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Toy Makers Eye Hollywood Deals for Profit

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OAKLAND, N.J. (AP) _ Mr. Fantastic, The Invisible Woman, Alex the Lion and Gloria the Hippo are more than colorful movie characters to Andrew R. Gatto, they're a growing business. His company, Russ Berrie and Co., makes plush toys based on characters from films such as ``Madagascar'' and ``Fantastic Four'' under license by the movie studios.

Gatto had been CEO of the company for a week when he attended last year's Licensing International conference with a single focus: Make some deals that would help Russ Berrie boost sales, which were down 20 percent last year. Now, the Oakland-based company expects its seven lines of licensed products to soon account for up to 10 percent of the company's sales, and perhaps double that in a few years.

Gatto's faith in movie-inspired toys is not shared by all toy makers.

Amid falling sales of such licensed products, they are concentrating more on their own brands, as retailers tighten their selections and movie studios pull films from theaters too quickly for the toys to build up sales.

As the annual licensing conference gets under way this week in New York, industry leaders Mattel Inc. and Hasbro Inc. _ longtime players in the market _ are cautious about expanding their portfolios. They are instead focusing on ``evergreen'' entertainment properties, icons such as ``Star Wars'' (Hasbro) or ``Batman'' (Mattel).

This guarded approach comes as sales of toys based on entertainment licenses dropped 8 percent last year from 2003, to $3.8 billion in the U.S. and Canada. By comparison, sales of video games based on entertainment franchises were up 4 percent to $2.5 billion. Sales of all entertainment-related licensed merchandise slumped 20 percent in the past decade, to $13.4 billion in 2004, according to The Licensing Letter, an industry publication.

Licensed products based on entertainment properties accounted for about a fifth of overall toy and video games sales, which dipped to $30 billion in 2004, down 2.3 percent, according to the Toy Industry Association.

``It's gotten to be a much more conservative business in the last few years, particularly from the retail end,'' said Marty Brochstein, The Licensing Letter executive editor. ``There are so many characters and movie characters out there, and a shrinking number of retailers, the retailers can be much more selective in what they stock.''

There is also less time to capitalize on a big film. Movie studios launch huge marketing campaigns for several movies a year, but only keep them in the theaters for a few weeks, Brochstein said.

``I don't see anything happening to change it,'' he said. ``It all comes down to studio economics.''

The first ``Star Wars'' film in 1977 launched the movie merchandising juggernaut, but toy makers have been trimming their lines in recent years, said independent analyst Chris Byrne.

One reason: tie-ins with fast-food restaurants. When a child can get a Mr. Incredible action figure with a Happy Meal ``that will satisfy the need for the toy'' and mom doesn't have to pay $30 for a grander version, he said.

Hasbro, of Pawtucket, R.I., is becoming more selective with its licensing of film products, while working to develop its existing brands, such as ``Star Wars,'' which it has licensed through 2019, said Brian Goldner, president of U.S. toys for the nation's second-largest toy maker.

Over the past 10 years, sales of licensed products declined to less than 10 percent of the company's sales, down from about 20 percent to 25 percent in the late 1990s, Goldner said. The company's emphasis now is on its own brands, such as My Little Pony, Milton Bradley and Playskool, he said.

Hasbro, however, is not spending the summer outside the theater. Its film products include ``Madagascar'' puzzles and figures.

``The better the box office, the better the sales, typically. But more important than big box office initially is longevity,'' Goldner said.

Toys based on films that are themselves based on comic books or other entertainment properties have a better chance, say the toy makers.

Gatto said a film such as ``Fantastic Four,'' opening July 8, brings a ready-made customer base because of its long history as a Marvel Comics book.

``The Marvel characters, we believe, will have ongoing appeal, and you'll get a spike when a character is featured in a movie or a television show,'' he said.

Mattel's products to accompany ``Batman Begins'' were selling well even before the film opened last week, aided by ``the built-in equity of the entertainment property,'' said Holly Stein, vice president of entertainment licensing for the world's largest toy maker, based in El Segundo, Calif.

Such ``franchise'' films, with a history in different media _ Batman was a comic book before it became a television series _ breed more success than a blockbuster movie that exits the theater in four weeks, Stein said.

She declined to say whether Mattel will do more or less licensing in the future, but said licensing would remain an important way to balance its product list. She said licensing of television-related properties had surpassed film, pointing to Mattel's co-branding effort between a hit show and its famed doll: ``American Idol'' Barbie.

``Movie licenses have become consumable and disposable,'' said Byrne, ``except for these things like Batman.''
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