MGA Archives - ToyJobs

He’s baaaaaack!…Neil Friedman Returns

After just a few short weeks in “retirement” Neil Friedman has returned to the retail side of the desk by being named Toys’R’Us’ US President. This comes just in time for the upcoming TRU IPO (good for him!). Early in his career, Neil spent ten years at Lionel Leisure before moving to the toy manufacturing side with Hasbro, Gerber and finally Fisher Price and Mattel. He also spent an additional short stint at Lionel Leisure in the early nineties.

The toy industry should benefit nicely by having Neil in such a prominent place at Toys’R’Us which has been looking awfully “Targety” lately. It should certainly be helpful that he understands and empathizes with the challenges that manufacturer/importers face. Congratulations to Neil and good luck to the toy industry which hopefully will find it just a little bit easier to do business with TRU.

Mr. Friedman’s alma mater, Mattel, just lost the most recent round in its “total war” with MGA. Most toy industry executives that I have spoken with are absolutely flabbergasted. To hear MGA Chief Executive Isaac Larian crow “After seven years of fighting with Mattel, I’m finally vindicated” reminds me of Ollie North saying “I’ve been completely exonerated. It seems that Mattel and MGA are now tied at one and one with one “do over”. So what happens next? Appeal? Jumpball? Tiebreaker?

From my reading of the case (which is admittedly far from complete) it seems clear that Carter Bryant created the original Bratz drawings on Mattel’s time and dime. It seems equally clear that Mattel turned the concept down internally (oops!). That’s completely understandable. We’re in a fashion business and much of product selection is just guessing at what a very fickle group will decide they must absolutely have usually for a very short period of time.

I, of course, haven’t read Carter Bryant’s Mattel contract but I do know (as does everyone in the toy industry) that these contracts are meant to cover all intellectual property developed day or night or weekend while in a company’s employ. Both Carter Bryant and Isaac Larian must have known that in producing Bratz, they were on a very slippery slope whether there was some loophole in the Bryant/Mattel contract or not. On the other hand, it is also very clear that MGA overwhelmingly built the Bratz franchise through smarts and hard work.

So, what should be done? This isn’t the way “the law” reads or the way contracts were written but it I were King Solomon…First, no damages for anybody. I would guess there was an adequate amount of “stolen trade secrets”, dirty tricks, subterfuge and just plain smarmy behavior by both combatants. The original concept was probably technically owned by Mattel but the business was built by MGA. So Mattel should receive the highest customary inventor’s royalty paid in some sort of split by MGA and Carter Bryant who surely knew he was violating the spirit if not the letter of his contract.

I’m not particularly happy with that opinion. I am decidedly not an MGA fan but in trying to be impartial that’s where I come out. It’s just one man’s opinion admittedly based on a very limited reading of the evidence (mostly newspaper stories). If I had more first-hand access to the evidence, my opinion might be different. So please, there’s no need for huffy phone calls from either the Mattel or the MGA camp. You both need to focus on the next round of your battle (and I’m predicting there will be a next round).

On to more broadly important matters. Last week we learned that US manufacturing output has been rebounding at an incredibly fast rate. During the first quarter it increased at an annual rate of 9.1% compared to an estimated growth rate of about 2% for the US economy as a whole. This is due to a number of factors. In 2010 most large companies postponed purchases in order to hoard cash. Now that the deer in headlights portion of the crisis is over and the recovery has slowly begun, companies are beginning to spend to satisfy pent up demand. Large increases in corporate spending for computer and software upgrades are being seen.

Another reason in commodity inflation as US companies seek to jump on the bandwagon of rising prices and growing sales volume. Food price inflation is boosting spending world-wide on agricultural equipment. Globally rising metal and oil prices have encouraged spending on mines and oil and mineral exploration requiring additional equipment. As freight traffic grows, trucking firms are investing in vehicles with better fuel efficiency.

All of this heavy machinery will require additional people to build it. Additional workers will mean increased spending on consumer products and consumer products firms will need additional employees to fulfill demand. When the manufacturing sector does well the rest of the economy generally follows. The whole shebang is beginning to snowball albeit very slowly. Indeed in March, the unemployment rate edged downward in its fourth consecutive monthly decline. I’ll be leaving tomorrow to attend a Pinnacle Society conference with the other Big Dogs of Recruiting. It will be interesting to hear how employment is fairing in all of their various niches.

