Spinning Toys

In the pretend economy of Monopoly, the goal is to buy as much property as you can, but in the real-world toyco marketplace, selling property has become the name of the game....
June 1, 2000

In the pretend economy of Monopoly, the goal is to buy as much property as you can, but in the real-world toyco marketplace, selling property has become the name of the game.

Faced with shrinking shelf space and the prospect that the toy category may never have the same pull on the imaginations of children that it once did, toycos blessed with a portfolio of well-known brands are trying to leverage the name-value of their toys across every facet of consumer life through outlicensing. In fact, numbers compiled by EPM’s The Licensing Letter show retail sales of toy and game brand licensed product jumping a substantial 20% from 1998 to 1999, to account for a total US$3.2 billion in annual North American sales.

Take Monopoly, for instance. Hasbro has grown the program for the 66-year-old board game from less than 25 licensees five years ago to 80 this year, licensing out the property to product in a diverse number of categories that range from candy to inflatable furniture to slot machines-even to other board games. The brand has also proven attractive for consumer promotions, with McDonald’s in particular making its Monopoly promos a yearly event. And Hasbro isn’t alone in trying to capitalize on its toy equity. Mattel has established burgeoning licensing programs for both Barbie and Hot Wheels that encompass every product category imaginable, from party plates to personal computers.

While developing an additional revenue stream may seem like the obvious reason why toycos are licensing out their toy properties, it’s not the only one: Generating brand awareness is also a key consideration. ‘We can gather much more market share at the store level [by licensing out our properties] through different categories,’ says Jane Ritson-Parsons, senior VP and managing director of 3D Licensing, the Hasbro division in charge of licensing out the company’s brands.

The toycos aren’t revealing how much they make from licensing out their properties, but compared to revenues from toys sales, it’s still early days. Parsons says Hasbro’s licensing business has grown considerably over the last five years, but John Taylor, a toy industry analyst at Seattle-based investment firm Arcadia Investments, estimates that the licensing royalties represent a ‘minuscule amount’ of the company’s 1999 revenues of US$4.2 billion.

Nevertheless, there are strong indications that the big two toycos believe they can grow this area of their business. For instance, Mattel reorganized its entertainment division and gave it responsibility for translating the company’s brands into other entertainment media and managing any related licensing programs. Mattel also maintains a separate department for Barbie outlicensing, as well as a department for Hot Wheels and Matchbox brand licensing called Wheels.

Hasbro, too, seems to be preparing for more outlicensing in the future, announcing last fall the formation of the Hasbro Properties Group, a new division charged with spinning Hasbro toys into different media, including TV, film, video, publishing and location-based entertainment. ‘Hasbro has done an excellent job of acquiring a portfolio of brands that are relevant to all kinds of demographic groups, and I think they’re trying to unlock value in those brands wherever they can,’ says Taylor.

HPG is comprised of four units that work in tandem to figure out ways to leverage Hasbro’s brands: The Fantasy Factory, the Hasbro Publishing Group, the Visual Media Group and the 3D Licensing & Promotions Worldwide Group. The process begins with the Fantasy Factory, the group’s creative division, which develops the backstory, or the fantasy, for a toy. Next, the group decides which media it can translate that fantasy into, at which time either the Hasbro Publishing Group or the division’s TV and film unit, the Visual Media Group, seeks outside partners to turn the show or book concept into reality. In the meantime, Parsons’ division creates a licensing strategy for the entertainment spin-off.

Not all toys that get the Hasbro Properties treatment emerge as TV shows, but Parsons is quick to say that the absence of entertainment does not preclude it from developing a successful licensing program.

‘Historically, Monopoly has been our number one licensed property,’ says Parsons. ‘The fact that there isn’t 26 half hours of animation is not an issue that comes up for discussion when we sell the Monopoly brand.’ That said, three properties that have yielded TV shows-Centipede, Action Man and Beast Machines-are likely to generate a lot of interest among companies at Licensing 2000. In February, Hasbro sold 26 half-hour episodes of a CGI animated show based on the `80s arcade game Centipede to Cartoon Network, which plans to air the program in its Toonami block starting in 2001. Parsons says she will start signing licensees once the show’s air date has been finalized.

Hasbro’s boy toy line, Action Man, which spawned a TV show slated to air on Fox Kids this fall, will be a major focus at Licensing 2000 for Parsons and her team. Hasbro will be looking to duplicate State-side the success it had with the property’s international program, which has grown to 180 licensees since 1993. At press time, Hasbro had signed Zak Designs for plastic serverware, Unique Industries for paper goods, and was close to finalizing agreements with several other U.S. licensees for the apparel, outdoor sporting goods and publishing categories.

For Beast Machines, Hasbro will aim to attract more licensees to its retro fashion program, targeted at male tweens and teens, which features artwork based on the toys’ Transformer predecessors from the mid-’80s. Additionally, Parsons says she plans to unveil Gloworld, a new concept based on Hasbro’s preschool toy line, which it will spearhead through publishing. Hasbro plans to announce its publishing partner at the show, where it will also be looking to sign licensees for additional categories. Other toy properties Hasbro will be focusing on in 2000 include Mr. Potato Head, for the school supplies and ceramic giftwares categories, and Shelby, a clam-like addition to Tiger Electronics’ Furby Franchise.

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