with Imagine Entertainment, is also in talks with Brad Bird, the director of "Iron Giant," as they identify Curious George as a key focus across their various business ventures, boasting 140 licensees and a themed attraction at their Florida park.

As the Toy Fair approaches, numerous licensing and merchandising companies will showcase their products through showroom tours, parties, and press events. The competition is fierce, especially in the absence of a dominating franchise like "Star Wars" this year. However, retailers are cautious; past experiences with overhyped toys that either underperformed or sold out too quickly, like Sony’s "Stuart Little" items during the holiday season, have made them wary of the current market dynamics.

Risky Business

Challenges in Toy Licensing

"It's a gamble every day," stated Steve Ross, the president of licensing and merchandising at 20th Century Fox.

He emphasized that while toys are a lucrative market, the number of films that can effectively drive toy sales is limited. "Having just one or two films a year that can support a toy line is significant," he noted, adding that certain films, like 'Magnolia' or 'Being John Malkovich,' simply don’t translate into toy opportunities.

The challenges don't end with film selection. Retailers are becoming more cautious and the battle for shelf space is intense. "There’s a lot of competition out there for limited visibility in stores," Ross remarked.

In light of this, George Jones, who oversees worldwide licensing at Warner Bros. Studio Stores, remains untroubled by the lack of a major film release for the 2000 Toy Fair. He believes that studios must carefully evaluate which films to associate with toy promotions. It's often wiser to understate the potential of a film rather than risk overselling it.

"There’s a credibility issue to consider," Jones explained. "While feature films can greatly complement toy lines, they can also fail miserably. If every film is hyped and then flops, retailers will be skeptical when a genuinely promising product comes along."

Toy Fair Insights

While major retailers preview upcoming products throughout the year, smaller businesses and a growing number of international attendees experience these offerings for the first time at the Toy Fair.

Peter Dang, executive vice president of consumer products at Sony Pictures, pointed out, "Many potential licensees wait for retailer feedback before committing to production." Typically, studios designate a primary toymaker—be it a giant like Hasbro or Mattel, or a smaller player—as the "master licensee." These companies showcase prototypes to gauge interest, and if the response is positive, they move quickly to manufacture the toys in time for the film's release.

Upcoming Toy Releases

A representative from Wal-Mart, the largest toy retailer in the U.S., mentioned that the company is excited about various upcoming products. Among these are toys inspired by popular titles such as “dinosaur,” “titan a.e.,” “stuart little,” “102 dalmatians,” “how the grinch stole christmas,” and “chicken run.” They are particularly looking forward to releases related to Fox's “x-men,” while Marvel continues to hold the licensing rights, and Disney/Pixar’s anticipated “toy story 2.”

In a more subtle strategy, Disney is preparing to launch “dinosaur” with a careful selection of around 70 merchandise items. This is a significant reduction from previous years when films like “pocahontas” and “hercules” saw as many as 300 products released.

Experts in the industry believe that the combination of Disney's marketing power and brand recognition will lead to strong sales for these items. However, there are concerns from some critics who argue that the dinosaur figures may not stand out enough from each other to attract buyers, especially with lingering products from the “jurassic park” franchise still available.

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