The ripple effect of unseen variables and a world that has been hard to predict continue to shape the evolution of doing business during the COVID-19 era.
One major point of impact comes at the intersection of the toy industry and the licensing business, particularly where Hollywood is concerned. During the early weeks of the pandemic, the entertainment industry came to a screeching halt as audiences began to stay at home and movie theaters closed their doors to honor mandatory safer-at-home guidelines and shelter-in-place orders.
Paramount Pictures’ Sonic the Hedgehog managed to make a big splash at the box office, pulling in more than $308 million to become the last big family hit before the world shut down. Similarly, Disney and Pixar’s Onward carries the somewhat dubious honor of being the first release to be stopped in its tracks due to the global spread of COVID-19.
Sonic hit theaters tied to a relatively modest licensed toy program with Jakks Pacific that leaned more toward the video games than the movie. Onward, however, had a bit more product, with a small assortment of action figures kicking off Mattel’s new ongoing line of toys based on Pixar franchises.
Traditionally, late winter and early spring theatrical releases aren’t merchandising juggernauts, but studios, toymakers, retailers, and every moving part involved in selling licensed product were soon staring down a problem they had never run into en masse before: Theatrical release dates were being shuffled, pushed back, postponed, or canceled with product already in the pipeline or already at retail.
YOU CAN’T STOP THE TROLLS TRAIN
DreamWorks’ Trolls World Tour had already been victim to a little bit of back-and-forth release date shuffling before an April 10 release date was settled for the U.S. and Canada. Anticipation for the sequel to the 2016 theatrical hit had been bolstered by eight seasons of the Trolls: The Beat Goes On! series streaming on Netflix and a merchandising and licensing program that had become pretty evergreen over the past four years.
Anchored by master toy licensee Hasbro, new products for Trolls World Tour were already at retail weeks before the pandemic hit. At Walmart, shoppers were greeted by pallet trains packed with dolls, action figures, apparel, and consumables with Trolls branding. Much to the dismay of theater operators in the U.S., DreamWorks’ parent company Universal made the decision to release the film as a premium digital rental day and date with the theatrical release.
“We continue to partner with Universal, [and] we’ll make the most out of Trolls that we can make,” said Hasbro CEO Brian Goldner on a July 27 call with investors and analysts. “That was a switch that happened because of unfortunate timing around COVID coming, theaters closing, movie marketing having been already in the marketplace, retail already being stocked, and shelves being set.”
While the Trolls sequel managed to play some drive-ins in North America in addition to screening theatrically in a few countries, for the most part, consumers enjoyed the film as a 48-hour rental that entertained families who were suddenly sequestered at home while simultaneously fueling demand for fresh product.
“I wouldn’t view that as really the kind of purposeful strategy that we could be looking at in the future,” Goldner says.
Similarly, Warner Bros. pulled the theatrical plans for its Scooby-Doo reboot SCOOB! The movie went straight to digital as a rental or premium purchase for families in May. Products featuring Scooby, Shaggy, and the Mystery Inc. gang had already hit retail as Walmart exclusives. Basic Fun! issued a line of action figures and plush, while other licensees like Playmobil and Spin Master shared display space in pallet trains.
TOUGH TIMES FOR TENTPOLES
Universal delayed the release of the ninth film in the Fast & Furious franchise a full year, moving F9 from April 2020 to April 2021. Another Universal film, Illumination’s Minions: The Rise of Gru was moved from July 2020 to July 2021, displacing Sing 2 from July to December. Warner Bros.’ Wonder Woman 1984 got kicked into October; Marvel Studios’ Black Widow was bumped to November; and Sony’s Ghostbusters: Afterlife slid from July 2020 to March 2021.
Paramount Pictures’ Top Gun: Maverick was supposed to be a summer blockbuster until the Tom Cruise-starring sequel to the 1986 classic got pushed to December. Mattel, which signed on as master toy partner for the franchise last year, shipped a full range of Matchbox-branded die-cast vehicles and playsets. Meanwhile, COBI came on board for building sets based on Maverick’s F/A-18E Super Hornet fighter jets; Lanard Toys issued 3.75-inch scale action figures and planes; Just Play released a feature plush bear that sings Kenny Loggins’ “Danger Zone;” and Hasbro created a Maverick Transformers toy. Now a full line of products is at retail for a film that has since been pushed all the way out to July 2021.
Similarly, Walt Disney Studios’ live-action reimagining of Mulan managed to have its red carpet World Premiere in Los Angeles mere days before the studio pushed its release date from March to August. Apparel, books, and a collection of dolls from Hasbro were already on shelves. By June, some items were already being sold at a discounted price. In August, Disney revealed plans to release the film as a premium add-on for Disney+ subscribers beginning Sept. 4.
At Toy Fair New York, Playmates Toys very carefully showed its Godzilla vs. Kong range in a private room to avoid spoilers from the film leaking out ahead of its marketing. By late July, the toys began hitting shelves, but Warner Bros. pushed the film to May of next year. Within days, fans were pouring over the packaging for clues to characters and other details from the upcoming film, the result of a careful decision to let the products get into fan’s hands.
“We wanted to make sure that Godzilla and Kong fans had these two massive Titans available right out of the gate,” says John Stelzner, vice president of marketing, Playmates Toys. “With so much to offer between now and the movie release next year, our goal is to keep fans engaged over the next several months with new and exciting products.”
Across the board, a host of licensing deals and tie-in products are in peril across a who’s who of licensees, including Funko, Jada Toys, The LEGO Group, Rubie’s Costume Co., and many more who have been affected.
When The NPD Group reported record sales for the toy industry — up 16% in the first half of the year — one of only three categories in decline was notable for being the one that licensing plays the biggest role: action figures.
The action figure category was down 12% in the first half of the year, reports NPD. According to Mattel, almost half of its revenue declines in the second quarter came from action figures, which had a big year last year thanks to Disney and Pixar’s Toy Story 4. Products for Minions, most of which are already at retail, should have offset that.
“With the entertainment shift with Minions, we’ve lost that piece of the business for the most part in ‘20,” said outgoing Mattel CFO Joseph Euteneuer during the company’s recent earnings call. “We anticipate a real resurgence in 2021 on that particular category.”
CUTTING LOSSES, ALTERING DEALS, AND LOOKING AHEAD
Heading into fall, most licensees and retailers have made decisions across three main trains of thought: Hold product and essentially pay rent to warehouse it for a year or more; sell product at clearance prices to clear the shelves and the supply chain; or to let it collect dust on store shelves with hopes of it moving when the movies arrive to support it, essentially taking up space that could be better used by faster-moving products.
Like a bit of a log jam in the stream of business, the lack of retail sales have resulted in reports of licensing deals being altered as some licensees have been unable to make their promised guarantees to licensors. One licensee who declined to go on record admitted to being forced to give up what had at one point been a very lucrative license from a major studio.
“This is a chance to look at contract language,” says Jennifer Staley, vice president, licensing at Bioworld Merchandising. “It’s an opportunity to change the business and modernize it.”
As it’s done in other areas of business, the arrival COVID-19 is forcing rapid change that may have otherwise happened somewhere down the road. Moving forward, players in the toy industry will need to streamline processes and have protective language in place in the event that another pandemic or major business disruption should arise in the future.
This article was originally published in the July/August 2020 edition of the Toy Book. Click here to read the full issue!