The story is a legendary one: an oft-recounted tale that sparked a turning point in toy and licensing history. In 1976, 20th Century Fox approached New York-based Mego Corp. with a licensing opportunity tied to a low-budget sci-fi film from a scrappy little production company run by the guy who directed American Graffiti. Mego, then dominating the action aisle with its popular range of 8-inch, doll-like clothed action figures, didn’t see much potential in a movie called The Star Wars.
But Cincinnati-based Kenner Products did. The General Mills-owned company known for Play-Doh and the Easy Bake Oven then innovated the entire action category with its 3.75-inch scale Kenner Star Wars collection. Within a few years, nearly everyone — including Mego — had copied the scale, and the hunt for the next big master license was on.
For most of the past 45 years, the master toy license for Star Wars stayed with the Kenner lineage, following the company through ownership changes and landing under the Hasbro umbrella in the mid-1990s. But then, just as Toy Fair New York kicked off last year, an unexpected change took place.
Hasbro and The Walt Disney Co. — which acquired Star Wars owner Lucasfilm Ltd. in 2012 — revealed a renewal and extension of their “strategic merchandising relationship” for the Star Wars and Marvel franchises. The carefully worded announcement was conspicuously missing some verbiage that had long been a part of the deal: “master toy partner.”
Star Wars has had countless licensees come and go, but certain categories — notably action figures and plush — had been firmly locked under Hasbro and Kenner. With the revised deal, the blast doors opened for new players to enter a galaxy far, far away by offering similar products in slightly different scales thanks to slicensing: the process in which a license is shared among similar licensees in the same space.
By midyear, Mattel and Hasbro were offering competing versions of The Child, aka Baby Yoda, from The Mandalorian, and Jazwares’ Kellytoy division was serving up Squishmallows versions of The Child, Chewbacca, and BB-8. Meanwhile, Hasbro’s 3.75-inch Star Wars: The Vintage Collection and 6-inch Star Wars: The Black Series action figures were joined by a new 7-inch scale Star Wars Select collection from Diamond Select Toys.
“The days of the master licensee are over,” says Michael Goodman, founder and CEO of Toronto-based licensing agency MLGPC. Goodman, who represents classic brands, including The Original Big Wheel and Weird-Ohs, recently inked a first-look deal with The Nacelle Co. — producers of Netflix’s The Toys That Made Us — to identify toy properties for its development and production slate. Goodman says that the shift away from master agreements “has a lot to do with the complete fragmentation of our current media landscape” across multiple, competing, platforms.
“In the past, if you owned a content-based IP, that content would be aired to a captive audience on one of three networks or be one of three films opening in theaters at a specified time,” he says. “If you own a content-based IP in 2021, it’s likely to live on one of many platforms, and because of that reason, there’s probably not enough of an audience to convince a toy manufacturer to allocate significant resources to licensing, producing, and ultimately marketing product based on that IP.”
One point of major concern is the lack of a genuine, knocked-out-of-the-park, digital-first hit toy line. While many series from Netflix, Hulu, and YouTube have spawned toys and other consumer products, it’s arguable — sans a couple of influencer-based toys — as to whether or not a streaming service will inspire the kind of hits that Saturday morning or after- school cartoons used to generate.
“Toy companies wait for — or should be waiting for — a hit now before becoming a licensee on an IP,” Goodman says. “The advantage of waiting for a hit is that you have a more precise prediction of how much business products based on any IP will do, especially if the streamers share numbers. Look at The Mandalorian. Not only did the licensing business around it explode when it became a bona fide hit, but also no one had exclusivity in toys — and look at the thriving business that’s been built around it.”
Elsewhere in the action aisle, another major shift further signaled that the category itself might be ground zero for the seismic shifts that are reshaping licensing agreements between IP owners and toymakers. Warner Bros. Consumer Products (WBCP) unlocked the master toy license for its expansive line of DC Comics and DC Entertainment properties in 2018.
