Stephen Berman is the chief executive of Jakks Pacific Inc., the Santa Monica-based toy company.
He is also a co-founder of the company, along with his late business partner Jack Friedman, who died in May 2010.
In the 30 years since the company was founded, moving quickly to fill space on shelves has been part of its business model.
“I wouldn’t use the word ‘envied,’ but we are very much looked after by the retailers that we are the go-to company that can move very quickly,” Berman said. “We are much faster than the larger toy consumer companies out there.
“We can do things in six months when it usually takes 18 months to two years (at the larger toy companies),” he added. “That has been in Jakks’ DNA since inception.”
Berman spoke with the Business Journal about what he sees happening for Jakks during the upcoming holiday season, how he started and grew the company and his two biggest regrets in business.
What motivates you?
My children, first off. Besides that, at this stage of my life, I’d say my executives and the staff motivate me because we all together made this company successful. When it first started it was a small group. It was myself, my business partner and a couple of other people. Now we’ve grown into a company with over 600 employees, and they are all motivational because when we do well, they do well, the company does well, the shareholders do well. It’s an abundance of things that motivates me. It is not just one.
What are your expectations for the holiday season?
We just announced our third quarter (financial results) recently and we are up approximately 4%. We had a good third quarter and a strong first nine months of the year. The season right now, the economy feels strong around the world. Globally, it is doing well. Overall, we are seeing people spend money, spend wisely. And for the areas in which we do business in, all the different divisions, they are all doing well and strong…
We have some really hot, fun things this year coming out (that the company is making toys for). We have the “Sonic 3” movie which comes out in December and the “Moana 2” movie, which is a huge anticipation, coming out at Thanksgiving. And then we have a tremendous amount of new products, like “The Simpsons” and our Authentic Brands products. Overall we have a nice evergreen business, and we are excited to get through this year and move on to the next.
Other toy companies like Mattel are betting big on movies and TV series for their IP. Is this something you are interested in as well?
We’re not as heavily focused on IP as Mattel and Hasbro are. Hasbro bought E-One years ago and Mattel has made statements and initiatives that they want to be in the entertainment business. We’d rather partner with the entertainment companies, like The Walt Disney Co., Nintendo, Sega, Authentic Brands. We don’t want to be a competitor against our major IP holders, which are the companies I just mentioned. We are more focused on realizing their IP like it’s our own IP. Why compete against the big guys who are very strong and great in what they do? We’d rather partner with them and benefit from what they do well. We are great at making kids happy and making consumer kids products.
Approximately 50% of Jakks’ annual sales came from Disney as of the spring of last year. Is that still the case?
The Walt Disney Co. is a major portion of our IP in many of our categories. Since they hit through their entertainment so many diverse age ranges and we hit so many diverse age ranges at Jakks, they hit every division that we work with.
What are some of your best-selling toys?
For 2024, right now we have our initial launch of “The Simpsons” that are selling extremely strong. They (retailers) have not had Simpsons product in the market over the last 15 to 17 years. So, it is the first launch of the Simpson product. The initial reads of “Sonic 3” the movie and “Moana 2” are extremely strong for this holiday season.
Our evergreen Disney girl’s business, our style collection, is doing very well. Our Nintendo line of product, which is a very deep line of product worldwide, is doing well. It seems like every area of business; a majority of our business is under $30 price point at retail and 90% is under $50 at retail. We are in those key price points that even when the consumer is hurting, we are at the right level of price point to get them quality product at lower prices. A lot of areas of our business are doing really well right now.
What are some of your regrets in business?
One was moving out of Malibu. The reason for that is that was where we were founded. We grew larger than the City of Malibu could handle… The other thing I would say is not moving faster internationally. We are now growing extremely well internationally. International is a very strong movement for us. I think the biggest regret would be not moving internationally faster than what we did today but at the same time it may not have been right at that time because we didn’t have the right IP and categories versus where we stand today. We have so many deep categories and IP and products that work well around the world.
What can others learn from you and your career?
Perseverance pays off. Even when things are difficult, you stay forward and you treat everybody with respect. Anyone that works in our company from any lower level (employee) to any executive, everyone is equal in our company and must treat everyone as equals. I think it is important for that. I think people tend to forget when you grow really fast that you don’t pay attention to everybody around you, so I say anyone around the world is equal to any executive around the world; we take care of our employees and at the same time the employees take care of us. We all work hand in hand together. When we make money, they make money and our shareholders make money. It is very important to me that everyone treats everyone with the utmost respect day in and day out.
What’s your background?
California boy, born and raised. I’ve worked since I was 14 and a half. I used to work at Lucky’s Market in the Valley. I was eager and hungry to be successful. From there I became a trainer. At the time, my family didn’t have the money to put me through college, so I had to make a living. From that, I focused on building businesses…
I had the opportunity when I was very young to meet my business partner, (the late) Jack Friedman, when I was a trainer. When he sold his company to MCA Universal in the ’80s, he had a company called LJN Toys, which made the ET dolls and the Michael Jackson dolls and he sold it to MCA Universal, today known as Universal, and I met him in the mid- to late-’80s and we became close. He decided to leave Universal and start THQ and that’s how we started our path forward.
He started THQ, the video game company?
Yes. We were together there at the same time.
So how did you end up starting Jakks Pacific?
The video game business was changing from the toy industry. Originally, the games were toys. You had a four-bit Gameboy game, the Sega Genesis, the Sega Game Gear, which was the color version of the handheld units. Those were still toys, you had to manufacture them in China, those were cartridges and ROMs that were used. Later in life when it went to 32 bit and 110 bits, it changed dramatically. It was very deep in cost to do development, and it became like doing a movie and the movies would cost (a lot) and you had to hit a home run to be successful. We didn’t want to spend that much capital developing the games and taking the risks. So, we took the platform that we did in licensing at THQ, we made “Home Alone” video games and Disney (video games) and we became the leader in Gameboy, we took that and left THQ at the end of 1994.
And then what did you do?
We started Jakks in 1995. With that same methodology but when we started Jakks we decided to do challenger toys to our competitors. At that time, it was 1995 and we acquired the rights to WWE and for WWE that was what Barbie was to Mattel or G.I. Joe was to Hasbro, it was our icon that we licensed.
How did the company grow?
From there we started to acquiring companies and having them as challenger brands to the major brands. We’ve done 30 acquisitions over 30 years, Next year is our 30th anniversary. But we acquired companies in the mid-’90s like Road Champs, which was located in New Jersey, and which was very strong in the diecast and 1:43 scale (cars) and you can take Hot Wheels as 1:24 scale and we were a leader in those categories. We acquired Remco, which was a steel truck company, and which was a challenger to the Tonka brand. We acquired Child Guidance, which was a preschool company and a challenger to Fisher Price and Playskool. What we did with these brands is we developed items, gave the retailer a higher margin than our normal competitors and gave the consumer a lower price point in order for us to get the shelf space and garnish strength and from that day forward we grew the company. We started in January 1995, went public in May 1996 and from there we started growing and became a leading toy company as we are today.
What are some of your hobbies or interests outside the workplace?
Hobby is still definitely Jakks. I am still very passionate about it. It doesn’t feel like work even though it is. I come into work, and it’s really not work. It’s fun. I love surfing, I’m an avid surfer. I love boxing. Outside (of work), my kids and my fiancée are my hobbies.