There are, of course, a few concerns. One is that the recent earthquake in Japan will lead to shortages of automotive parts, semiconductors and electronic components. That could slow production of some goods but thus far the effect seems to be relatively minor. A bigger worry is a spike in oil prices due to Middle East unrest. Saudi Arabia has enough spare oil capacity to offset almost any Middle East problems short of someone going to war with Iran (which doesn’t seem likely). The biggest danger would be if Saudi Arabia itself sank into crisis. If that happens…well, let’s just hope it doesn’t.

Toyjobs continuing forecast is for increased toy industry hiring of specific and necessary jobs and an increase in sales to toy retailers. Unfortunately, due to China’s slowly strengthening currency, rising labor costs, rising commodity prices and general inflation – we foresee lower margins. Things are so much better than they were a year ago but in 2009 the economy sank so low that it’s still not even close to normal.

All the best,
Tom Keoughan

By ToyJobs|2011-04-27T10:02:00-05:00April 27th, 2011|ToyJobs Blog|Comments Off

Retail Zombies and Statistical Aberrations

The Human herds were out in droves like something out of a cheap zombie flick as the Thanksgiving weekend kicked off the holiday shopping season. Although the lack of “door buster deaths” could be considered a negative indicator; retail chains reported strong customer traffic and increased per capita spending. According to the National Retail Federation, the average shopper spent $365.34, up 6.4% over last year. Weekend web and Cyber Monday web sales also set new records.

After several years of relative thrift shoppers may be parting with their money more willingly simply due to pent-up demand which retail analysts have been calling “frugality fatigue.” That said, consumers have been trained to only shop for bargains. We may see the Thanksgiving weekend spike fade as shoppers wait to see if retail prices come down before buying, leading to a second spike right before Christmas. Let’s just hope that everyone buys more Dance Star Mickey’s and Squinkies than they do iPads and Microsoft Kinect Systems.

The toy industry is expected to have a solid up year and that should translate into increased toy industry hiring for 2011. Most observers were surprised by the increase, from 9.6% to 9.8%, in November’s unemployment rate and several economists have called it a statistical aberration after the positive jobs trends of September and October. It seems that after seeing the strengthening employment environment many people previously too discouraged to even bother looking for work – “entered the job market” therefore driving the percentage of unemployed job seekers even higher. However, if you look at a wider variety of indicators, the overall trend continues to show steady, if unimpressive, improvement.

Hours worked and wages have been rising (although they were flat in November). Both measures tend to foreshadow future job growth. As we have seen, consumer spending is up. Third quarter results from Visa, Mastercard and American Express showed US consumers spending approximately 13 per cent more than last year. Consumer sentiment rose in November to its highest level since June. November Job postings on Monster were up 22%. Lastly, the government revised jobs data for September and October to show stronger numbers than previously reported. It would not be surprising to see November’s numbers revised upward as well.

Anecdotally, here to Toyjobs, we have seen search starts pick up sharply beginning in the second half of October. My impression is that coming out of the depths of 2009, few companies budgeted for much, if any, hiring during the current year. When they found themselves in need of people they would start to look, they would interview, but would then find some way to postpone actual hiring. Now that the economy has stabilized and is growing albeit very slowly – they are looking to shore up their rosters and have that in their budgets for 2011. That does not mean that I foresee a wave of wholesale hiring but rather that companies are now looking to fill the holes that in 2010 they left vacant. This is the employer version of pent-up demand.

The US economy is firing on more (but still not all) cylinders and the recovery is just beginning to pick up steam. That said, there’s still a chance that it could disrail as many employers remain cautious about hiring due to the uncertainty over taxes, new health care and environmental laws, etc. Nancy Pelosi and Harry Reid appear to be oblivious to the “shellacking” they took in the recent elections. Fortunately most of the Democrats and President Obama (despite what he says publicly) seem to get it. It looks like in the next week or so we will see a compromise bill passed which will forestall any and all tax increases for a period of two years. Unless Congress acts, tens of millions of people could see their withholding taxes go up in January. That could dampen household spending and further weaken employment and the fragile recovery.

