More play dates with the toy industry

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Related Q&A: Hasbro's Lisa Licht

NEW YORK -- Spock and Captain Kirk will jockey for position with Transformers, Harry Potter and Wolverine. SpongeBob is looking to outcharm Dora the Explorer and the Simpsons.

In short, the annual Toy Fair that kicks off in New York this weekend is expected to place bigger bets on the latest dolls and playthings based on movies and TV shows.

"Every studio is very involved this year," says Reyne Rice, trends specialist for the Toy Industry Assn. "It's definitely going to be a big year for entertainment licenses."

Rice says that 25%-35% of all toy dollars are typically spent on products tied to a licensed or entertainment property, but this year, it may be more. She counts more than 25 movies that lend themselves to toy treatment; in most years, it's closer to 10-15.

That's good news for Hollywood studios.

Licensors of entertainment properties generally get an upfront guarantee from a master toy licensee, which can be worth $1 million or more for top franchises. Then the studio typically gets a 10%-15% cut of wholesale receipts, which are around 50% of retail, says Steven Ekstract, group publisher at License Global! magazine.

In the case of major franchises like Disney/Pixar's "Toy Story," that percentage can go even higher. "It's a very great and very profitable business for studios," Ekstract says. "It's a revenue stream they really need."

Meanwhile, such powerful retailers as Wal-Mart and Target won't even accept product if it's not a franchise property because they use it as a promotional tool to drive people to their stores. Sterne, Agee & Leach analyst Margaret Whitfield says that 2007's "Tranformers" movie changed the game, helping boost the Hasbro toy's sales from $100 million a year to an estimated $500 million after the film's release.

"No wonder they want to continue with a sequel," Whitfield says.

" 'Transformers' the movie reinvigorated the toy franchise to such a degree that we launched a TV show after it, greenlit 'G.I. Joe' and made a deal with Universal on nine more properties," says Lisa Licht, GM of entertainment and licensing at Hasbro. "It's very compelling for the company."

At the same time, film studios increasingly mine the built-in name recognition of toy and game brands for potential blockbusters.

This summer brings Paramount's "G.I. Joe" and a "Transformers" sequel from DreamWorks/Paramount, both based on Hasbro properties and with Hasbro as a producer. Ridley Scott is set to direct Universal's "Monopoly," and "Candyland," "Ouija" and the maritime classic "Battleship" also are in development as part of Hasbro's six-year strategic partnership with Universal covering nine Hasbro properties and at least four films.

In addition, "Trivial Pursuit: America Plays," based on the Hasbro classic, is airing as a syndicated TV program.

In fact, in the past years, the now WMA-repped Hasbro quietly has refashioned itself as a quasi-content company, licensing its franchises for film or TV treatment and partnering on development and financing.

"We want our consumers to be able to experience the brands that they have an emotional connection to, that they have loved since they were children any time, any place," Licht says.

Whitfield says that in the toy industry, "Hasbro has taken the lead in licensing brands to film studios, but Mattel may follow in 2010 and later" after sticking a first toe in the water last year with the release of "Kit Kittredge: An American Girl." Although the movie grossed only $17.7 million in domestic boxoffice, well below the $319 million of "Transformers," Mattel chairman and CEO Bob Eckert said in an analyst call last month that more films might be on tap.

Piper Jaffray analyst Anthony Gikas argues that licensing is a low-risk model for toymakers.

Although Hasbro is co-financing script development with Universal and has the option of co-funding productions, financial commitments typically are low. Hasbro retained all merchandising rights under the Universal deal, though the studio does participate in film-based merchandising revenue. The two firms haven't disclosed financial details.

"The benefit to them is increased toy sales at reduced marketing spend -- a higher-margin business for them," Gikas says.

As with all movies, there is the risk of flops. And with the deepening recession, Mattel and Hasbro reported lower earnings for the key holiday-season quarter. Still, toys and entertainment are considered more recession-resistant, and more so when they are combined.

"Brands and recognizable characters are becoming more important at retail during tough economic times," says Marty Brochstein, senior vp industry relations at the Licensing International Merchandising Assn. "Because they help drive consumers into stores."



The industry is also reacting to the times, offering toys at a lower price point.

