Toy companies sign Mega licensing deal
New sets will be based on Barbie, Hot Wheels
Mega Brands Inc., Canada’s largest publicly traded toy maker, struck a multi-year deal with giant Mattel Inc. giving it licensing rights to develop construction toy sets based on the Barbie and Hot Wheels brands.
The brands are considered among the toy industry’s top crown-jewel names, recognized and coveted internationally by children of all ages. Montreal-based Mega is betting they will be a significant revenue driver, adding to its existing lineup of building block brands like Power Rangers, Need for Speed and Smurfs.
Sales of building block sets like those made by Mega and Danish rival Lego AS rose 33 per cent last year in the United States, to an estimated $1.6 billion U.S. Amid a stillshaky recovery, it is the only one of 10 major toy categories tracked by consultancy NPD Group seeing sales growth.
Until recently, manufacturers have focused on boys in this space. But products geared for girls, such as Lego’s Friends building sets, are gaining popularity and Mega is clearly hoping to capitalize on that.
“This is a clearly an expanding area,” said Lutz Muller, a consultant with Klosters Trading Corp. in Williston Hills, Vt. “Barbie is obviously an icon with the girls and so I think it’s a pretty neat move.”
Mega CEO Vic Bertrand is trying to reassure investors by driving consistent profits after a near-brush with bankruptcy in early 2010. The company disappointed the market with a two-cent profit per share in its most recent fourth quarter on revenue of $108.5-million U.S., well short of Bay St.’s average forecast of 15 cents. “We see (these titles) as very significant additions to our portfolio,” Bertrand said in an interview Thursday. “In the midaged categories (of girls) between 4 and 8, this is where we see Barbie coming in and making an incredible impact. ... What we’re going to do is make it more attractive for girls to participate in the (segment).”
No financials were disclosed as part of the announcement.
One interesting aspect of Mega’s move is that it shifts away from the strategy of buying product licences tied to movies or video-game releases. Mega Brands, for example, has Halo and Iron Man building block sets in its lineup. Barbie and Hot Wheels are brands unto themselves, what industry players call “evergreen content” that have existed over decades. Bertrand said Mega is attracted to such properties.
“These are things that just spell more longevity, more security or less risk. And what we feel is the amount of investment required to make these worlds come to life, it’s just a better business model for us.”
Shares in Mega Brands rose 8 cents to $6.58 on the Toronto Stock Exchange.