In the interests of full disclosure, I am an independent who has voted Democrat more often than not. I generally (but not always) admire Democrat’s social goals but often find myself concerned about the unintended consequences of their proposed actions. With the economy at a tipping point this is no time to be raising any kind of taxes on anything and definitely no time for continued uncertainty. If you’re going to make those kinds of changes, do it during “good times” so that the system can better absorb them. Once we get the economy steadily growing again, tax revenues will rise and it will be easier to attack the deficit. If you can get rid of all the agendas, dogma and histrionics (fat chance!) it pretty much becomes common sense – Econ 101. I’m going to shut my mouth now, before I get into any more trouble.

Muddling through,

Tom Keoughan

P.S. Sorry, I just couldn’t help myself from taking one last stir at the pot. In the last couple of weeks, Isaac Larian of MGA Entertainment had publicly accused the Toy Industry Association of being prejudiced against him and his firm. While I can’t speak either for or about TIA or MGA; I’m not sure that prejudice is always such a bad thing. I oftentimes find myself biased against working with nasty, unethical people and/or the companies they control. Is that wrong? I don’t think so.

By ToyJobs|2020-11-20T08:51:04-06:00December 8th, 2010|ToyJobs Blog|Comments Off

Fall Toy Preview: A Little Grumbling Despite The Full Dance Cards

My experience at the Dallas Fall Toy Preview was that the overall mood was “workmanlike”. While I can’t say that people were exactly upbeat, there wasn’t the pervasive sense of gloom that we’ve seen at the last few trade shows. Most people seemed to give off more of a sense of being survivors, of being beaten up but having made it through with the knowledge that the worst is over but that there are still some tough miles ahead.

In the weeks leading up to the show there was a lot of talk that Target and Wal-Mart (both extremely early price choppers this year) were not planning to attend. I hear that before every trade show and, as always, Target and Wal-Mart sent buyers although not their entire contingent. Even with that I still heard a lot of grumbling at the show despite the fact that most companies had very full dance cards. My sense is that those people and companies who were disappointed were so because they had a false set of expectations. If you go into Dallas thinking that you are going to write a Target order, I can guarantee you that you will be disappointed. This is a great show for getting retailer feedback about your offerings, giving you a chance to tweak product, packaging and assortments prior to the all important Hong Kong Toy and Gamers Fair in January. It’s also a great time to focus and have some quality meetings with second and third tier retailers. As one VP Sales said to me “even if Wal-Mart and Target weren’t here at all, I have the opportunity to meet with fifty customers in just three days. Where else would I want to be?”

With Wal-Mart de-emphasizing the toy aisle those second and third tier retailers are becoming more important. By stepping back, Wal-Mart has allowed other retailers to see opportunity in the toy business and many of them are responding aggressively. Toys ‘R’ Us is stepping into the malls with eighty pop-up stores. This will be their first year of doing this so their execution is a question mark but let’s face it, anything has got to be an improvement over the mess that was the KB Toys retail experience. Sears is testing getting back into the toy business and, if successful, will make a bigger commitment for 2010. Barnes and Noble and Borders, two retailers that definitely still get traffic, are putting a greater emphasis on toys and providing a lot more shelf space. I suspect that other retailers will follow suit now that they won’t have to compete with Wal-Mart pricing on as many products. Toy companies should be happy with the increased shelf space, diversification of customers, and the likely higher margins to be had from these retailers.

What toy companies should be complaining about is the lack of trade show support from toy behemoths Mattel, Hasbro and Lego. This lack of support has now spread to second tier players such as Jakks Pacific, Spinmaster and MGA. Certainly this makes business sense for larger companies as they know they will get their face time with the retailers. Obviously, they would prefer that buyers be totally focused on their product line rather than “distracted” by a hundred smaller competitors. Alright, I get it, but the toy industry may want to consider whether they want these large companies dominating the TIA board. Certainly, the TIA needs their dues but one of TIA’s main functions is to organize trade shows and industry events. In choosing not to support trade shows, these companies’ dominant place on the TIA board is a clear conflict of interest. One of a trade organization’s most important missions is to promote and protect the interests of it’s smaller and medium sized members. The big boys have the ability to fend for themselves.

