Toy companies are increasingly working with their direct competitors to refresh, extend, or strengthen their own brands. This would have been almost inconceivable in the past and shows how much the toy industry has changed over the past decade or more as players in this sector face numerous challenges: competition from video games, social media, and other activities at an ever-younger age; retail challenges and fragmentation due to the rise of e-commerce and the loss or extreme downsizing of key retail channels including Toys R Us; and the disappearance of mainstream marketing platforms like Saturday morning TV advertising. All of these trends and more have made the leading toy marketers reconsider how they do business, even to the point of entering into licensing deals with their fiercest competitors.
Such agreements tend to follow from one or more of the following strategies:
- Authorizing competitors to handle production of core toy lines. Hasbro has been leading the way on this path. Last week, it announced that it would license Power Rangers, which it purchased in 2018, to Playmates Toys. Playmates will introduce Power Rangers action figures, blasters, plush, role play, vehicles, and accessories—all categories that are among Hasbro’s core competencies—starting in 2025. Hasbro has also recently granted the rights to many of its toy brands to rival toy makers, allowing them to oversee core categories. Examples include Play-Doh being licensed to Horizon Group; Barrel of Monkeys to Spin Master; Playskool, Koosh, and Spirograph to PlayMonster; and Littlest Pet Shop to Basic Fun!.
- Forging brand-extension licensing deals with direct competitors. Hasbro and Mattel are working together to marry their respective IP and toy brands by way of an agreement announced last year. The partnership sees Mattel’s Barbie brand featured in a Barbie edition of Hasbro’s Monopoly board game and Hasbro’s Transformers appearing on co-branded versions of Mattel’s Hot Wheels vehicles and Uno card games. The reveal was timed to high-profile movie releases for both IP in 2023. While the license is fairly limited, it was still a surprise to many, given the players involved. In another example, Crayola licensed MGA Entertainment to produce co-branded L.O.L. Surprise! Loves dolls, each inspired by Crayola color names, even granting MGA sub-licensing rights for the co-branded IP in other licensed categories.
- Pairing with competitors for a presence in specific proprietary multi-property toy lines marketed by those competitors. The Hasbro and Mattel deal mentioned above is just the highest-profile instance of a trend that has been ongoing for a while, as toy companies want to be part of popular product lines featuring properties from a range of different licensors. Examples over the past few years have included Rubik’s Cube, Wham-O, and Crayola pairing with Zuru to be part of its Toy Mini Brands collectible line; Hasbro working with Lego to create Transformers brick-building sets; Crayola and Mattel’s Barbie being featured in Build-A-Bear’s line of DIY plush collections; and Hasbro’s Transformers, G.I. Joe, Power Rangers, and Dungeons & Dragons appearing in McFarlane Toys’ Page Punchers line of collectible figurines and comic books, among other examples.
- Granting rights to competitors for ancillary toy categories. The longest-standing of the strategies mentioned here is for toy companies to authorize other toy makers to feature their properties in toy categories where the IP holders do not have a major presence, usually because the opportunities are too small, too specialized, or too distant from their core capabilities to make them worth producing in-house. Jazwares licensed its Squishmallows brand to The Op Games (formerly USA-opoly) for board games and puzzles, Hasbro authorized WowWee to make Super Soaker and other outdoor water toys for its Nerf brand, and Mattel gave Fashion Angels the rights for Barbie arts and crafts and Dan Dee the rights for Thomas & Friends plush, for example.
Note that there is a lot of overlap between these four strategies, and several of the examples cited could be used to illustrate more than one of them.
Hasbro has been the most active of late in working with competitors to revive, refresh, and re-energize its toy brands in core categories while it focuses on toys tied to its key owned and licensed franchises and supports all of its IP with licensing, entertainment, and experiences. The strategy, along with cost-cutting, inventory reductions, and more emphasis on digital gaming, seems to be helping the company improve its financial performance. Its first-quarter results, announced last week, showed a smaller-than-anticipated sales decline, with revenues down 9% for the period year-over-year (excluding the divestiture of eOne, which brought the decline to 24.3%). It also reported better operating margins and better than expected adjusted net earnings per diluted share (61 cents, versus the 27 cents anticipated by analysts).
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