WHAT ELECTRONIC ARTS DITCHING FIFA CAN TEACH US ABOUT BRAND LICENSING…

WHAT ELECTRONIC ARTS DITCHING FIFA CAN TEACH US ABOUT BRAND LICENSING…

FIFA has been a massively successful video games franchise for decades now for Electronic Arts. In fact, your author once interviewed to manage the brand, back in the early noughties, coming a close second to the winning candidate!

FIFA delivered $1.6bn in revenues to EA in the financial year ending March 2021. That’s a big chunk of their revenues, and so to make such a fundamental change, and to drop the FIFA name has to be seen as a major financial risk. However, FIFA were reportedly demanding to double their receipts from the game to a whopping $1billion.

Needless to say, there have no doubt been all kind of conversations behind closed doors to try to get a deal done that worked for both sides, but in the end, EA have decided to go it alone. This seems to offer a big lesson on brand licensing, which could be that Licensors can kill their own golden goose if they are not careful. EA already reportedly have deals with the major national leagues & with UEFA for the Champions League, and so the question is what is the value of the FIFA brand & IP? Football is a massively tribal sport, and fans care first about their teams and star players, and the video games player cares about that plus perhaps the glamour and kudos of the top players in the world. In the end, there may not actually be that much value in the FIFA name, or at least not enough to merit $1bn.

That is not to say that EA won’t face risks with their new ‘EA SPORTS FC’ title. For those old enough to remember, FIFA (the game) once had major competition from International Super Star Soccer, which morphed into Pro-Evolution. Looking back in time, Pro-Evo was a far better game, but they didn’t have the license or the star players, which FIFA did, and over time EA fixed the gameplay to make it as good as Pro-Evolution, and maybe better. The key thing to note here is that a worse game with branding and star players won a head-to-head battle.

The key question going forward will be whether the star players, national leagues & UEFA champions league will be enough to propel EA to ongoing success versus whatever official FIFA versions EA’s competitors are willing to pay to produce.

In the end, FIFA can’t fail but to lose out though, because at the very least the effect of these changes will be to split up the video console football (soccer!) revenues between multiple titles. And it seems unlikely any other company would stump up $1bn, when EA will be directly competing. The Golden Goose may be about to downsize, and in that should be a lesson for Licensors in general, a lucrative bird in the hand, is often the best option.

SPIN MASTER GROWS Q1 REVENUES & PROFITS YEAR ON YEAR

SPIN MASTER GROWS Q1 REVENUES & PROFITS YEAR ON YEAR

After a stellar 2021, Spin Master has continued their growth with a very successful Q1 2022.

Spin Master’s CEO Max Rangel was quoted as saying

“Following our very strong performance in 2021, we are extremely pleased with the positive momentum we saw across all three of our creative centers in the first quarter of 2022,” said Max Rangel, Spin Master’s Global President & CEO. “The Toy creative centre benefited from strong customer demand for our innovative toy line and our global commercial team continued to manage supply chain volatility to ensure we delivered product on time.”

Year on year revenues for Q1 increased by a whopping 34%, most of the increase coming from toy sales. Even more positively, Q1 operating income was $61.7m, up from $6.7m, which shows that Spin Master is not just shifting more boxes, they are doing it at profitable margins, despite all the supply chain shenanigans which are ongoing into 2022.

Looking forward, the company is predicting full year growth in the low double digits for toy sales. That’s quite something when there is no Paw Patrol movie this year and the company had such a stellar year last year. It is also astounding that the normally conservative bean counters at Spin Master HQ have allowed such a forecast to be released in a high inflation environment, where consumer spending is inevitably going to be affected by diminishing ‘real’ disposable income value, high fuel and food prices, and other factors.

Yet again, we can be hugely grateful to work in a business where demand remains strong even in tough times, and Spin Master certainly seem to be proving that so far in 2022…

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

 

 

MATTEL REPORTS STRONG Q1 2022, AND PROGRESSES CONTENT STRATEGY

MATTEL REPORTS STRONG Q1 2022, AND PROGRESSES CONTENT STRATEGY

Mattel have this week reported strong figures for Q1 2022. Net sales in what is normally a fairly sleepy quarter were up 19% year on year at $1,041m. Reported operating income was up by $46million, or 136% hitting $80m for the quarter.

