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,