In our isn’t that ironic file: Mattel has reached a settlement in twenty-two class action suits over their widespread product recalls in 2007. The recalls resulted in over-regulation which disproportionally affects small and medium size toymakers. While Mattel can amortize testing costs and manpower over a gazillion products sold; the smaller companies are hit much harder by testing costs, time to market and eyestrain (from having to wade through all those crazy new regs). Creativity has also been blunted because small companies can no longer produce a new and innovative product and take a flyer to see how it sells in the marketplace. The new rules mean that a company needs pretty large presells to be sure that a product will at least break even. Now do I think that Mattel intended this from the beginning? Of course not, but the fact remains that Mattel is one of the biggest beneficiaries of their own quality and product safety failures. If the court approves this settlement – it looks to me like they got off cheap.

Toy industry hiring continues to slowly improve. It’s certainly not good but it’s better than it was six or even three months ago. My continuing forecast is that hiring will continue to be weak at least until the August/September (and it may take longer) time frame. For most of 2010 hiring will be slow although not as bad as 2009. Some very important meetings are coming up in December and January. Those meetings are not with retailers and not in Hong Kong but with banks. Banks slashed loans and lines of credit in 2009. With banks still reluctant to lend, regardless of Holiday sales numbers, I can’t imagine that seasonal fashion businesses will be at the top of their lending lists.

Muddling thru,

Tom Keoughan

By ToyJobs|2009-10-30T10:47:22-05:00October 30th, 2009|ToyJobs Blog|Comments Off

Poor Economy Continues to Dog Toy Industry

The economy remains stagnant as continued layoffs and tight credit have left consumers cautious. Even the currently employed have stopped spending and are hoarding cash because it seems that on any given Friday anybody can be laid off.

Retail sales continue to be poor and have even worsened after the brief January, February upturn which followed a dismal autumn. March retail sales fell 1.1% from February and were down 9% from the same month year ago. The only bright spots were the usual suspects, discounters Wal-Mart, Costco, the Dollar stores and drug chains.

On the brighter side the financial situation does seem to be stabilizing although still not recovering. The LIBOR rate (the interest rate at which banks lend to each other) is now in close to normal territory and the stock market has been recovering as bargain hunters have appeared. Of course, all evidence of “stabilization” could evaporate in a day and we could be back in the freefall zone of last autumn.

The employment situation continues to be bad with lots of people looking for work but few available jobs. Companies are still saying that although operationally they need additional people they are not hiring due to financial concerns and banking restraints. In “the tiniest glimmer of hope” department, Toyjobs has just recently noticed a slight uptick in the number of new search starts. It seems as if during the first quarter 98% of companies had a hiring freeze but now that we’re in the second quarter only 85% do. That is not exactly overwhelmingly good news but we can hope that it becomes a trend that continues.

In a humorous note, Reuters reported on April 17th that Isaac Larian of MGA has offered Mattel an opportunity to pay MGA for the Bratz line after the court awarded Mattel $100 million from MGA and ordered MGA to stop making Bratz, which the court determined was misappropriated from Mattel in the first place. That order was later suspended until the end of 2009. Toyjobs only comment is: “Gee, what a kind and generous offer from Mr. Larian. Bless his heart.”

Muddling Thru,
Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00April 14th, 2009|ToyJobs Blog|Comments Off

It’s Crunch Time in the Toy Industry

The annual summer doldrums for the economy at large and the toy industry in particular are beginning to come to a close. Toyjobs’ fast first half start which had us on track to have our best year ever fell off precipitously in late June, July and early August. Both search starts and search closes slowed to a crawl. However, just over the past week I have noticed that things have begun to pick up. Suddenly we are having a lot of discussions about new search starts and should be beginning a number of new searches shortly. All of this is pretty predictable and is part of the annual hiring cycle for toy company jobs. Same as it ever was.

Typically in the last two weeks of August a lot of retail buyers turn all their “happy talk” into actual written orders. A few toy companies experience joy, most companies grumble even while emitting a sigh of relief and a few toy companies are left staggering like punch drunken boxers. The business is even crazier than usual this year due to wildly fluctuating costs as well as the longer lead times needed between order taking and shipping. “So, you have finally confirmed your order now that pricing has changed, and by the way we can’t get the goods to you by the time you would like them”. Most toy companies will be “okay” but will have spent the year running even faster for less sales volume and lower margins. Not exactly progress.

