It might all be fun and games for the kids, but the modern toy industry is no joke.
In fact, the business of selling toys has never been more complicated, as the industry has shifted to a high-stakes, connected economy battle over who can license and promote the most brands in the most places, and right now, second-ranked Mattel is aggressively closing the gap on rival Hasbro on that front.
During a Q4 earnings webcast with investors Wednesday (Feb 9) evening, Mattel Chairman and CEO Ynon Kreiz made clear that the company’s California media connections and his own roots in the film business were playing an increasingly important role in driving its transformation and earnings.
“The strong quarterly and full-year results across all key metrics are attributed to the quality of our products, strength of our brand portfolio, capabilities of our team and successful execution of our multi-year strategy to transform Mattel into an IP-driven high performing toy company,” Kreiz said. “Our turnaround is complete. We’re now in growth mode,” he said.
The IP-Driven Deal Machine
While reporting that Mattel’s products had “resonated with consumers at levels not seen in years” last quarter, Kreiz also pointed to a future of higher growth rates, this year and and more so in 2023, that has been built on the backs of a string of big name deals.
“We have been very successful in making Mattel a partner of choice for the major entertainment companies and see this as another growth lever,” Kreiz said, before rattling off a list of what he called a “formidable lineup of evergreen properties” that complement its own Barbie, Hot Wheels and American Girl brands including pacts with Microsoft, Nickelodeon, Nintendo, Universal, Warner Brothers, WWE and Disney.
Looking forward, Kreiz said the company’s multi-year global licensing agreement that it signed for the Disney Princess and Frozen franchises will go into production at the beginning of 2023, while two other major media moves are set to get underway later this year, moves Kreiz said reflect the company’s effort to capture the full value of its IP.
“[The Warner Bros. movie] ‘Barbie’ is in pre-production with principal photography starting next month, and ‘Masters of the Universe’ — our live action motion picture that is in development with Netflix — is expected to start production this summer,” Kreiz said, noting that further details on the progress of its entertainment offerings would be released next week it the company’s analyst presentation on Feb. 18.
What Headwinds?
It is also worth noting that Mattel’s makeover — or IP-driven focus as it calls it — has happened at a time when it, like other manufacturers, has faced major challenges from supply chain constraints and inventory problems, to widespread and significant retail closures.
Even so, Kreiz said, the industry is expected to grow “as children, parents and caregivers have made toys and play a bigger part of their lives.”
From an investor standpoint, shares of Mattel have jumped 200% from the March 2020 lows, versus a 75% gain for Hasbro, lifting its market value to nearly $9 billion compared to $13.5 billion for its Rhode Island-based rival.
“By working in close collaboration with our retail partners, we have outpaced the industry for the second year in a row and expect to continue to gain market share” going forward, Kreiz concluded.
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