Many people are expecting 2022 to be tough overall with high inflation predicted to dampen down consumer demand, but despite the inflationary environment Mattel delivered this quarter. The company has reported their expectation of 8-10% growth in ‘constant currency’ for full year 2022 at this point. Mattel obviously has some massive advantages in their owning some of the strongest brands in the industry in Barbie, Hot Wheels and Fisher Price, but nevertheless it’s a strong start to 2022 by Mattel.

Looking further forward, Mattel have also announced that J. J. Abrams Bad Robot will produce a live action Hot Wheels movie in conjunction with Warner Bros. Additionally, Rock ‘Em Sock ‘Em Robots will also get a live action movie via Universal and Vin Diesel. These movies mark Mattel’s 12th in production. On the Q1 earnings call, CEO Ynon Kreiz also confirmed that their latest Barbie TV movie is performing very well on recent release on the Netflix platform.

Going back 5 years or so, it seemed like Mattel had lost some lustre, some of what had driven the company to success for so long. The effect of Ynon Kreiz’s reign as CEO so far seems to have been to significantly ramp up Mattel’s content strategy and output. At the same time, toy sales and most importantly brand health have improved. Clearly there is a long way to go yet in 2022, but the outlook for Mattel’s 2022 and 2023 is starting to look a tad on the rosy side!

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

 

 

HASBRO MAKING MOVES & ANNOUNCES Q1 RESULTS

HASBRO MAKING MOVES & ANNOUNCES Q1 RESULTS

My ex-employers Hasbro have been in the new for three announcements in the last week:

Firstly, they announced the acquisition of D&D Beyond from Fandom. This is in effect an acquisition of a collection of fans of the brand via a popular web portal. Clearly new Hasbro CEO Chris Cocks has a deep understanding of the Wizards of the Coast business, and all thinks Strategy and online gaming, and that is reflected in the company’s first major acquisition under Mr. Cocks’ stewardship.

Next Hasbro announced two key appointments – Shane Azzi joins the company from Kimberley Clark as Chief Global Supply Chain Officer, and Matt Austin is promoted to Chief Commercial Officer. These job titles may sound a little bland, but they are key roles in driving the company forward – supply chain is obviously the major challenge for any consumer products business currently, and the Chief Commercial Officer at a major stock market listed company like Hasbro has responsibility for making sure shipments meet market expectations, which is a highly pressured position. Again, we can see the impact and control of Hasbro’s new CEO in these senior level appointments.

Finally, this week (so far at least!), Hasbro reported Q1 results. Bearing in mind the stellar performance of the US toy market in 2021, and Hasbro’s super strong full year in 2021, it will be particularly hard for the company to deliver growth again in a high inflation environment where consumers have less disposable income to spend on such fripperies as toys! Nevertheless, Hasbro reported revenue growth of 6% for Q1 2022 vs 2021 (allowing for a $17m unfavourable FX move). Operating profit was down for the quarter, but Q1 is not the most critical for driving profitability. Overall, Hasbro made good progress in Q1 against the backdrop of a stellar 2021 which was always going to be hard to match let alone beat and extremely difficult times.

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

 

THE CRITICAL ROLE OF ACQUISITIONS IN TOY COMPANY GROWTH

THE CRITICAL ROLE OF ACQUISITIONS IN TOY COMPANY GROWTH

Mattel purchased Mega Bloks for approximately $460m USD back in 2014. Hasbro acquired Power Rangers for $522million USD in 2018 and E1 (including Peppa Pig) for around $4billion USD in 2019. But it isn’t just recently that these long-established behemoths of the toy business have been on the acquisition trail, the history of both companies is littered with acquisitions.

Looking at other companies – MGA Entertainment acquired Little Tikes back in 2006 and of course Spin Master have made numerous purchases over the last decade or so with Rubiks being among the most notable of those.

Here’s why acquisition is always a big part of growth strategies for toy companies – it takes years, if not decades to build strong toy brands. Once a toy company gets to the size where they can access more advanced financing options, it often makes more sense to buy another brand or company than it does to proceed with a risky new launch in a category not previously entered.

For those building companies and brands with a desire to eventually sell up and cash out, there are many companies out there looking to buy ready made opportunities. If you’ve only recently started, you would need something quite special to get a quick sale most probably, but anything is possible!

 

Did you know we offer an acquisition Consultancy and agency service? For established businesses with something to offer that companies will want to buy we can potentially help. For more information, or to get in touch: www.KidsBrandInsight.com

NYC TOYFAIR CHANGES THE TOY BIZ TRADE SHOW TREADMILL FOREVER!