Crunchtime is accompanied by an annual tumult of some toy companies laying off, some companies elatedly hiring, some companies buying each other and some toy companies just collapsing entirely. In 2008, this is exacerbated by problems with the economy at large and the whirlwind is likely to be even more acute than usual.

From a toy industry recruiters perspective, it seems as if the toy industry as a whole breathes a deep sigh of relief and then suddenly is jolted to attention by the realization that the next toy selling season is only eight weeks away. A burst of hiring begins as toy jobs appear and toy companies seek to beef up their sales teams for the next campaign. Of course, just as retailers haven’t given companies enough time to produce, inspect, ship and deliver goods by a specific date; now toy companies haven’t given themselves enough time to staff up and fill those jobs by the Fall Toy Preview. Even with resumes already on their desks, most companies won’t be able to execute hires that quickly. Some will. The message here is “Don’t Wait!” Every year it’s a mad scramble and that scramble has already begun.

Even as business continues through this stormy period, there are beginning to be a few brief patches of light. Sales at Walmart and a few other retailers (Walgreen, BJ’s) are doing well even as overall retail remains sluggish. More importantly oil prices have begun to ease which should translate into lower resin and transportation costs and if retailers allow toy company price hikes to stick – wider margins next year. Our short term forecast is for a rebound in toy company jobs this autumn but not as big of a rebound in toy jobs as usual.

With the Olympics underway, all eyes are focused on China (albeit with brief glances to the Caucasus). We have lots of non-Olympic China news in this month’s China Report. Now that we know that spyware has been installed in many Chinese hotel rooms and in Chinese taxicabs, our main feature focuses on a few methods to combat this increasing threat (we’ll post it on our website for future use). Toy industry executives certainly travel a lot in China but you might want to consider adopting some of these strategies here at home especially now that in Los Angeles a U.S. Court has determined that in the toy industry, intellectual property theft even occurs on U.S. soil. Who woulda thunk it? Here at Toyjobs we have revamped our website and added a few new features. We hope you like it and find it useful. Please feel free to send our comments and/or the usual blistering critiques.

Wishing for more toy company jobs,

Tom

By ToyJobs|2020-11-20T08:51:04-06:00August 15th, 2008|ToyJobs Blog|Comments Off

The Consumer Electronics Store that Stole Christmas

In what looks like a repeat of last year, the toy industry’s big challenge this year appears to be the consumer electronics business. All indicators are that consumers will be torqueing their credit cards on wide screen TVs and DVD players. There is also the launch of next generation video game platforms. With “Bobby” getting a $500 Sony PlayStation 3 along with a small stack of video games/accessories, and Dad buying a mammoth flat screen TV “for the family” (even though it seems to only be able to tune in football games and golf); chances are there’ll be a lot less toys under the tree this year; especially when you factor in hundred pound fruitcakes and embarrassing holiday sweaters.

On the bright side, Christmas 2007 will not have new video game platforms launched and two years worth of widescreen TV demand will already have been satiated.

MGA’s pending purchase of Little Tikes should be interesting to watch. We have no doubt that Isaac Larian will take great glee in trying to poke Mattel’s Fisher Price unit in the eye. Fisher-Price, however, is a colossus. Its brand recognition, product line and execution are all very strong. Mattel President Neil Friedman knows exactly how to manage this business although it is possible that he may be distracted while trying to rescue Barbie and the rest of Mattel’s El Segundo operation. MGA doesn’t have a lot of experience running its own manufacturing plants. The bulk toy business means lots of expensive plastics, resins and transportation. Manufacturing plants also mean lots of employees to manage–never an MGA strong suit. This being said, there is plenty of fixing up that can be done. Little Tikes and indeed all of Newell Rubbermaid’s operations were put into a downward spiral due to the disastrous management policies of fired CEO, Joseph Galli.

Over at Mattel, Neil Friedman has the Fisher-Price division in very strong shape – strong brand recognition, strong new products and strong execution. The new TMX Elmo looks to be a runaway hit and the Kid Tough Digital Camera looks very strong. Hopefully, Friedman can work his magic on Mattel’s El Segundo operation for 2007. This year’s El Segundo product line isn’t his and previous “leadership” has left him with such apparent boondoggles as – “Tanner” – The Defecating Dog!…He Eats, He Poops!” What were they thinking? Seven year old boys are going to love this and little sisters everywhere are going to be repeatedly tortured. Also, in stores now – Botox Barbie! Stick your finger in her back and watch her face…you just really have to see it for yourself. Products like these are like landmines left for new management by the Bousquette team as they were chased from the building.

