Blog #3: Staying the Course- A Comparison of Two Toy Companies

In my opinion, one of the more peculiar trends in the movie industry has been big titles based on kid’s toys. There’s been three G.I. Joe movies, six Transformer movies, the movie Battleship, and four Lego Movies, to name just a few. At first, I thought this trend was the result of a Hollywood starved of original creative content. However, as it turns out, it is the result of the toy industry’s strategy to use the entertainment industry to market and save its own big brands. In the Harvard Business Review article “Seven Ways to Fail Big” one of the common failures is “Staying the Course”. A comparison of toy company giants Hasbro and Mattel provides an interesting case study on this common failure.

One of Hasbro’s differentiating core capabilities is extensive market research on the play habits of kids including the use of what they dub “FunLabs”. The company’s FunLab’s are set up to allow researchers to observe how children play. Using this analysis, Hasbro found that many of their big brands were faltering because children wanted to play with toys connected to the shows and films they watched. This led them to take the bold move and co-produce Transformers in 2007 with Paramount Pictures. After its success, $710 million worldwide, the toy company took another risk and opened its own film studio to continue to revive its old toys with films and television shows. According to a Bloomberg article comparing Hasbro and its rival Mattel, as of 2015, each new Transformers movie Hasbro produced doubled its toy sales. (Link to Bloomberg article)

While Hasbro was exploring this new strategy, Mattel was staying the course. About the same time Hasbro was on its fourth Transformers movie, Mattel’s ex CEO admitted that, “The way we were selling toys in the ’70s and ’80s is the way they’re selling toys today.” Fast forward to 2019, and four chief executive latter, Mattel has now begun pursuing a similar strategy of turning toy brands into movies with upcoming films based on brands “Barbie” and “Hot Wheels”. (Link to WSJ article)

Hasbro also out strategized Mattel when it swiped the contract to produce Disney’s princess dolls from them in 2014. At the time, the Disney doll business was sized at about $500 million, not including revenue from the movie Frozen which sold $531 million in dolls and dresses by itself. Despite Mattel being the established doll makers in the toy business, Hasbro was able to sway Disney to take a risk on them by impressing them with their research and analysis capabilities. (Link to Bloomberg article)

Currently, Mattel Inc has a market capital of $3.6B whereas Hasbro has a market capital of $11.1B. With the departure of physical retailers, like "Toy’s R Us", and the easy entry of toy makers into the market, it will be interesting to see how the two companies continue to navigate the future.