Mattel Inc. shocked Wall Street a couple of weeks ago when it announced its fourth quarter operating earnings had plunged unexpectedly. The reason: suddenly anemic toy sales.
“We just didn’t sell enough Barbie dolls,” Mattel’s chief executive, Bryan Stockton, said at the time.
The El Segundo manufacturer is not alone. Its main rival, Hasbro, last week reported its fourth quarter net income slid 15 percent.
What’s going on? Analysts and observers have postulated that physical toys are no longer quite so dearly desired. Children today are perfectly happy playing with a tablet or some electronic gizmo. Even a kid’s app on mom’s smartphone can be plenty entertaining, and mom appreciates the fact that the app was free or nearly so.
Can that be? I mean, kids have cherished toys since the first Neanderthal toddler picked up bones from the cave floor and began drumming on his brother’s head. But maybe it really is true. NPD Group, a market research firm, recently reported that toy sales overall declined 1 percent last year. Action figures were down 6 percent. But what’s called “youth electronics”? Up 18 percent. Yikes.
If true, this does not augur well for Mattel, a company that depends on Barbie, Hot Wheels and other classic, physical toys. Maybe that explains why its stock plunged 12 percent the day it announced its earnings, and trended even lower after that. As of last week, Mattel’s stock was down 23 percent in this young year.
Just a note: Toys are a fairly serious matter to the L.A. economy. Mattel is Los Angeles County’s seventh-biggest public company. Other local toymakers include MGA Entertainment in Van Nuys and Jakks Pacific in Malibu. Even the Walt Disney Co. in Burbank has a fairly big toy component.
Suddenly drooping toy sales appears to be part of a trend we’ve noted in the past. The digital revolution, having already roughed up obvious victims (newspapers, travel agents, bookstores), is moving on to cut up some not-so-obvious targets. Taxicabs, for example, feel like they’re being cut off in traffic by ride-sharing apps Uber and Lyft. And now, toys.
What’s one of the big unknowns of doing business now? Waking up some bleak day and realizing – oh no! – maybe it really is happening. Your industry suddenly is one of the not-so-obvious targets of the digital revolution.
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You may have wondered – or laughed – when Aaron Kushner announced in December that he planned to start a daily newspaper in Los Angeles. The first question: Is there a market for that?
But after reading the article in the Business Journal a few weeks ago, I think there just may be.
Kushner, owner of the Orange County Register, explained that his new Los Angeles Register will have a free-market orientation. That will make it distinctly different from the liberal Los Angeles Times.
So how big is the market for such a paper? Well, there were 885,000 Los Angeles County votes cast for Mitt Romney in 2012 and 956,000 for John McCain in 2008. That implies there are about 900,000 folks in the county motivated enough to vote who may be receptive to the Register’s free-market message. And let’s say 10 percent of them subscribe to the Register, a ratio that’s fairly conservative. (Yes, the pun was intended.) That gets you to 90,000 subscriptions. Not huge, but it’s more than the Los Angeles Daily News, which has average daily circulation of less than 70,000, and it’s enough to survive. The market exists.
The bigger challenge for the new Register will be on the news pages. Angelenos are pretty informed and sophisticated. Readers won’t warm up to any publication – new or old – that fills its news hole with wire stories, tepid accounts of routine government meetings and the usual next-day sports stories. We don’t need another Daily News.
The problem is, it takes real money to reliably produce smart, informed, readable news pages. Since Kushner has been laying off people at a time you’d think he’d be staffing up, well, it doesn’t instill much confidence.
Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].