NYC TOYFAIR CHANGES THE TOY BIZ TRADE SHOW TREADMILL FOREVER!

Big news this week with the Toy Association (USA) announcing that the 118th New York toyfair will break with longstanding tradition and occur between September 30th and October 3rd 2023.

For decades, many toy people have traipsed across the world from Hong Kong to Nuremberg to New York speaking to the same buyers about the same products, with many international companies also having their own national fairs, such as the BTHA’s UK toyfair which occurs in January every year (under normal circumstances).

Now though, things have really changed! With the growth of mass market retailers, and with supply chain woes, the February date of the New York show was increasingly looking anachronistic. While it may have suited smaller independent retailers, the reality is that ASTRA has them well covered and most toy companies would not incur the costs of the New York show to service that smaller market. The new dates appear to offer a useful selling opportunity at the beginning of the annual sales window on the U.S. East coast, with the chance to actively influence the largest volume of sales. This would appear to future proof demand for the New York show. It is now set to become a must attend event versus becoming increasingly an expensive trade PR exercise with limited tangible payback for many companies.

For international visitors and those who have historically traipsed the international event circuit, this new timing should be good for some of the same reasons – more open access to mass market retailers at the time that matters, as well as decluttering the start of the new year which is only going to help.

Looks like us toy tradeshow circuit followers will be starting in September with the glitziest show in the business in New York and ending with the biggest toy trade show in the world in late Jan/Feb – that being Spielwarenmesse in Nuremberg. Traditionally, going from the dark and cold of Nuremberg to the dark and cold of New York was not altogether pleasant, but an additional benefit will be visitor experience – Manhattan in late Sept/early Oct is going to be a lot more fun!

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

 

 

MATTEL WINS ANOTHER DOLL OPPORTUNITY – FIRST DISNEY PRINCESS, NOW TROLLS

MATTEL WINS ANOTHER DOLL OPPORTUNITY – FIRST DISNEY PRINCESS, NOW TROLLS

Having only recently announced the return of Disney Princess Doll rights, Mattel has further announced the signing of the Trolls license for and beyond the next instalment of the Trolls movie franchise, due for release in late 2023. Mattel’s rights are reported to cover Dolls, Games, Vehicles and Plush.

The original Trolls movie grossed a creditable $346million at the global box office. The second movie ‘Trolls World Tour’ was released just as the Covid-19 pandemic emerged, and as a result had a limited release cinematically. A third Trolls movie could be a reasonable revenue booster for Mattel in 2023 and beyond.

Mattel’s momentum definitely seems to be building – alongside the resurgence of their core iconic brands, and their move further into producing entertainment content based on these franchises, the company also appears to have seen off a challenge from key rivals Hasbro to its long-term position as a major player in the Dolls category.

Moreover, there can be no crossover or mistaking Trolls for Barbie or a Disney Princess. Mattel now has a good few years ahead of strong momentum in their Dolls business, as long as they maintain focus and momentum on their flagship Barbie brand.

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

 

 

COVID SURGE IN CHINA, INFLATION STILL INCREASING & THE WAR GOES ON…

COVID SURGE IN CHINA, INFLATION STILL INCREASING & THE WAR GOES ON…

China’s Covid surge is starting to seriously worry toy & games companies. While Yantian port is officially open, there is reportedly a backlog and a shortage of other critical elements of the logistics process, like truck drivers for instance. As the toy business is heading into peak season production, delays in production and shipments are not going to do anybody’s frayed nerves good (perhaps aside from shipping company people!). Many toy companies we spoke to were already planning to commit to manufacturing earlier than usual, this latest Covid surge in China will most likely cause others to do the same. It does not seem that the shipping issues of 2021 will be going away in 2022 alas!

Many major economies are still seeing inflation increase, with the UK this week updating on inflation figures to the highest levels seen in 30 years – truly crazy! The oil price has been fluctuating like usual, but on the day of writing this article (23rd March 2022) the price is in the vicinity of $120 per barrel, which is VERY high, and effectively means that the vast majority of toys produced in 2022 will be produced with the highest plastic resin prices we have had in recent years.

In Ukraine sadly the horrific conflict is continuing, with more and more homes being destroyed, people being displaced and both innocent civilians and fighting forces on both sides losing their lives. For the toy & game business this human tragedy will also not help business in most cases, as Russia was a good-sized market which will now be very hard to supply.

