Would she make it after all? Toy companies today seem addicted to licenses. - the 'she' is Barbie, includes related article on Play-Doh - Cover Story

Brandweek, Feb 9, 1998 by T.L. Stanley, Karen Benezra

Her name is Amy, and she's the first baby doll to feature the computer technology of a virtual pet wrapped in a cuddly, doe-eyed package. With her vocabulary of 15,000 phrases, Amy will communicate exactly what she wants and when she wants it, pointing out that she should be changed out of her pajamas for play time, and that she wants cereal, not pizzas, for breakfast. Her creators, Playmates Toys, like any proud parents, thinks she's destined for greatness. Yet they are aware of the harsh realities of life in which a little girl, even one dubbed "The First Virtually Real Little Girl," can get lost in the shuffle.

Amazing Amy, who makes her public debut at this week's American International Toy Fair in New York, will be one of many homegrown products vying for buyers' attention against a plethora of licensed fare based on entertainment properties ranging from Sony's Godzilla and DreamWorks' Small Soldiers to Disney's Mulan and A Bug's Life. Will she be able to chatter her way into the popular consciousness against the two-headed monster comprised of the big toy companies and Hollywoods's licensing legion?

"No doubt, it's daunting," said Gina Beebe, senior vice president of marketing for girls and pre-school properties of Costa Mesa, Calif.-based Playmates. "It's about getting the property in front of the consumer. The investment, the media buys, the packaging and pricing all have to be right. And obviously, so does the toy."

At a time when toy lines based on mega-budget Hollywood movies, television shows and sports franchises are among the top sellers, toy marketers are faced with some difficult choices. It is possible to drum up enough attention for an original toy to establish the building blocks for a long-term franchise? With licenses used as insurance policies against failure, is it too great a risk to launch a product without one? Will retailers, who have limited space, support a product that isn't pre-sold, risking lost dollars and leftover inventory? And what happens to the creative process in an atmosphere that's highly risk-averse and profit-minded? In short, would Barbie make it off the sketch pad if the idea came along today?

Toys "R" Us, the nation's top toy retailer, will help determine just, how that delicate-balance plays out. It plans to dedicate space this year to lines based on properties from Godzilla to Rugrats; while maintaining support for such tried-and-true brands as Hot Wheels and Monopoly.

"Licenses are important and will continue to be," said Ernie Speranza, the chain's svp-marketing and advertising.

"But the toy industry still has a lot of fife to it; there's a lot of inventiveness still out there. They need to focus in on that aspect instead of taking the easy road."

Toy makers feel the dichotomy, struggling for some peaceful co-existence between research and development on proprietary products and the feeding frenzy for homerun licenses at a time when Hasbro paid a whopping 12% to 15% royalty fee to retain the Star Wars franchise, and Mattel fought aggressively for its recently-signed rights to the National Basketball Association, expected to generate 300 million in sales over years.

Overall, licensed toys account for 40% of sales in the nearly $20 billion industry, or some $8.2 billion last year, according to the Toy Manufacturers of America.

While it's the entertainment links with studios--such as Dream-Works, Warner Bros. and Lucas-film--that are the most visible, more than 75% of Hasbro's current line is driven by non-entertainment licensed properties, said Sharon Hartley, general manager of global marketing development at Hasbro. That will shift in 1999, with the release of the first movie in the Star Wars prequel trilogy (working title Episode I), another George Lucas epic that sets up his original Star Wars tableau.

"You never know what could turn into the next classic, so our Blue Sky group will continue to look for the Holy Grail," Hartley said. "We also devote ourselves to our licensed properties, though that doesn't take away from our r&d budget for originals. Our doesn't take away from our Ad budget for originals. Our homegrown brands benefit at retail from our entertainment links."

That the licensed toy phenomenon has flourished among children as young as 2 or 3 has been a boon to the Tyco Preschool division of Mattel, whose Sesame Street-based lineup of cuddly characters has included such holiday hits as Tickle Me Elmo and Sing 'n Snore Ernie. "The fact that moms feel good about Sesame Street is a major factor," said Neil Friedman, president of Tyco Preschool. "They feel good about the characters and look strongly to us as a brand."

Tiger Electronics' Marc Rosenberg said the company chases the major licenses, such as Rugrats, Elmo and Babe for its Giga Pets handheld line, while shoring up original properties like Game.com, Lazer Tag and Brain Warp. The strategy for the home-grown properties has been to link them with major promotional partners--Nabisco, General Mills, Nickelodeon and others--to gain attention outside traditional toy channels.