While it may be one of the most recognizable toys out there, Barbie has lost much of its popularity in recent years, and Mattel has seen four straight quarters of massive decreases in Barbie sales (including 21% this past quarter), which is just one factor contributing to overall stagnating sales for the America’s largest toy company. Mattel has traditionally relied on strong sales for girl toys, but close substitutes and new brands of toys have slowly eaten away at their market share, which is what the hotelling model predicts. Due to Mattel’s declining sales and the success of “The Lego Movie,” Lego dethroned Mattel as the world’s largest toy company earlier this year. Adding to Mattel’s woes are recent moves by Disney to shift the licenses for many of its princess brands in 2016 to Mattel’s largest American rival, Hasbro. This will create stiffer competition for future licenses and should help the entertainment giant move into the toy industry with its own products while raising future licensing costs for Mattel and Hasbro.
Mattel has also seen revenues decline due to electronic replacements for traditional toys. While an ipad or smartphone may be more expensive up-front, parents can more easily purchase new games for their kids on a device and cut back on future toy expenditures. Mattel thus far has relied on traditional toys and has not signaled a willingness to move into this market, but if revenues continue to fall it may begin to rethink its strategy. Future bright spots include licenses for ten Warner Brothers billed to be released in coming years, but even these will not replace the losses from Disney and Barbie.
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Interesting piece. I looked up the quarterly reports for Hasbro, and they have seen steady revenue increases (7% in the third quarter of 2014) across all of their franchise brands, including toys for girls. Hasbro has licensing rights for the widely popular Frozen, which the company notes as a key factor for increased sales. Transformers and Star Wars toys, also created by Hasbro, have seen an increase of around 22%. This suggests that kids prefer toys based on previous exposure (i.e. through television/movies). I wonder if Disney has considered some form of vertical integration as a possibility to increase market share and profits.
That’s a cool thought. Video games are surely taking away market share from physical toys kids can play with. Maybe soon the only people that will use physical toys are babies that are not yet old enough to hold an iPad or video game controller.
The Barbie brand has been under scrutiny for some time now. With Barbie’s proportions absolutely out of wack many are concerned that Barbie is just one of the many things in popular culture that are contributing to body issues in women. Recently a company came out with a fashion doll similar to barbie but more realistic. The doll is called Lammily, and while still girly and glamorous she resembles a real human being in a much more real way and girls are all loving this new “Barbie” look. Maybe Mattel not only needs to be looking into online games but also looking to shift the image that their toys represent in order to be more socially responsible and more aligned with the emerging preferences of consumers.
http://www.usatoday.com/story/news/nation-now/2014/03/06/average-barbie-lammily-doll/6113875/ (more information on Lammily)
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