US OPINION: How Disney grabbed the toy market

Disney's toy licensing programme has given it a significant influence over the worlds top five toy manufacturers. Lutz Muller examines how it happened and what it means for the industry...
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Disney has for a long time been a major player in films, theme parks and TV stations. 

Very quietly, Disney has also become a major influence in the toy market. By placing their increasingly potent licenses with the major players, they literally have become the puppet master pulling the strings to which all five top toy manufacturers dance.

It began with the acquisition of Marvel, the provider of most action figure licenses to Hasbro in August 2009. Traditionally, Disney had been working with Mattel, the largest toy company in the world, as the master licensee for its film properties but this acquisition also gave them leverage over the second largest toy manufacturer, Hasbro. In addition, they increasingly use Jakks as a licensee for a number of their properties including The Pirates in 2012.

To round out the picture, Disney moved away from Mega and appointed Lego in 2009 for all its film properties in the construction toy category. Finally, Spin Master obtained the rights for Tron Legacy and I assume that this relationship will be further expanded once Disney is satisfied with Spin Master’s performance for this title.

In short, Disney now has leverage over the five largest toy companies in the world and is becoming an important influence in action figures, dolls, pre-school, construction toys and, with the Cars license, vehicles. Between them, these five categories represent nearly half of the US toy market.

In this, Disney was aided by a string of incredibly successful movies this year – Alice in Wonderland with a worldwide box office well North of $1 billion; Toy Story 3 again with more than $1 billion and Tangled which appears well poised to exceed $500 million. Tron Legacy, released in December was expected to be very strong and in box office results only second to this year’s Harry Potter. Tangled and Tron are expected to have a very long tail and to drive toy sales well into the second half of next year.

Given the nature of the movies it released, its main focus in toy terms is dolls, pre-school, construction and action figures.

The jury is still out for the action figure category but Disney has made real progress in all the others. The company is still overshadowed by Lucas’ Star Wars in the construction category and by Hit’s Thomas in pre-school but has carved out strong positions and will undoubtedly continue to gain market share.

After all, Disney’s venture with Lego and its entry into pre-school with Mattel only dates back to the beginning of this year and the progress made in this short period is nothing less than astounding.

All dolled up

However, it is the story of their doll business which is truly extraordinary.

I asked Chris Heatherly, Disney VP Toys and in charge of the North American toys and electronics business about this and this is what he said about fashion dolls.

"We are up 90 per cent in retail sell-through this year. We have doubled our market share in the past few years and this year became the number two fashion doll brand, second only to Barbie."

As for Princess + Me from Jakks: "This line has been on virtually every holiday gift list and already won tons of awards and the sales have well exceeded everyone’s expectations. TRU has been an incredible partner in marketing this linje and we have aggressive plans for next year to expand."

Regarding small dolls he says: "We have also had a major expansion in small dolls, have quickly gobbled up market share and have already outpaced Strawberry Shortcake".

Lastly, on its role-play items, he says: "We have similarly explosive growth in role-play with Jakks-owned CDI. Even though we launched with Tolly [only] in August, we have already doubled our sales from the prior year."

Alice brand

The one puzzle in this picture is Alice in Wonderland. Movie industry insiders had predicted that the film was going to be very successful but even they did not foresee the astounding box office result that materialised – over $1 billion worldwide.

Mattel released only one figure for this license – the Mad Hatter at $59.99 in TRU only – and this situation remained unchanged during the lifetime of the film, the release of the DVD and at Halloween.

In contrast, Funko had the plush license and did very significant business with approximately 10 reasonably priced SKUs. While I am sure that Mattel had good reasons for handling Alice the way it did, I cannot help thinking that there was perhaps a missed opportunity.

2011 looks like another winning year for Disney if its movie line-up is anything to go by. Between Disney and Marvel, they will have eight very strong films – three for action figures [Thor, Pirates and Captain America]; three for pre-school [Winnie the Pooh, Spy Kids, and the Muppets]; one for dolls [Enchanted] and one for vehicles [Cars]. And then there is also the spill-over of both Tangled and Tron Legacy for the doll and action figure categories, respectively.

Interesting is the apparent decision of Disney’s to stay away from Mattel as far as the action figure category is concerned, since Tron Legacy went to Spin Master and the Pirates are going to Jakks. It will give both companies a singular opportunity to show what they can do and whoever turns out to be the winner is likely to be favorably considered for future opportunities in this category


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