The Real Toy Story
It’s an industry almost entirely dependent on whims.
Toys are a $29.4 billion business where minimal investment can breed wild success and massive amounts are no hedge against stunning failure.
It is into this environment that Jakks Pacific Inc. entered the fray in 1995, building a company that last year generated $284 million in revenues.
“What we’ve learned is you have to be very well diversified because in all the different segments, there is always an area that slows when another picks up,” said Stephen Berman, Jakks’ president and co-founder.
A good example is video games, which grew 78 percent in 2001, to $6.4 billion, according to NPD TMI, a toy market index. Overall, toy industry sales eclipsed $29 billion in 2001.
Traditional toys dolls, cars and the like continue to command market share, but they are subject to constant tweaking to keep up with fickle tastes.
Hasbro Toy Group was the prescient licenser of toys for “Star Wars,” which have become a perennial seller. Still, action figures from the long-awaited prequel to the initial series, “The Phantom Menace,” released in 1999, failed to do as well as action figures manufactured for the original trilogy.
Given the vagaries of predicting what licenses will hit and having to commit to a product months before it hits the stores, many toy companies have turned inward.
Muchkin Inc. was founded in 1991 on the basis of a license to manufacture Pepsi-themed baby bottles. Steven Dunn, founder and chief executive of the Los Angeles-based company, later decided that internally developed and patented products would produce more reliable sales and higher margins.
It worked for MGA Entertainment. The L.A. firm developed Bratz, a spunky doll clad in midriff shirts and drenched in makeup, designed with older doll buyers in mind. Bratz, which was the 10th best selling toy in 2001, according to Toy Industry Association Inc., helped MGA record sales of almost $100 million last year.
Technology now plays a big part in the educational toys space. Earlier this year Leapfrog Inc. raised $117 million in one of the few initial public offerings of 2002. Its Leappad Books Assistant product was the best selling toy of 2001.
Of course, the big guys continue to hold their own.
Mattel Inc. had four of the top 10 selling products in 2001 and at least one in the top 10 for at least the past five years. The El Segundo-based toymaker, in the midst of a restructuring after several tough financial years, has given Barbie a much-discussed makeover, looking to update the 42-year-old icon for today’s youth.
Hasbro, of Pawtucket, R.I., has also scored hits each of the last few years.
Jakks is primarily part of the traditional toy market, but has grabbed a piece of the video game action by inking deals with THQ Inc., a Calabasas-based video game concern also founded by Jack Friedman, Jakks’ founder and chief executive.
Berman said that as far as the toy industry is concerned, “kids are getting older quicker.”
“There is more information through computers, more for them to do,” he said. “But kids still are kids they still play with toys.”
Conor Dougherty