The reality right now is that there are some very grim things going on which are making life and doing business much more difficult than ever, but we can remain thankful that demand for our products is robust and that we as an industry have a good future ahead, even if the clouds are currently gathering!

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

 

THE GLOBAL ECONOMY AT RISK DUE TO CHINA’S NEW COVID LOCKDOWNS & WAR IN UKRAINE

THE GLOBAL ECONOMY AT RISK DUE TO CHINA’S NEW COVID LOCKDOWNS & WAR IN UKRAINE

The term ‘turbulent’ is becoming very boring as it is getting repeated so often these days – but what better word is there to describe these times we are living in? This week, China rolled out extensive lockdowns due to a rise in Covid cases topping 5,000 cases. In a country which has a Zero Covid strategy, this was inevitably going to lead to a major response from the authorities.

For the toy business, most critically, Shenzhen and Dongguan are locked down, although some media reports confirm that those factories in Dongguan who don’t have Covid cases can carry on producing under strict conditions designed to minimise any risk of escalating Covid cases. With so many workers living in dormitories in factories, the hope is of course that toy production will not be badly affected.

The timing is bad though, typically toy factories reach peak production from May through to August, but due to the ongoing container shipping crisis, many toy companies have placed POs early and planned to get stock on the water as soon as possible after notification of listing by key retailers. In short, the latest Covid issue in China is not going to help already disrupted supply chains.

Looking more broadly at toy manufacturing, this latest challenge in China as we get towards the main production period of the year is just going to further strengthen the gradual shift of toy production away from China. Any toy companies who don’t have a risk diversification strategy well underway on their sourcing efforts are taking a big risk.

In Europe, the dreadful war in Ukraine is continuing. The horror of this war makes any commercial considerations seem meaningless, but there will be some loss of sales to the ever more isolated Russian market. This shouldn’t have too adverse an affect on the overall toy industry though as the Russian toy market accounted for just a few percent of the global total before the currency was devalued by the current war. Toy companies have been admirably doing their bit to provide toys and other critical items, as well as funding, to the people of Ukraine. Looking forward we are now seeing suggestions of a peace deal being reached in the foreseeable future, we hope this comes as quickly and effectively as possible. Oil prices have receded significantly from their highs of the last few weeks, where prices went above $130 per barrel, such exorbitant prices only previously being exceeded during the global financial crisis. At the time of writing this article, the cost had slid back to just under $100. The issue for the toy business here is that plastic materials purchased now as production starts to ramp up will inevitably be significantly more expensive, as will transportation. In short, the terrible war in Ukraine will only add to the general inflationary pressures we are seeing in the world today. We would expect yet more difficult conversations with retailers about pricing as things stand.

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

 

LEGO REPORTS INCREDIBLE FULL YEAR 2021 RESULTS!

LEGO REPORTS INCREDIBLE FULL YEAR 2021 RESULTS!

Lego reported their annual results this week for a turbulent 2021 in which they performed incredibly well (yet again!). Total revenues were equivalent to $8.15 billion USD, which makes Lego the biggest toy company by some way, and that figure represents growth of 27% yoy (!) compared with 2020. Operating profit came in at around 30% of revenues, which in terms of industry benchmarks is around twice what a toy company could reasonably be expected to deliver in good years.

In summary, Lego is an incredible business which has thrived during the pandemic both commercially and in terms of brand equity.

One major advantage Lego had in 2021 was the fact that they are the only major toy company to have their entire factory capacity in house and near to market. Whereas most toy companies manufacture most or even all of their products in Asia traditionally and then ship products to the major toy markets in the West, Lego have a long-term strategy of building their own factories closer to market i.e. Mexico for the lucrative North American toy market, Denmark & Hungary for Europe, and China & soon to be Vietnam for the fast-growing Asia-Pacific region. So, when most toy companies were in despair about container shipping prices and availability, Lego could keep on churning out their products close to home delivering industry leading profitability ratios and ensuring supply. There was probably some fun & games going on in the background in terms of securing plastic and other raw materials, but Lego had some massive innate advantages that other toy companies just didn’t have!

Another major advantage Lego has is own retail stores – with 832 stores as of December 2022. Most toy companies would see this as being too risky in terms of the business model and operational management of retail, and as being in competition with their customers. But Lego prove that a). toy companies can manage concept toy stores and b). they help not hinder other retail customers.

Lego have yet again shown the way to do it in 2021 – congratulations to Lego’s management and people around the world.

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com