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The State of the Toy Business 2014: Hey, Is That a Cliff?

This is the latest kick in the teeth to the toy business …


While Transformers, the movie is doing fine – the toys are stacked to the gills and selling at a slow pace. Basically, the toy business is like the movie business now. If you don’t have blank pegs by the time the movie opens, the toy line is pretty much a done deal.

And if you can’t sell Transformer toys with a giant movie opening, you cannot sell toys.

AND if you can’t sell trucks or robots that change into dinosaurs, there is big trouble in toyland.

The #1 licensed toy line in America usually generates about $400-$500 million in sales a year. No, real surprise, Star Wars has been pretty much #1 since 1977 … though sporadically, other lines have broken through to take the crown including Ninja Turtles, Spiderman, and of course Transformers. CARS was a solid #2 in 2007-2009 and came close but never could close than last $50-$75 million to overtake Star Wars. Mattel had high hope for CARS 2 but everyone here knows what happened there … Planes did well but I doubt it broke $100 million in the US, a solid surprise hit but not Star Wars territory.

At the rate the toys are selling, Transformers might still crack $225 million which is a lot but when you create inventory to sell $500 million dollars worth of toys? That’s not so good – plus all the 2nd and 3rd waves they were expecting to sell. So, get ready for some massive markdowns and serious re-packing … so wait for the sales and markdowns (and pick up the wave #2 & #3 releases for sales stock as they won’t get as much distribution).  🙂

Last year, toy sales were down 9% in the US which is obviously not good BUT the worse news is if you took out LEGO, toy sales are down 17%!

The toy business is like the video game business 5 to 10 years ago, their business model were built on spending $10-$20 million to create a huge game but generally able to sell 5-15 million copies of a game at $49 per and having dozens of “blockbusters” a year by piling on the polygons … only the economy took a dive, the demographics changed, and mobile gaming took a big bite so from 5 years ago, times have changed – An A titles cost as much to make but the market has shrunk to a few hits a year … basically the same problem as the toy industry – spending money no longer makes money anymore.

Up until a few years, spending more money on more bells and whistles meant you could charge more – add lights, sounds, and “simple technology” wowed the audience and you could charge a bit more but now, adding lights & sounds jacks the price but do sales increase as much? No. Because we’re all jaded … the toy industry can’t match what we value anymore or we cannot be dazzled by “simple technology” anymore.

Don’t get me wrong, I’m not saying people don’t want toys anymore or that there won’t be a toy market but the market has splintered to people willing to pay top dollars for amazing sculpts and design and to the MASS MARKET who will pick up some “basics” toys (diecasts, doll, bear, stick, etc, etc …) but not bother with a $49.99 plastic plane when they can just hand over their iphone or ipad.

The problem is the toy industry is now business-built staffing wise and revenue-promissory wise of $49.99 plastic playsets and $59.99 electronic Monopoly … and this summer, with Transformers a non-blockbuster, they may just have driven off a cliff … and with Mattel, things are not very rosy. Monster High has stopped growing, the growth engine that covered a lot of problems. Barbie and Hot Wheels are flat or still slowing … while Planes is doing fine, it’s a minor line in the big scheme of things … and of course, CARS is down – real shock to everyone here … right? (psst, small shipments equal small sales).

Mattel was counting on huge growth from their own properties, Max Steel and the strangely named BoomCo, a Nerf competitor of foam darts and arrows … neither seems to have made much of an impression on consumers.

And of course, retailers are going to accelerate the deceleration … one more row of headphones, wifi speakers, ipads and itunes cards are a lot more profitable than Planes MicroDrifters, Max Steel action figures or now apparently Transformers …

So, the next couple years will be very telling. Massive layoffs seem to be coming, what will the toy industry look like in a few years? Can the two giants fix their overhead issues of staffing that does not serve the toy industry as a going concern (more designers, less VP’s of computer databases?) Will they have to crash and burn before rising from the ashes? Will they rise from the ashes? Will Disney simply wait for Mattel to collapse before swooping them up at bargain basement prices? Will 3D printing change the dynamics of the toy business? Send $10k for the full report and analyses. 🙂


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13 July 2014 Toys 8 Comments


  • BMW says:

    Last week I was in a Walmart that had just restocked with case A, the Lubewig case. A Mom and her 5 year old son were looking at the Cars.
    She said she had been looking for one car in particular. I couldn’t understand which car it was. She kept saying mthekin. Finally I bent over and asked her son to repeat the car he wanted. After he repeated 3 times, it dawned on me the he was saying Mrs. the King. I made arrangements with her to call me and pick up a Mrs the King. Meanwhile she let him pick out one car. He chose Francesco. She said his other Francesco was pretty beat up from hard play.

    I was a bit shocked with all the newer cars on the pegs, that he wanted a new Francesco. I guess Mattel does know their consumer base after all.

    (MET: Very cute!)

  • Matersgrlfriend says:

    I don’t know much about the toy business. I do know about Cars and with as much as Mattel messes up what could be a gravy train in just this one small segment, multiplied by all their lines, plus the factors laid out in this article, I can see why they have a big problem. One can only hope they rethink some things and start to get more right.

    Toy companies have unprecedented access to what their customers are thinking and what they want and they refuse to use it and instead continue to make decisions as if they know what the customer wants more than the customer does.

    • NeilJam says:

      Hasbro and Mattel are both too entrenched in their main character mindset, insisting that is what everyone wants. They pack cases with far too many McQueens, Bumblebees, and Batman figures which end up clogging the peg, then say that they sell better. Those sales are just the result of the assortments they selected to sell to the stores, and they don’t seem to take into account which ones get clearanced, sold to an outlet, or hang around unsold for an extended period.
      The stores would have to keep track of this and start asking for better assortments from the manufacturers. Most stores such as Target and KMart have many other areas to maintain so they don’t want to allot the time and resources to the task of tracking which individual characters sell better or faster rather than just the overall sales for a toy-line.

    • Mack_me_Bucko says:

      True enough, but they did make $4.35 billion last year in gross sales. They must be doing something right?

  • Jack says:

    I don’t think they are too worried. With no competition the only 2 toy companies picked to produce most of the worlds toys make more than enough to miss on some lines. They will eventually sell anyway, even if they have to keep them there for a few months until Christmas shopping season.
    Maybe it’s time to give the Transformers a break for while. They have been milking that cow for years. It’s too much now.

  • BMW says:

    Plenty of pegwarmers with Star Wars, Hasbro made way too many Greedo and Slave Leia that no one wanted at 20.00 each. Pegwarm everywhere.

    I thought the latest batch of Transformers were very plastic and cheap looking, unlike the awesome ones that people clamored for last year.

  • John in Missouri says:

    With Star Wars toys, do they simply produce what Collectors want and need, or are there pegwarmers there too?

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