“There are a few factors that are contributing to the shift away from the dependence on master licensees, but the biggest is probably consolidation,” says Anita Castellar, founder and CEO of FanGirl Consulting and Brand Management, and former hardlines licensing manager at Lucasfilm. Castellar, who represents licensing for Ol’ Dirty Bastard, Boss Fight Studio, and Masked Republic, says that continued consolidation is placing a bigger burden on many IPs under one roof.
“These companies begin to apply the 80/20 rule, which means that if your brand is not part of the business driving 80% of the revenue, it will most likely fall to the bottom of the list when it comes to care and attention by the master licensee,” she says. “IP owners need to branch out with more partners in order to have a better presence at retail if the master licensee is not producing goods at a level that is satisfactory to the brand owner, or if the product lines have become less innovative and less distinctive. Toy companies tend to homogenize their product development across multiple properties in order to be more efficient and minimize risk.”
Mattel, which spent nearly 20 years as “master toy licensee for the entire universe of DC Comics characters,” renewed its partnership with WBCP in 2018 to continue producing licensed DC toys in the girls, preschool, vehicles, games, and novelty toy categories. Without the master designation, Spin Master stepped in to launch new kid-focused lines of action figures, vehicles, and playsets featuring Batman and other DC Comics characters, while McFarlane Toys took over the design and production of premium, collector-focused figures and vehicles, all of which hit retail in 2020.
McFarlane Toys’ CEO and Creative Force Todd McFarlane says that the process of being a category and scale-specific licensee is a balance that comes with the opportunity to refresh and reinvent iconic licenses with new designs and characters that have never been put into plastic form.
“The most important aspect — which may make it the most challenging — is to coordinate with all the other items that are coming out to retail from the brand,” McFarlane says. “Essentially, no one wants to be offering products that are being done by another licensor with that same brand. Additionally, from a creative viewpoint, [I question] how I can add value and/or detail to an item that might not have been there in the initial character designs … to make a figure jump out to the customer’s eye as it hangs on its store peg.”
The initial assortments from Spin Master and McFarlane did very well in the past year and have already been refreshed for 2021, complete with a new visual identity for Spin Master’s Batman line and McFarlane’s new assortment of DC Multiverse figures inspired by the Batman: Last Knight on Earth comics.
“Probably the most fun comes in attempting to give a slight twist to the figures and characters that have already been out in the marketplace in the past, so even those fans that have those older items will be awakened to a different — and hopefully better — quality,” McFarlane says.
Spin Master’s Vice President of Marketing and Global Business Unit Lead, Boys Adam Hyman says that while the company does hold master licenses for properties including Monster Jam and Supercross, working on the DC lines offers the company a chance to connect with kids in new ways to put “smiles on their faces.”
“We have the incredible opportunity to inject fun, innovation, and value to the amazing characters and rich stories of some incredible franchises,” Hyman says. “If that means we focus on one key area rather than a master toy license, it makes no difference. The DC Universe is such a well-established, trusted, and loved franchise that we take great pride in being an important part of the family. There is no better feeling than watching a child open up and play with a toy that our team has put so much time into creating.”
The shift away from the concept of a global master toy partner certainly doesn’t mean that the position no longer exists. Over the past 18 months, deals for both emerging (Among Us, Bluey, Apex Legends) and legacy (Smurfs, Ghostbusters, Halo) brands have awarded master licenses to companies including Jazwares, Hasbro, Jakks Pacific, and others. The biggest question moving forward is how quickly the rest of the industry may take the stance that a master licensee is no longer necessary as the business evolves and the continued — and sometimes confusing (see: Fortnite) — growth of slicensing becomes the norm.
While Goodman insists on non-exclusive deals for his clients for younger brands, Castellar believes that there are still some benefits left to be had for parties of all sizes.
“I don’t think the master licensee model will go away any time soon, and I do think there is still value in this type of relationship,” Castellar says. “It’s an efficient way for less established brands to build the core product categories that are foundational when launching a new licensing program. For toy companies, it is a great way to make a bet on a new brand that could be the next blockbuster franchise. Not every company can replicate the immediate success of Kenner’s empty box campaign, but the toy industry is full of dreamers, so we are always chasing after it.”
This article was originally published in the February 2021 edition of the Toy Book. Click here to read the full issue!