Finally, noted jackasses Charles Schumer and Lindsay Graham delayed action on a bill to levy a 27.5% tariff on all Chinese made goods. Do these idiots have any idea how many thousands of US owned businesses design, market and sell products that they have contract manufactured in China? The Schumer-Graham bill would gut their profit margins (you can bet Walmart isn’t going to move its precious price points) and drive many, if not most, of these companies out of business. If anything gives China an unfair advantage in world markets it’s the fencepost level stupidity of America’s lawmakers. Somebody ought to vote these geniuses out of office…and fast.

One also wonders if there is anyone even slightly awake at the TIA. Do they have a lobbying effort on this? Has anyone heard about it?…didn’t think so.

See you at the October show,

Tom Keoughan

By ToyJobs|2006-10-03T09:00:19-05:00October 3rd, 2006|ToyJobs Blog|Comments Off

Total Turmoil in Toyland

Let’s see, what hasn’t happened in the last four weeks? Toy shows always bring out plenty of news, rumor and innuendo but this time it’s a little hard to keep up.

We opened with the bankruptcy announcements by Applause, Fun 4 All, Hedstrom, and Huffy and from there moved on to poor earnings announcements at Mattel, Hasbro and Leapfrog. Then there was Hit Entertainment’s dismissal of CEO and chief architect Rob Lawes. Add to this KB Toys announcement that it will be shutting close to 200 stores after Christmas and the discovery that TRU’s toy division is being actively shopped (although TRU isn’t saying much, maybe they’ve gotten just a little bit smarter). Also, the Toy Building has been put up for sale – something they forgot to mention at their cocktail party.

Then there are the lawsuits. The World Wrestling suit against Jakks Pacific, Stanley Shenker, Bell Licensing et al looks particularly nasty. It will be interesting to see how that plays out. Allegations are easy to make especially when there are lots of big egos involved. They can be much more difficult to prove even if true. I certainly have no way of knowing what if anything happened, but it will be interesting to watch.

Then there is the lawsuit that Mattel has filed against Ron Brawer because he didn’t care to work for them any more and found himself another job. This appears to be a nuisance suit as apparently Mr. Brawer had no non-compete or confidentiality agreement with Mattel. Never in my life did I think I’d find myself on the same side of an argument as Isaac Larian, but Mattel is really screwing up here.

If a hypothetical company, let’s call it “Stalag El Segundo” were hypothetically to start having current and former employees followed by private detectives, were to submit their current employees to grillings by teams of attorneys, were to install security cameras in many of its offices, were to begin heavily monitoring employee phone bills, e-mail and computer activity; if a hypothetical company were hypothetically to do all that, my twenty three years experience as an executive recruiter tells me that they are likely to get results that they did not intend. That companies employees might be cowed for a month or two but in such a stifling environment would quickly decide to head for the exits. It’s the sort of thing that brings joy to a headhunter’s heart.

After rehashing all that, the following may seem counterintuitive but the October Toy Show was pretty upbeat. While some people complained about the lack of hall traffic, that’s not the type of show it is. Of the approximately thirty toy company presidents that I talked to, most felt that the show was very productive. Also surprising is that toy industry hiring continues at a torrid pace.

Too many things are happening too fast to have a fully developed thirty minute answer as to why this is so (sorry, sitcom watchers). It may be that we are finally at a tipping point. Much has been said in the last couple of years in this space and everywhere else about how Walmart’s drive to use toys as loss leaders has structurally changed the business. We may now be at the point where the market is choosing winners and losers. In the current environment it is very hard to be a winner, it is also very good to be a winner. Even more difficult than being a winner is to be average and still survive. In other words, it has started to get mean out there. Companies that are developing new and flexible strategies and successfully executing them and adapting to a rapidly changing reality are moving ahead. Companies that are unable to see the changes, plan for the changes or execute on their plans have begun to and will continue to fall by the wayside.

I know the message is not particularly cheery, but it’s definitely time to toughen up.

All the best,
Tom Keoughan

By ToyJobs|2004-11-02T10:53:47-06:00November 2nd, 2004|ToyJobs Blog|Comments Off