"With the current state of the economy, consumers are looking for familiar, economically friendly options," says Manuel Torres, senior vp global toys, video games and consumer electronics at Nickelodeon & Viacom Consumer Products. "Our partners have been able to bring very innovative yet price-sensitive product to the market with the highest-quality standards."

Karen McTier, executive vp, domestic licensing and worldwide marketing at Warner Bros. Consumer Products, says her studio also is offering more affordable toys. "There are increasing numbers of consumers looking for value-based toy propositions at retail, and we expect this trend to continue as cash-conscious consumers, or 'recession-istas,' want the best bang for their toy bucks," she says.

With Hollywood franchises out in force at Toy Fair, Disney again will put the spotlight on its Disney Princess franchise led by its newest princess, Tiana, featured in holiday release "The Princess and the Frog." "Toy Story," the first installment of which will be re-released in 3-D this fall and whose third film comes out next year, "Cars" and the growing Disney Fairies franchise, will also be among the featured brands.

Driven by such franchises as Disney Princess, "Hannah Montana," "High School Musical" and "Cars," retail sales of Disney toys and other merchandise rose to a record $30 billion globally for the fiscal year ending Sept. 30, making it the consumer-products leader among studios.

Time Warner's Warner Bros. Consumer Products unit, with an estimated $6 billion in annual retail sales, will present product tied to the new Cartoon Network animation series "Batman: The Brave and the Bold"; "Harry Potter," whose sixth film installment is out in the summer; and "Watchmen."

Viacom's Nickelodeon network, generally seen as the No. 3 entertainment and the top TV-driven licensor, has annual retail sales of about $5 billion thanks to such key franchises as SpongeBob SquarePants, which will kick off its 10th anniversary with a talking plush from Play-A-Long; a line of classic games from Hasbro; Lego sets; and educational toys from LeapFrog.

In addition to toys based on this summer's "Transformers" and "G.I. Joe," Nickelodeon & Viacom Consumer Products will debut the first toys tied to Nick Jr.'s "Ni Hao, Kai-lan" at Toy Fair, showcase toys for "iCarly" and unveil a brand extension for "Dora the Explorer" that targets girls ages 5-8. Mattel is expected to offer this grown-up version of a Dora doll, which can be computer-customized to change eye color and hair length, priced at $59.99.

Viacom sibling CBS Corp. is bringing one of the biggest buzz brands to Toy Fair - "Star Trek." Liz Kalodner, executive vp and GM of CBS Consumer Products, says this year's "Star Trek" product lineup is "the largest collection that has been in the market certainly in a decade." The toys, based on the cast of J.J. Abrams' reboot of the franchise, will be available at retail locations at the end of April, ahead of the Paramount film's May release.

For example, Wal-Mart is offering a new line of Mattel "Star Trek" Barbie dolls for the fanboy set, which sell for a grown-up price of more than $40.

Meanwhile, News Corp. is gearing up for a particularly big toy year after a more quiet 2008. Fox's strongest franchise in toys has been "The Simpsons," which has amassed more than $5 billion in retail sales during its history, says Elie Dekel, executive vp at Fox Licensing and Merchandising. On the film side, Fox partners are expected to showcase action figures and vehicles for "Dragonball," bobbleheads and remote control planes for "Night at the Museum: Battle of the Smithsonian" and action figures for "X-Men Origins: Wolverine (which Fox releases in partnership with Marvel, which retains the licensing rights)."

All these new Hollywood offerings compliment older franchises that will be on display at Toy Fair, including CBS Consumer Products' "Twilight Zone," which celebrates its 50th anniversary, and "I Love Lucy," and Warners' "Wizard of Oz," which is celebrating its 70th anniversary with a special collectible Barbie doll of the Wicked Witch.

Also taking the stage will be a "Seinfeld" trivia game, upon which Jim Pressman, president of Pressman Toy Corp., is betting after having success last year with "The Office Trivia Game," based on the NBC hit comedt. It shipped 350,000-400,000 units, he says.

"You look for something that has the widest appeal, but also a really dedicated appeal," Pressman says. In the current recession, games tied to known entertainment franchises that provide comfort and classic games will do best, he predicts.
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