Licensing is a changing business, and it’s not just about chasing the hottest brand or the flavor of the moment. In fact, many toymakers are turning the tables on the licensing game as they work to develop their own intellectual properties (IP) in house, creating new brands that get licensed outward. And while some take that approach, others are mining the corporate archives to revive dormant brands and legacy products or even forge new partnerships that celebrate milestones.
Of course, this is hardly a new idea, but in a cyclical industry, many are tired of paying out when they could just as easily be cashing in on their own. The motivation grows as royalty rates continue to climb and exposure to risk from properties that are aging or unproven becomes a major factor.
“We’ve noticed companies trying to create their own brands for a few years now,” says Patti Becker, CEO and founder of Becker Associates, which, alongside Anjar Co., has licensed more than 1,000 properties worldwide accounting for more than $2 billion in retail sales. “By creating and investing in their own IP, companies grow their brands, and their company value grows simultaneously.”
SEARCHING FOR NEWNESS
The new properties of today have the potential to be the biggest brands and licensing hits of tomorrow.
“If they do it right, [companies] can create a stable of revenue-generating IP that nobody can take away,” says Adam Levine of Alvin Brand Services. Levine, who previously served as head of outbound licensing for The Topps Co. and spent time at Marvel Entertainment and NECA, believes that the toy industry should be looking to itself for the future.
“The industry needs a constant infusion of fresh, new brands to invigorate the landscape and prevent stagnation,” he says.
In terms of recent success, look no further than to what MGA Entertainment has built with its Toy of the Year (TOTY)-winning L.O.L. Surprise! line. While the California-based company produces its dolls and accessories in house, the brand is now ubiquitous with other toymakers licensing it for every category imaginable, from craft kits (Horizon Group USA) and board games (Cardinal Games) to smart watches (iTime) and even a branded version of Monopoly (Hasbro). Later this year, Super Impulse will issue an L.O.L. Surprise! Tilt handheld electronic game.
“The thing I love about the toy industry is that companies can be built on the back of a single hit toy line,” says Michael Goodman, founder of the MLGPC Licensing Agency, which has licensed IP to Spin Master, Funko, Super7, and others. “More specifically, I think the low cost of creating, manufacturing, and ultimately marketing a new toy line is what’s motivating smaller toy companies to launch their own IP. The truth of the matter is that the cost to create and market a new toy IP has never been so low.”
While development costs might be down, the odds of finding success are still pretty low, as each year brings dozens of new brands that fail to connect with an audience and quickly fade into obscurity.
Because success can be a crapshoot, there is a growing tendency to look for a sure thing, and that’s just one of the reasons why “retro” is so hot right now.
“It’s very difficult to create successful products and brands, and that’s why many toy companies are relaunching proven classics,” Becker says. Last year, Anjar and Becker Associates brokered a deal for Fat Brain Toy Co. to relaunch Timber Tots by Klorofil in the U.S. Previously marketed by Kenner back in 1976, Timber Tots is a property owned by Vulli, best known as the maker of Sophie la Girafe. “This type of distribution deal minimizes the risk and provides a very successful approach, especially for companies that want a turn-key solution and don’t necessarily want to invest in tooling or develop[ing] media,” Becker says.
Mining the archives for dormant or under-utilized IP has been a successful strategy for companies, like Hasbro, which has two big legacy brands relaunching this year in the hands of other toymakers: Tonka and Micro Machines.
Tonka wasn’t dormant, but it hadn’t had a proper push in years, partially because Hasbro wasn’t entirely sure if it wanted to keep licensing it or sell the brand outright. When an old licensing agreement with Funrise expired, Basic Fun! swooped in to secure the rights for a full-scale relaunch. Likewise, Micro Machines hadn’t been properly exploited in decades, and Wicked Cool Toys, a Jazwares company, is returning the brand to its roots with a new collection of vehicles and playsets slated to hit retailers this fall.
Hasbro is also relaunching its G.I. Joe brand this year, and while it will produce a core line of 6-inch action figures in house, it has developed a robust, outbound licensing program. Jada Toys, Jazwares, and Super Impulse are just a few of the companies that will be debuting G.I. Joe products in the months ahead.
DORMANT CLASSICS AND BIG MILESTONES
At Topps, Levine looked at Garbage Pail Kids (GPK) as an opportunity to create new revenue streams from a brand that the company owned but hadn’t fully utilized in years.
“If a brand has been largely absent from the public eye for decades, there’s the challenge of making it relevant again,” he says. “I used the 30th anniversary of Garbage Pail Kids in 2015 to attract a core group of licensees that included Funko, generating products that brought modern audiences back to the brand in a big way. Now, you see Topps co-branding [GPK] with WWE, creating retail initiatives at FYE, and launching a line of books from author R.L. Stine.”
One of Levine’s latest projects brought the classic, 1960s Topps property Mars Attacks to independent trading card maker Sidekick Lab. Mars Attacks: Uprising became a successful Kickstarter project, raising more than $169,000 against a $25,000 goal.
Similarly, Becker has seen an uptick in demand for her company’s Anjar Classics line of toys and games, including Fireball Island: Curse of Vul-Kar, which Restoration Games licensed and relaunched via Kickstarter. The game raised a record $2.8 million against a $250,000 goal.
Other Anjar properties that have since been relaunched include Pocket Games by TCG Toys (formerly sold globally as Shirt Pocket Games), Tumball by Megableu (previously sold by Ideal Toys as Breaking Point), and the Rock ‘n Roller Piano by Fat Brain (previously marketed as the Roller Piano by Fisher-Price). “In some cases, these brands can be launched within weeks,” she says.
Becker and Anjar recently launched a new outbound licensing program for Vulli’s Sophie la Girafe, which aims to have products based on the famous teething toy available across all categories in time for the brand’s 60th anniversary next year.
Over the past five years, major licenses that have been traditionally evergreen have shown signs of fatigue and can’t always be trusted to be a hit.
“Even a brand like Star Wars is not immune to ups and downs, and in a business predicated on financial agreements that can come and go on licensor whims, generating in-house IP is a clear effort to diversify [toy companies’] portfolios,” Levine says.
And while the licensing world may be reaching a new level of balance between inbound and outbound properties, Goodman cautions that some licensees are getting trigger happy when it comes to licensing new categories from some of the major players. In some cases, that can be a gamble that creates a costly backfire. He says that companies need to give new toy lines a chance to build an audience and be proven at retail before building licensing programs around them.
“We’ve been seeing licensees lining up to slap characters from any and every new toy line being released by any and every large toy company onto their products before that toy line has had a chance to prove itself,” Goodman says. “Licensees need to be careful and should not be lulled into a false sense of security just because a toy line is being launched by a large toy company — that alone will not guarantee them success. What happens when the toy line they’ve licensed flops at retail and they’ve already slapped characters from that toy line on the school bags and pencil cases they manufacture? As a licensee of that toy line, they might very well be left holding the bag. Literally: They might have a warehouse full of school bags that they can’t get rid of.”
This article was originally published in the June 2020 issue of the Toy Book. Click here to read the full issue!