15 December 2017 ~ 0 Comments

Will The Disney-Fox Deal Be Good Or Bad For The Toy Industry?

WILL THE DISNEY-FOX DEAL BE GOOD OR BAD FOR THE TOY INDUSTRY?

The toy industry has seen some big headlines during 2017, and that hasn’t stopped despite us being so close to the end of the year!

The announcement that The Walt Disney Company is to acquire Twenty-First Century Fox Inc. is as big a story as any so far this year. The question though is whether this will be good or bad for the toy industry?

Firstly, let’s just be clear about what is and what is not on the table:

The deal is reported to include Fox’s film & TV studios, cable networks & international TV networks. It has also been reported that the Fox IP is also included in the deal. This brings Marvel’s cinematic universe all under one roof, which may put some duplicated actors out of work but will surely simplify the narrative.

THE IMPLICATIONS FOR THE TOY INDUSTRY

Disney will have a vastly increased on demand/streaming content offer – with the rapid growth in power & distribution of Netflix, Amazon etc., it has become increasingly important for the 20th Century movie behemoth studios to compete to maximise long term revenue streams & to insure against any declien in box office takings. Why does this matter to the toy industry? Well now we’re heading towards the situation where Disney is going to be the major power in streaming/on demand movie content viewing in terms of blockbuster movie franchises. With Star Wars, Marvel, Disney, Pixar AND Fox’s content all on offer, clearly Disney is going to play a huge part in shaping the marketplace for streaming/on demand. This is a critical viewing platform for kids, our end consumer for toys. So actually Disney’s increased power base in this space should help the toy industry, as the same company that benefits from large consumer products revenues is also controlling what airs when & how in order to maximise the impact.

Disney’s Licensing clout just got even greater – Disney already controls a huge chunk of key toy licenses i.e. Star Wars, Marvel etc. Now they will control even more. I don’t need to tell any one in the toy industry about Disney’s ability to maximise commercial returns from licensing/effectively manage licensees, so Disney having an even greater market share is likely to help drive greater sales overall in terms of Disney’s massive & highly efficient marketing machine, but perhaps could arguably shift power in licensing negotiations even further in their direction. Woe betide a toy licensing executive who falls out with Disney Consumer Products in this day and age!

Disney will manage the movie slate efficiently – going forward this deal should minimise clashes in release slate for Marvel movies for a start, but in general should allow for the slate to be maximised to avoid movie vs movie cannibalisation as far as is practical. You could also argue that Disney are more likely to increase output on key franchises – for instance Avatar is still by far the highest grossing movie of all time – the only movie to get anywhere near $3bn at the box office. Yet Avatar hit screens in 2009, and here we are in 2017 without an Avatar 2 having released. If Disney had released the movie originally would we still be without a sequel all these years later? With 4 sequels now finally on the way between 2020 & 2025, the Avatar franchise alone could go some way to paying Disney back for the Fox acquisition.

Disney will focus on franchises – the following logic can probably be applied to all companies/industries – when you acquire many of your competitors and assemble an almost unbelievable array of brands/franchises, originality is going to take a back seat! Clearly a company with so many franchises is going to milk them until the cows come home. You could argue one of the biggest challenges for Hasbro & Mattel is that they have so many opportunities with existing properties that they struggle to take the risk of as many new launches as their smaller competitors do. The same could apply in the kid targeted movie world.

The only worry with that, and it is potentially a very big one is that 2017 has been a very disappointing movie year. It has been speculated that consumers may be getting a little bored with blockbuster franchise CGI explosion-athons, reuslting in poor box office this year as franchises dominated. So the challenge is how to ensure the kind of fresh smash hits ( e.g. Frozen) which drive massive unexpected consumer product sales (especially toys) continue to come when it may be easier/less risky to accept each sequel tailing off a little vs the last in the series.

The clear answer to this for Disney in recent history has been Pixar. Pixar has been an ongoing source of innovation and freshness for a long time now. But as Fox is amalgamated, and with one less entirely separate commissioning team to give original concepts the chance of becoming movies, could we end up in a downward spiral of ‘same as’/’me too’ movies which in turn might fail to recruit the next generation of potential movie goers, which would be bad news for the toy industry?

The clear conclusion should be that there needs to continue to be a space for new brands and franchises, and if Disney don’t launch these, they may fail to benefit from their even further increased market share, and we may see disruptive platforms like Netflix/Amazon agressively moving to fill the gaps for original non-sequel content

Either way the world will keep on turning, and movies will continue to sell toys, but a less bumpy path would no doubt be appreciated by the global toy industry after the turbulence of 2017!

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading toy expert consultancy to toy companies around the world, which helps people & companies to get ahead in the toy industry and to save $$$ by sourcing the best toy & game factories. Steve also advises investment companies via leading expert networks like Gerson Lehrman (Steve is an acknowledged GLG toy expert)

Leave a Reply